The Silver 
 
 The Gold ihtestion 
 
 Ji'.njiX 
 
of 
 4 4 (California 
 
 \ 
 
THE SILVER QUESTION 
 
 AND 
 
 THE GOLD QUESTION. 
 
THE SILVER QUESTION 
 
 AND 
 
 THE GOLD QUESTION. 
 
 BY 
 
 EGBERT BARCLAY, 
 
 AUTHOR OF "THE DISTURBANCE IN THE STANDARD OF VALUE." 
 
 FOURTH EDITION. 
 
 LONDON : 
 EFFINGHAM WILSON & CO., KOYAL EXCHANGE. 
 
 MANCHESTER: 
 J. E. CORNISH, ST. ANN'S SQUARE. 
 
SPRECKELS 
 
CONTENTS. 
 
 PAGE 
 
 INTRODUCTION 1 
 
 CHAP. I. BI-METALLISM GENERAL VIEW OF 
 
 THE QUESTION 11 
 
 II, THE NATURE OF MONEY 42 
 
 III. THE FUNCTIONS OF MONEY 52 
 
 IV. THE VALUE OF MONEY 68 
 
 V. INTERNATIONAL TRADE 75 
 
 VI. FOREIGN COMPETITION 85 
 
 VII. THE PERVERSE RUPEE" 102 
 
 VIII. HISTORICAL ASPECT AND PRESENT 
 
 POSITION OF THE QUESTION ... 130 
 
 APPENDICES. 
 
 A. FRENCH MONETARY LEGISLATION 145 
 
 B. VARIATIONS IN THE PRICE OF SILVER PRIOR TO 1873 .. 147 
 
 C. THE LATIN UNION 150 
 
 D. THE INTERNATIONAL MONETARY CONFERENCE OF 1867.. 153 
 
 E. GERMAN MONETARY LEGISLATION 157 
 
 F. ACTION OF FRANCE AND THE LATIN UNION IN CONSEQUENCE 
 
 OF GERMAN LEGISLATION 160 
 
 G. THE INTERNATIONAL MONETARY CONFERENCE OF 1878.. 162 
 
 113604 
 
iv. Contents. 
 
 PAGE. 
 
 H. THE INTERNATIONAL MONETARY CONFERENCE OF 1881.. 165 
 
 I. THE BRUSSELS INTERNATIONAL MONETARY CONFERENCE 
 
 OF 1892 167 
 
 J. LORD HERSCHELL'S COMMITTEE, 1892-3 171 
 
 K. EARLY AMERICAN MONETARY LEGISLATION 177 
 
 L. AMERICAN "BLAND" ACT 179 
 
 M. SHERMAN SILVER ACT, U.S. A 181 
 
 N. ENGLISH MONETARY LEGISLATION 186 
 
 O. THE BULLION REPORT OF 1810 193 
 
 P. MR. ERNEST SEYD'S PREDICTIONS 201 
 
 Q. EXTRACT FROM SPEECH OF M. EMILE DE LAVELEYE ... 204 
 
 R. EXTRACTS FROM FINAL REPORT OF ROYAL COMMISSION ON 
 
 GOLD AND SILVER, 1888 206 
 
 S. TABLE SHOWING ANNUAL PRODUCTION OF SILVER IN 
 
 TROY OUNCES, ETC. 215 
 
 INDEX 217 
 
~ Of THE. 
 
 UNIVERSITY 
 
 INTRODUCTION. 
 
 nnHE silver question and the gold question as 
 -*- monetary questions cannot be separated. 
 When the disturbance of the old relative value of 
 the two precious metals began to show itself, it 
 was the fall in silver only that at first engaged 
 attention ; but it soon became apparent that while 
 silver had fallen, gold had at the same time 
 become appreciated in its purchasing power, and 
 evidence to this effect has of late years become 
 overwhelming. Is this rise in the value of gold 
 connected with the fall in the value of silver? 
 How much also of the apparent fall in silver is 
 due to the enhanced value of the gold standard 
 in which we measure it ? These are questions 
 not of mere curiosity, but of great practical 
 import, for this disturbance in the relative value 
 of these two monetary metals is interfering with 
 commerce everywhere, and it behoves us to inquire 
 
Introduction. 
 
 into the causes to which this disturbance has been 
 due. Are they simply natural causes which can- 
 not safely be meddled with, or are they, on the 
 other hand, causes under human control the 
 result of legislative action, or of the want of it? 
 A belief in the former of these views, that nothing 
 can be done to remedy the present state of matters, 
 has been at the root of the apathy with which so 
 many have regarded this question. They admitted 
 the evil, but believing that only the stern law of 
 supply and demand was involved, they gave the 
 matter no serious consideration, and regarded the 
 opinions of those who took a different view almost 
 with contempt. I think, however, that a better 
 disposition as regards the investigation of the 
 subject now prevails. In the difficulties with 
 which we are now face to face we have the ful- 
 filment of the predictions of such men as M. 
 Wolwoski and Mr. Ernest Seyd,* and surely when 
 actual experience is corroborating those predictions 
 it is well to examine the arguments on which they 
 were based, and the proposals to remedy the anti- 
 cipated evils which they so earnestly urged. 
 * Appendix P. 
 
Introduction. 3 
 
 How also are the opinions of those who opposed 
 them standing this same test of experience? I 
 select two who in the early days of the controversy 
 were most prominent and influential in their op- 
 position. In his book on " Money and the 
 Mechanism of Exchange," published in 1875, 
 Professor Stanley Jevons wrote : 
 
 "Within the last year or two the predictions 
 of M. Wolwoski may seem to have been veri- 
 fied in some degree. The price of standard 
 silver, which was at one time 62d. per ounce, 
 has already fallen as low as 57|d., while the 
 demonetisation of silver in Germany is only 
 partially accomplished. . . . but it is by 
 no means certain that it will fall further than 
 it has already done. That a great rise will 
 really take place in the purchasing power of 
 gold is wholly a matter of speculation. We 
 cannot do more than make random guesses 
 on the subject, and as a mere guess, I should 
 say it is not likely to rise. Gold has since 
 1851 been falling in value, and the increased 
 demand for gold is not likely to do more than 
 slacken, or, at the most, arrest the progress of 
 depreciation." 
 
Introduction. 
 
 In the preface to a collection of his articles on 
 the silver question, published in the Economist, 
 Mr. Walter Bagehot wrote, in February, 1877, 
 just a few weeks before his death : 
 
 "I consider that the rise in the price of 
 silver from 47d. last summer to 55Jd. now, 
 shows the preceding great fall from 54f d. last 
 February to be only a momentary accident in 
 a new and weak market, and not the perma- 
 nent effect of lasting causes. ... As yet 
 no one can prove that the permanent value of 
 silver, whether in its relation to gold or to 
 commodities at large, will change so much as 
 to render any alteration necessary." 
 These authorities, as well as the two on the 
 other side whom I have named, have passed into 
 the silent land, and while reverently recalling the 
 words in which they ventured to forecast the issue 
 of the question, we cannot fail to see in the light 
 of the experience which we have since gained, that 
 on the point referred to the two first named were 
 right, and the other two wrong. Wolwoski and 
 Seyd stood at first almost alone in raising the 
 voice of warning against the propaganda in favour 
 
Introduction. 
 
 of gold mono-metallism which resulted from the 
 Monetary Conference of 1867.* We catch a 
 glimpse of the spirit of the former from a few pre- 
 fatory words of M. Emile de Laveleye, in an 
 address read before the French Institute in Paris 
 on 10th May, 1881, in which he says : " If I 
 undertake within these walls to speak of .money, 
 it is to obey the wish of my distinguished and 
 regretted master, Wolwoski, who in his last illness 
 wrote me in a hand already enfeebled ' My 
 strength is forsaking me ; but do you continue to 
 defend our cause, which is the truth.' ' Of Seyd's 
 earnestness his writings testify, and the circum- 
 stances of his end show how much his heart was 
 in the cause he so earnestly advocated. He died 
 in a hotel in Paris in April, 1881, whither he had 
 gone for the purpose of watching the proceedings 
 of the Monetary Conference, which was held that 
 year, and which was then beginning its sittings. 
 Of the two others we must speak in similar terms 
 of respect and reverence. Bagehot's influence on 
 those with whom he came in contact seems to 
 have been unique in the loving sympathy and 
 
 * Appendix D. 
 
6 Introduction. 
 
 esteem for his genius which he inspired, and 
 perhaps reverence for his opinions still dominates 
 the journal with which he was identified, and 
 influences its attitude towards this question. Nor 
 was the influence which Jevons exercised less re- 
 markable, as was shown by the thrill of sorrow 
 which was everywhere felt, when on that summer 
 day twelve years ago his body was found in the 
 water near the shore where he had gone to bathe. 
 Though opposing the views which it is the object 
 of these pages to advocate, his writings have 
 done much to establish them, more especially the 
 demonstration he has made as to the smaller 
 variation in the value of money in relation to 
 commodities under a double standard of gold and 
 silver than of gold alone. 
 
 Time, I believe, with him might have wrought 
 further change, for we must bear in mind that the 
 idea that gold was the only standard which civil- 
 ised nations should have, was, seventeen or 
 eighteen years ago, almost universally entertained. 
 It was a cherished dream of perfection in money 
 which the economists of that time held deari 
 Jevons was one of those who saw all the possibili- 
 
Introduction. 
 
 ties as to universal money which the idea involved; 
 and it is not wonderful that he clung to it. Most 
 of those now known as bi-metallists at one time 
 shared the same views, and I think it is not assum- 
 ing too much to believe that the waiting attitude, 
 as "of travellers lost in a fog waiting till the 
 air becomes clear," which Jevons advocated in one 
 of his latest papers on the subject might, in the 
 fuller light which experience is throwing upon this 
 question, have resulted in his making a further 
 advance towards what Wolwoski, with his clearer 
 perception, so early discerned as "the truth." 
 . What we have to recognise is, that the world's 
 money consists of silver and gold, and that the 
 aggregate volume of both these precious metals, in 
 their monetary uses, is a common possession of 
 the nations on which the standard of value actu- 
 ally rests. It is now seen that silver cannot be 
 displaced without affecting the value of gold, and 
 that individual nations cannot make fundamental 
 changes in their monetary laws without the conse- 
 quences being felt in the monetary exchanges of 
 all the capitals of the world. 
 
 The remedy proposed by bi-metallists is as de- 
 
8 Introduction. 
 
 finite and clear as the facts to be recognised, viz., 
 that this common possession of metallic money for 
 standard and exchange purposes should be dealt 
 with in concert by the nations, and that they 
 should agree upon a common ratio at which the 
 two metals should be coined. This would secure 
 a steady equivalence between them such as for- 
 merly practically existed. Concerted action of this 
 nature would not affect the volume of money. 
 The precious metals are in the world now as 
 nature yields them to us, doing their monetary 
 work ; they would be there still in unchanged 
 volume; but instead of conflict and discord be- 
 tween the two valuations, there would be harmony, 
 and a rupee or a silver dollar at their par value 
 would always mean definite amounts in English 
 money. 
 
 The idea of acting independently of other nations 
 in these matters, by which England has been so 
 long dominated, must be abandoned. She of all 
 nations is most interested in the free flow of inter- 
 national trade, and the removal of all barriers, such 
 as this, which hinder it, should be her first concern/ 
 
 In revising these pages and adding what has 
 
Introduction. 9 
 
 been necessary to make them a faithful representa- 
 tion of the controversy at the present day, it has 
 been interesting to note the great advance which 
 Bi-metallic views have made, and the new phases 
 of the question that have been developed. 
 
 At first we had to accept the fact that the then 
 leaders of the science of political economy were 
 opposed to bi-metallic views : the professors 
 were all against us. But to-day the leading 
 authorities, whose teachings are moulding the 
 thought of England on economic questions at our 
 Universities, and also in America and on the 
 Continent of Europe, are nearly all with us.* It 
 is not, therefore, the opinion of the scientists that 
 we have now to fear, but the non possumus of those 
 who are living under the shadow of the old ideas 
 regarding money, and who will not carefully ex- 
 amine the question because they believe that they 
 have nothing new to learn. The chief stronghold 
 of this opposition is in that vague yet formidable 
 thing known as City opinion, which dominates 
 banking circles and influences the monetary writers 
 of the press of the metropolis, and which even 
 * Appendix Q. 
 
10 Introduction. 
 
 statesmen who know better, and are favourable to 
 our views, say they cannot go against. City 
 opinion, however, may not prove so unchangeable 
 as many think. Formerly it was strong because 
 it was backed up by the opinions of the older 
 economists whose views then prevailed, but now 
 that old things in this respect are passing away, 
 and all things are becoming new, this source of 
 strength is failing, and like a fortress that has lost 
 the outside supports on which it relied, it may 
 suddenly collapse. 
 
 The serious position in which the Indian govern- 
 ment at present finds itself in consequence of the 
 action that was taken in closing the Indian mints, 
 is forcing the general monetary question upon the 
 attention of our rulers, and I cannot help thinking 
 that ere long the only true solution of all these 
 difficulties by International Bi-metallism will be 
 accepted. 
 
 March, 1894. 
 
CHAPTER I. 
 BI-MBTA.LLISM. 
 
 GENERAL VIEW OF THE QUESTION. 
 
 MANY people suppose that bi-metallism is some- 
 thing new. The name may be new, but what it 
 serves to indicate, viz., the use of gold and silver 
 as money, is nearly as old as the history of man. 
 The advocates of bi-metallism do not propose any- 
 thing of a revolutionary character; on the contrary, 
 their action is conservative, and their aim is to 
 resist what has been leading to, and must ulti- 
 mately end in, a disastrous revolution in the world 
 of money. 
 
 For seventy years prior to 1874 (and for an 
 indefinite time also before the beginning of that 
 period, though less perfectly) bi-metallism was 
 practically in force for all the purposes of inter- 
 national commerce. Individual nations had differ- 
 ent standards some had gold alone, some silver 
 alone, and others gold and silver; but, owing to 
 the uniform relative value of the two metals, silver 
 and gold throughout the world formed practically 
 one mass of metallic money, and the par of ex- 
 change between a gold country and a silver 
 country, or between either of these and a gold and 
 
12 Bi-metallism. 
 
 silver or bi-metallic country, was, for all practical 
 purposes, a fixed value ; varying almost as little as 
 if all the nations of the world had been mono- 
 metallic that is, had had one metal only as the 
 standard of value. 
 
 How this uniformity in the relative value of gold 
 and silver was maintained did not engage the 
 attention of economists. The fact was accepted, 
 and it seemed almost an arrangement of nature 
 which the most violent variations in the relative 
 supplies of the two metals could not disturb. But 
 a day came when the true cause of this uniformity 
 was revealed. The promulgation of a new mone- 
 tary law at Berlin, and the decision of France and 
 the Latin Union* to suspend the coinage of silver, 
 showed the world that this uniformity of the two 
 metals had been dependent on the action of the 
 bi-metallic system of France, backed by the equili- 
 brium which was maintained by the counteracting 
 influence of silver mono-metallic countries such as 
 Germany, as against gold mono-metallic countries 
 such as England. With the French lawf in abey- 
 ance, and the general equilibrium disturbed, the 
 world quickly saw that it was human law acting on, 
 and through, the natural law of supply and demand 
 that had linked the two metals so effectually and 
 so beneficially together. 
 
 While silver was always sold in London as ' a 
 
 * Appendix F. f Appendix A. 
 
General View of the Question. 13 
 
 commodity, the coinage ratio of France (15j to 
 1 of gold) necessarily ruled the price in London. 
 As long as free mintage was maintained in Paris, 
 nc one would sell silver in London at a less price 
 than would result from sending it to Paris and 
 getting it turned into francs at the legal rate ; nor 
 would anyone buy silver in London at a higher 
 price than would result from sending gold to Paris 
 and getting francs for it. 
 
 The following table shows the ratio of price 
 between gold and silver from the year 1801 to 
 1889 ; also the annual production of each metal as 
 far as I have been able to obtain them, with further 
 columns showing the proportion which the supply 
 of gold bore to that of silver, and the total supplies 
 of "both metals. The earlier figures are mainly 
 taken from the report of the Silver Committee of 
 1876. For recent years, the figures indicating 
 supplies are from the statistics compiled by the 
 United States Mint authorities. I give two 
 columns for silver from 1873, one showing the 
 nominal or coining value on the basis of the 
 American Bland dollars of 16 to 1 of gold, or say 
 59d. per ounce, and the other the commercial 
 value, based on the average price of silver for each 
 year. 
 
14 
 
 Bi-metallism. 
 
 DATE. 
 
 RATIO. 
 
 PRODUCTION MILLIONS. 
 
 Propor- 
 tion of 
 Gold to 
 Silver 
 Ito 
 
 Total of 
 Gold and 
 Silver. 
 
 GOLD. 
 
 SILVER. 
 
 Coining 
 Value. 
 
 Commercial 
 Value. 
 
 
 
 
 
 
 
 
 
 18011810 
 
 15-61 
 
 2-6 
 
 7-7 
 
 . , 
 
 2-97 
 
 10'3 
 
 18111820 
 18211830 
 
 15-51 ) 
 15-80 } 
 
 1-6 
 
 3-6 
 
 
 
 2-25* 
 
 5-2 
 
 18311840 
 
 15-67 
 
 
 t , 
 
 . . 
 
 
 
 18411850 
 
 15-83 
 
 . . 
 
 . . 
 
 
 
 . . 
 
 1849 
 
 15-80 
 
 5-4 
 
 7-8 
 
 . , 
 
 1-44 
 
 13-2 
 
 1850 
 
 15-83 
 
 8-9 
 
 7-8 
 
 
 0-88 
 
 16-7 
 
 1851 
 
 15-46 
 
 13-5 
 
 8-0 
 
 
 0-59 
 
 21-5 
 
 1852 
 
 15-57 
 
 36-6 
 
 8-1 
 
 . , 
 
 0-22 
 
 44-7 
 
 1853 
 
 15-33 
 
 31-1 
 
 8-1 
 
 , , 
 
 0-26 
 
 39-2 
 
 1854 
 
 15-33 
 
 25-5 
 
 8-1 
 
 . , 
 
 0-32 
 
 33-6 
 
 1855 
 
 15-36 
 
 27-0 
 
 8-1 
 
 
 0-30 
 
 35-1 
 
 1856 
 
 15-33 
 
 29-5 
 
 8-2 
 
 , , 
 
 0-28 
 
 37-7 
 
 1857 
 
 15-27 
 
 26-7 
 
 8-1 
 
 
 0-30 
 
 34-8 
 
 1858 
 
 15-36 
 
 24-9 
 
 8-1 
 
 . . 
 
 0-32 
 
 33-0 
 
 1859 
 
 15-21 
 
 25-0 
 
 8-2 
 
 , . 
 
 0-33 
 
 33-2 
 
 1860 
 
 15-30 
 
 23-9 
 
 8-2 
 
 
 0-34 
 
 32-1 
 
 1861 
 
 15-47 
 
 22-8 
 
 8-5 
 
 . . 
 
 0-37 
 
 31-3 
 
 1862 
 
 15-36 
 
 21-6 
 
 9-0 
 
 
 0-42 
 
 30-6 
 
 1863 
 
 15-38 
 
 21-4 
 
 9-8 
 
 . . 
 
 0-46 
 
 31-2 
 
 1864 
 
 15-40 
 
 22-6 
 
 10-3 
 
 . . 
 
 0-45 
 
 32-9 
 
 1865 
 
 15-33 
 
 24-0 
 
 10-4 
 
 
 0-43 
 
 34-4 
 
 1866 
 
 15-44 
 
 24-2 
 
 10-1 
 
 . . 
 
 0-42 
 
 34-3 
 
 1867 
 
 15-57 
 
 22-8 
 
 10-8 
 
 . . 
 
 0-48 
 
 33-6 
 
 1868 
 
 15-60 
 
 22-0 
 
 10-0 
 
 
 0-45 
 
 32-0 
 
 1869 
 
 15-60 
 
 21-2 
 
 9-5 
 
 
 0-45 
 
 30-7 
 
 1870 
 
 15'60 
 
 21-4 
 
 10-3 
 
 . . 
 
 0-48 
 
 31-7 
 
 1871 
 
 15-59 
 
 21-4 
 
 12-2 
 
 
 0-57 
 
 33-6 
 
 1872 
 
 15-63 
 
 19-9 
 
 131 
 
 
 0-66 
 
 33-0 
 
 1873 
 
 15-93 
 
 19-2 
 
 16-3 
 
 16-4 
 
 0-85 
 
 35-6 
 
 1874 
 
 16-18 
 
 18.1 
 
 14-3 
 
 14-1 
 
 0-78 
 
 32-2 
 
 1875 
 
 16-59 
 
 19-5 
 
 16-1 
 
 15-5 
 
 0-79 
 
 35-0 
 
 1876 
 
 17-89 
 
 20-7 
 
 17-5 
 
 15-6 
 
 0-75 
 
 36-3 
 
 1877 
 
 17.21 
 
 22-8 
 
 16-2 
 
 15-0 
 
 0-66 
 
 37-8 
 
 1878 
 
 17-95 
 
 23-8 
 
 19-0 
 
 16-9 
 
 0-71 
 
 40-7 
 
 1879 
 
 18-41 
 
 21-8 
 
 19-2 
 
 16-6 
 
 0-76 
 
 38-4 
 
 1880 
 
 18-06 
 
 21-3 
 
 19-3 
 
 17-1 
 
 0-80 
 
 38-4 
 
 1881 
 
 18-25 
 
 20-6 
 
 20-4 
 
 17-9 
 
 0-87 
 
 38-5 
 
 1882 
 
 18-28 
 
 20-4 
 
 22-3 
 
 19-6 
 
 0-96 
 
 40-0 
 
 1883 
 
 18-66 
 
 19-0 
 
 23-0 
 
 19-7 
 
 1-04 
 
 38-7 
 
 1884 
 
 18-64 
 
 20-3 
 
 21-1 
 
 18-1 
 
 0-89 
 
 38-4 
 
 1885 
 
 19-40 
 
 21-6 
 
 23-7 
 
 19-5 
 
 0-90 
 
 41-1 
 
 1886 
 
 20-81 
 
 21-2 
 
 24-1 
 
 18-5 
 
 0-87 
 
 39-7 
 
 1887 
 
 21-15 
 
 21-0 
 
 24-8 
 
 18-8 
 
 0-89 
 
 39-8 
 
 1888 
 
 21-99 
 
 21-9 
 
 28-4 
 
 20-6 
 
 0-94 
 
 42-5 - 
 
 1889 
 
 22-09 
 
 24-6 
 
 32-4 
 
 23-4 
 
 0-95 
 
 48-0- 
 
 1890 
 
 19-76 
 
 24-0 
 
 34-7 
 
 28-2 
 
 1-17 
 
 52-2 
 
 1891 
 
 20-93 
 
 25-0 
 
 37-2 
 
 28-3 
 
 1-13 
 
 53-3 
 
 1892 
 
 23-14 
 
 26-1 
 
 39-3 
 
 26-5 
 
 1-01 
 
 52-6 
 
 1893 
 
 
 
 
 
 
 
 See further Table, Appendix S. 
 
CHAP. I. 
 
 General View of the Question. 15 
 
 A glance at the ratio column will show how 
 small were the variations up to 1874, and how 
 violent they became after that date. In 1876, the 
 action of the German Government in selling their 
 demonetised silver began to tell with full force, and 
 the price was run down to 46Jd. per ounce in the 
 month of July in that year; by the month of 
 January, 1877, the price had rebounded to 58Jd. 
 In March, 1879, it stood at 49d. ; in May, 1882, at 
 52d. From that time, with variations, the tendency 
 continued downwards till February, 1890, when 
 42 Jd. was reached. The movement which carried 
 the Sherman Act in America then began to tell, 
 and when that Act was signed by the President in 
 July, 1890, the price was quoted at 54d. Very 
 sliortly afterwards, however, the price again began 
 to give way, and gradually declined, until, upon the 
 closing of the Indian Mints in June last, it fell to 30d. 
 It rebounded to 31d. and now stands at 28d. Every- 
 one knows that the exchanges of silver countries on 
 England have had to follow these violent fluctua- 
 tions, and the losses and disorganisation of business 
 which have resulted therefrom are also well known. 
 
 Let us look back for a moment at the causes 
 which led to the action of Germany in demoneti- 
 sing her silver. In the year 1867 a conference was 
 held in Paris with the idea of discussing some 
 system of universal currency by which the coins of 
 all nations might be harmonised. A very laudable 
 
CHAP. I. 
 
 16 Bi-metallism. 
 
 object, no doubt. These reformers, however, found 
 that a serious obstacle to the realisation of their 
 schemes existed in the different standards of value 
 which the leading nations had adopted, and from 
 that time there began a propaganda in favour of 
 gold mono-metallism. The English system was 
 regarded as the best, and England's commercial 
 prosperity was supposed to have resulted largely 
 from her monetary system. The idea was that 
 gold should become the standard of all the richer, 
 while silver might remain the standard of the 
 poorer nations. These ideas had made consider- 
 able progress in France when the Franco-German 
 war commenced. Had it gone differently, perhaps 
 France would have parted with her silver as 
 Germany has done ; but we all know the issue of 
 that war and its consequences. France lay at the 
 feet of her conqueror, and with the indemnity 
 money in hand, Germany thought she had the 
 power of gaining a further victory over her rival 
 by getting ahead of her in her monetary system. 
 The currency of the German empire sadly needed 
 reform, but more than this was decided upon. Led 
 away by the views of the panegyrists of gold mono- 
 metallism, she decided to change her standard 
 from silver to gold,* and thus put herself in line 
 with England. The operation of trying to get rid 
 of her silver, and of replacing it with gold, proved 
 
 * Appendix E. 
 
CHAP. I. 
 
 General View of the Question. 17 
 
 a costly and difficult one for Germany, and after 
 continuing her sales of silver for four years, she 
 had to suspend them. A large amount of legal 
 tender silver is still circulating in certain denomi- 
 nations of coins, and as these are on the basis of 
 15 J to 1 of gold she is, so far, practically in the 
 same position as France. It is quite understood 
 that Germany now doubts the wisdom of the move 
 she made. Will she stop short, or go forward in 
 completing the change ? That question has at 
 different times agitated Germany. Her Govern- 
 ment sees the difficulties on both sides, and it is 
 believed that, in view of these, there is a better 
 disposition on her part towards international 
 agreement as to the best solution of the difficulty. 
 The economist who urged the adoption of gold 
 mono-metallism seemed to think that gold and 
 silver would always continue, as they had done, 
 about the same relative value. They did not foresee 
 the effect of their propaganda on the value of 
 silver. It required, however, only one nation to 
 become a convert to their views, and to carry them 
 out practically, to bring about all the disastrous 
 consequences we have seen, and already the prin- 
 ciple of gold mono-metallism is self-condemned. 
 The world sees that it cannot be extended without 
 entailing untold evil, and all monetary authorities 
 those who rank themselves as the opponents of 
 bi-metallism, as well as those who favour it are 
 
 c 
 
18 Bi-metallism. 
 
 now equally opposed to the extension of gold mono- 
 metallism. All equally wish to see silver as well 
 as gold maintained as money. But how is it to be 
 done, if not in the way that bi-metallists advocate ? 
 Their opponents do not say. They only say 
 " England must do nothing in the matter." Such 
 a course is not only selfish, but illogical. If 
 nothing is done, nation after nation must give up 
 silver as its standard, and it is only the magnitude 
 of the danger that makes them pause to see if 
 nothing will be done by the leading nations in the 
 direction of bi-metallism. France still waits, but 
 she cannot wait indefinitely. Her currency laws 
 are founded on bi-metallism, and must ere long be 
 repealed if they cannot be put in force. At 
 present they are simply in abeyance as regards the 
 free coinage of silver. Throughout France, pur- 
 chases to any extent can be made with coined silver 
 on as good terms as with coined gold, but nothing 
 fresh can be coined. Her bi-metallic system, with 
 its free coinage of silver for all comers, had, as we 
 have seen, linked gold and silver together, not for 
 France only, but for the world ; but, like some 
 grand old bridge of solid masonry held together 
 more by the cohesion of its materials than by its 
 structural form, it gave way, after resisting many 
 a strain, under a pressure it was never intended to 
 bear. It can never again be restored on the same 
 lines ; a new bridge must be constructed, resting 
 
CHAP. I. 
 
 General View of the Question. 19 
 
 on the broad basis of the general accord of nations. 
 France and the United States would willingly join 
 in such an accord, but the co-operation of one 
 other power is necessary to initiate bi-metallism. 
 That power is England, and whenever she can be 
 induced to lay aside old prejudices, and join in a 
 convention, the whole thing will be accomplished, 
 and gold and silver will be again practically re- 
 garded as one metal for all the purposes of inter- 
 national trade. 
 
 I have referred to the equilibrium formerly main- 
 tained between silver countries and gold countries, 
 and will now indicate more fully what I mean by 
 this. 
 
 The gold and silver money existing in the world 
 in- the year 1870 was estimated by Mr. Ernest 
 Seyd to amount to about 1,850 millions sterling, 
 consisting of 700 millions gold, and 650 millions 
 silver. The distribution of this amount was as 
 follows : 
 
 GOLD. SILVER. 
 
 Coin & Bullion. Coin & Bullion. 
 Full Value. Full Value. 
 
 England 
 
 130 millions 
 
 . . millions 
 
 15 millions 
 
 France 
 
 260 
 
 70 
 
 14 ,, 
 
 Germany 
 
 &\j\j , j 
 
 30 
 
 \j 9 , 
 
 60 ,, 
 
 16 ,, 
 
 Belgium, Holland, 
 Portugal,Denmark, 
 Sweden, & Switzer- 
 land. 
 
 w ) ) 
 
 40 
 
 45 
 
 10 
 
 The rest of Europe . . 
 
 60 
 
 30 ,, 
 
 25 
 
 Total in Europe 520 millions 205 millions 80 millions. 
 
CHAP. I. 
 
 20 Bi-metallism. 
 
 United States 
 
 GOLD. 
 
 Coin & Bullion. 
 Full value. 
 
 30 millions 
 
 SlLVI 
 
 Coin & Bullion. 
 Full value. 
 
 . millions 
 
 !K. 
 
 Subsidiary 
 Coinage. 
 Debased value. 
 5 millions 
 
 Other States in Ame- 
 rica, the Colonies, 
 and generally dis- 
 tributed 
 
 | 140 ' 
 
 50 
 
 10 
 
 India, and China, the 
 East . 
 
 Y 
 
 250 
 
 40 
 
 700 millions 505 millions 145 millions 
 
 Mr. Seyd divides the countries he*re embraced 
 into four groups, the first three having metallic 
 currencies and the fourth having no metallic cur- 
 rency. The first group consisting of 
 
 England, Portugal, ) 
 
 Chili, and Aus- [ Under the gold valuation, 
 tralia ) 
 
 The second group consisting of 
 
 France, Belgium, \ 
 
 Switzerland, Spain, f TT , ,, , , , ., , ,. 
 
 New Granada, EC- ( IInder the S old and Sllver valuation, 
 uador, and Peru . . ) 
 
 The third group consisting of 
 
 Germany, Holland,^ 
 Sweden, Norway, 
 
 Denmark, Mexico, Y Under the silver valuation. 
 Central America, I 
 India, and China.; 
 
 The fourth group consisting of 
 
 Turkey, Brazils, 
 United States, 
 
 Italy, Greece, Aus- 
 
 Having an inconvertible paper valuation. 
 
 tria, and Russia. 
 
 Mr. Seyd further estimates that under the gold 
 valuation there are in a country 
 
 88 per cent. Gold coin, legal tender. 
 
 10 2 
 
CHAP. I. 
 
 General View of the Question. 21 
 
 Under the gold and silver valuation 
 
 60 per cent. Gold coin ) T -, m * 
 28 P Silver coin j Legal Tender. 
 
 l l I,' or**T W l [Token money. 
 Under the silver valuation 
 
 75 per cent. Silver coin, legal tender. 
 13 ,, Gold coin, current, but not legal tender. 
 10 Silver coin, depreciated \ r r -. ,. 
 
 2 ^ Coppercom j Token money. 
 
 In 1870 there was therefore the hi-metallic group 
 forming a centre, and on either side the gold and 
 silver groups; the former, with its 88 per cent, 
 gold, forming a counterpoise to the latter, with its 
 75 per cent, silver. 
 
 Keeping this arrangement in view, one can 
 understand how it was that no undue strain came 
 upon the mints of France and the other States of 
 the Latin Union* which held to the bi-metallic 
 system. Gold and silver alike passed freely through 
 their mints, and, as a rule, there was no undue 
 accumulation of either metal. The gold which they 
 could spare found its way to the gold States, and 
 the silver to the silver States. But when Germany 
 and the smaller States which she influenced retired 
 from the silver group and joined the gold group, 
 this equilibrium was destroyed. Germany had 60 
 millions in silver to dispose of, and she required 60 
 millions in gold to take its place. In alarm, as we 
 have seen, and afraid that she might be deprived 
 of her gold as well as inundated with silver, France 
 
 * Appendix C. 
 
CHAP. I. 
 
 22 Bi-metallism. 
 
 closed her mints, and the system which had secured 
 the uniform relative value and free use of silver 
 and gold throughout the world collapsed. Silver, 
 thenceforward, for international purposes, hecame 
 nothing more than a commodity, while gold as- 
 serted itself as the only and supreme standard 
 throughout the world, " el Rey de todos los Reyes," 
 in the empire of money. 
 
 It is just possible that if France and the other 
 bi-metallic countries had held boldly to their 
 system the danger might have passed, and that 
 the excessive supplies of silver sent from Germany 
 to her mint might have found their way, as they 
 had done formerly, to other countries where they 
 were required. But why should France be exposed 
 to such a risk ? It was right also that the world 
 should recognise the beneficent services she had 
 been rendering, and that other nations, such as 
 England, which had benefited so largely by her 
 action, should see the necessity of also bearing 
 their part in maintaining the proper relation of the 
 two metals as money. 
 
 The world was staggered by the consequences 
 which ensued upon the closing of the French mint. 
 There was the grossest ignorance prevailing every- 
 where regarding the matter ; and, to intensify the 
 difficulty, the rich results which were reported as 
 being obtained from the working of the new silver 
 mines in Nevada and California, especially from 
 
CHAP. I. 
 
 General View of the Question. 23 
 
 the Comstock lode, for a while caused the greatest 
 alarm lest silver might become as cheap and plenti- 
 ful as copper or tin. This, however, proved only a 
 short-lived scare, and the output of new silver 
 actually kept comparatively steady. 
 
 The theorists who opposed bi-metallism pointed 
 to this increase in the supply, and ascribed the 
 whole disturbance in the price of silver to the 
 natural law of supply and demand. They over- 
 looked or shut their eyes to the fact that equally 
 sudden, and far greater, variations in the supplies 
 of the two metals had frequently occurred during 
 the previous seventy years without disturbing their 
 relative value. The table to which I have already 
 referred also shows this.* In the parallel column 
 'against each year will be found the relative supply 
 of the two metals, from which it will be seen that 
 while the ratio in price of the two metals kept 
 almost uniform, the proportionate supply had varied 
 from 2.97 of silver to 1 of gold, to '22 of silver to 1 
 of gold. 
 
 In the early years of the century there had been 
 a great increase in the relative supply of silver. 
 Again, on the discovery of the gold mines of Cali- 
 fornia and Australia, the supplies of gold sprang 
 from 5 millions in 1849 to 36 millions in 1852, 
 without any corresponding increase in the supply 
 of silver. Yet the price of silver remained the 
 
 * See page 14. 
 
CHAP. I. 
 
 24 Bi-metallism. 
 
 same. These facts effectually dispose of the idea 
 that it was the supplies of silver from Nevada and 
 California that led to its depreciation. Under the 
 breakdown of the old system they intensified the 
 difficulty, but apart from this they might have had 
 no effect. 
 
 I will now notice briefly a few of the practical 
 effects of the disturbance in the relative value of 
 gold and silver. I have shown that prior to 1874 
 the two metals were practically one in constituting 
 the metallic money of the world. When econo- 
 mists spoke or wrote of money in connection with 
 international trade, they meant the precious metals 
 silver and gold, not one of these metals only* 
 and the two together in their aggregate volume 
 formed the metallic basis of exchange by which 
 the trade of the world was carried on. Economists 
 justly assert that, while metallic money is a stand- 
 ard of value in relation to other commodities, it is 
 also itself a commodity ; and, as such, is subject 
 to the laws which rule the value of all other com- 
 modities. Scarcity must enhance its value, and 
 abundance must diminish its value. If the quantity 
 is increased, its value in relation to all other com- 
 modities must fall ; if it is reduced, its value in 
 relation to these must increase. Now take, for 
 illustration, the estimated figure of ,1,350 millions, 
 
 * John Stuart Mill's "Political Economy," Book III.,' 
 chapters 19 and 21. 
 
CHAP. I. 
 
 General View of the Question. 25 
 
 or say 1,400 millions, as the value of the metallic 
 money of the world half this amount being gold 
 and the other half silver. Suppose that amount 
 were rapidly diminished, values of commodities 
 everywhere would fall ; suppose it were increased, 
 values would be augmented. If silver were every- 
 where effectually demonetised, this would reduce 
 the metallic money in the world to 700 millions 
 of gold, and, as this 700 millions would have to 
 do the exchange work which is at present done by 
 1,400 millions of the two metals, its value would 
 be correspondingly increased. One sovereign 
 would have the same purchasing power as two 
 sovereigns now have, prices of commodities would 
 seem to fall to this extent in relation to money, but 
 in reality it would be that money had become en- 
 hanced in value owing to its scarcity. 
 
 It requires little demonstration to prove that this 
 would be an immense evil. The whole balance of 
 values would everywhere be disturbed. Not to 
 speak of the immediate loss to the holders of silver, 
 every debtor who owed gold would have, practically, 
 to pay double the amount which he owed. National 
 loans, contracted in gold, could not be discharged 
 without the surrender of double the property which 
 these loans, when made, could have bought. In 
 fact, everywhere the debtor would suffer and the 
 creditor gain. Of course, this is putting the thing 
 in an extreme light, but it serves to show how it 
 
 THE 
 
26 Bi-metallism. 
 
 must work. With the partial demonetisation of 
 silver and the old equilibrium destroyed, we have 
 already seen a great depreciation in its relative 
 value, accompanied by a great appreciation in the 
 value of gold ; and, as the process of demonetising 
 silver goes on, as go on it must, unless effectually 
 arrested by the adoption of bi-metallism, this 
 divergence must increase, affecting money values 
 and all debts, including our own National Debt, in 
 the manner I have indicated. 
 
 With regard to the National Debt also it is 
 necessary to remember that the 850 millions, 
 which existed when the legislation of 1816 estab- 
 lishing the gold standard came into force, had all 
 been contracted on a silver or on a bi-metallic 
 basis ; that is, the nation had received from the 
 bondholders money based on silver or on silver and 
 gold, and, in equity, the nation had the right of 
 repaying what it had borrowed on the same basis ; 
 but the law of 1816* stepped in between the bond- 
 holders and the nation, and said that this debt 
 must be recognised as a gold debt. As we have 
 seen, owing to the general action of the bi-metallic 
 system over the world in maintaining the old ratio 
 of value between the two metals, no practical in- 
 justice ensued, though it might have been other- 
 wise. Now, however, if the demonetisation of 
 silver is allowed to go on increasing the weight of 
 * Appendix N. 
 
CHAP. I. 
 
 General View of the Question. 27 
 
 all gold obligations, this question may become im- 
 portant, and the British taxpayer feel that he is 
 suffering under an arrangement which, in this 
 phase of it, was morally wrong.* 
 
 In speaking of money, it is too often regarded 
 only as the medium of exchange. Its functions, 
 as one writer asserts, being merely " to express by 
 a kind of shorthand the relative value of one com- 
 modity as compared with another." This is so far 
 true, but it is far short of all the truth. Besides, 
 the attribution to the precious metals of these 
 functions of exchange gives them, as we have seen, 
 their substantial value as wealth, and it is in this 
 capacity that they become our standard of value. 
 Who doubts that the gold in the vaults of the 
 Bank, and circulating throughout England, con- 
 stitutes so much real wealth ? So with silver 
 money also where it exists. No doubt, anyone 
 who has looked into the matter knows that, in 
 relation to the immense settlements which are 
 made without the intervention of metallic money 
 (say by bills, clearing-houses, &c.), the extent of 
 the transactions in which it is used appears trifling. 
 Nevertheless, metallic money is the basis on which 
 these credit documents rest, and the pivot on 
 which all these settlements turn. We know that 
 the reserves in the Bank of England cannot decline 
 
 * See for a full reference to this aspect of the question " The 
 Standard of Value," by Mr. Leighton Jordan. (London: David 
 Bogue.) 
 
CHAP. I. 
 
 28 Bi-metallism. 
 
 a few millions without affecting commerce every- 
 where. And the contraction from the depreciation 
 of silver must have had its effect in other countries 
 as surely, though not so visibly. There is a 
 mysterious power which the monetary reserves of 
 the world possess, and writers on all sides of the 
 question have shown that the periods when the 
 largest increase of the precious metals took place, 
 were those marked by the greatest advances in 
 commerce. The period succeeding the conquests 
 in South America by Spain, with the large influx 
 of gold and silver into Europe which resulted, 
 witnessed such an advance ; and, after the gold 
 discoveries of California and Australia, we know 
 that a long period of prosperity followed, during 
 which commerce everywhere advanced. No doubt 
 other causes also were at work, but I believe that 
 the increase in the money basis of trade was the 
 most potent. A relatively increasing supply of 
 metallic money is necessary for the growing trade 
 of the world, and the contraction of that supply, 
 in whatever way, must be adverse. 
 
 The effect of the disturbance in the relative 
 value of silver and gold on Exchange transactions 
 is the most apparent of the evils to which it has 
 given rise, though it may not be so fully under- 
 stood by those who are not trading with foreign' 
 countries. It may be well, therefore, to explain 
 
CHAP. I. 
 
 General Vieiv of the Question. 29 
 
 that what is known as par value is the exact equiva- 
 lent of the coins of one country measured in the 
 currency of another ; that is, reducing both to 
 their exact value as metals. If the course of trade 
 requires the money of England to be sent to any 
 foreign country, it will be worth there its par 
 value plus the cost of transmission of specie ; if, 
 on the other hand, the balance of trade is against 
 that country, and specie has to be sent to England, 
 then the money of England will only be worth 
 there its par value minus the cost of transmission. 
 There are other minor causes, such as rates of 
 interest, usance, &c., that affect the rates, but, in 
 the main, the figures which indicate par value plus 
 the cost of transmission of specie, and par value 
 ininus that cost, are the two points which mark the 
 limits of variation beyond which quotations cannot 
 go far. Par value is like the polar centre of the 
 compass over which the needle point of Exchange 
 quotation oscillates, and towards which centre if 
 will always tend to return. In the case of silver 
 countries prior to 1874, say for instance India and 
 England, the par value of the rupee was almost as 
 steady as if both had been gold countries. The 
 sterling value of the rupee varied under the con- 
 ditions as to the balance of trade which I have 
 described, but the variations in the relative prices 
 of gold and silver were so small that there was 
 hardly any perceptible variation from this cause, 
 
30 Bi-metallism. 
 
 and, in all average adjustments throughout India, 
 2s. per rupee was the recognised average of the 
 relation of the two currencies. 
 
 After 1874, however, the matter became very 
 different, and we have seen the exchange value of 
 the rupee following all the violent fluctuations 
 that have taken place in the price of silver up to 
 26th June last, when the Indian Government 
 closed its mints for the coinage of silver, and 
 entered upon the dubious experiment of attempting 
 to give the rupee an exchange value apart from 
 the price of that metal. Silver, however, still 
 remains the money of India ; and cannot be long 
 independent of its outside value. In China, and 
 all the other Eastern countries where the silver 
 dollar is used, the exchange continues necessarily 
 to follow the value of silver. 
 
 The inconvenience of this state of matters is 
 evident, and in the presence of such uncertainty 
 the merchant is face to face with a danger that 
 well-nigh appals him. He can calculate and 
 arrange for the ordinary risks of exchange; but, 
 besides this, to gauge the probable prospective 
 price of silver, is both beyond his province as a 
 merchant trading with a particular market, and 
 beyond his power. The Manchester market is 
 fully conscious of this danger, and the market 
 reports concerning cotton goods and yarns give- 
 full prominence to these variations in silver, know- 
 
General View of the Question. 31 
 
 ing that the operations of buyers for India and 
 other silver countries must be at once affected by 
 any sudden change. Would not the course of 
 commerce with silver-standard countries be much 
 more safe and clear if this danger could be obviated ? 
 But, further, let us see for a moment how the 
 present system works. The London market rules 
 the price of silver. It is sent to London, not to 
 be stored and dealt with as any other commodity, 
 but it is remitted as money, and the shippers wish 
 it permuted at once into sterling. A number of 
 shipments arrive together at a moment when there 
 is no demand, and the supply dams up at once as 
 against a dead wall, until it forces an outlet at a 
 reduced price. A fortnight later there may be no 
 stock in the market, and some petty demand is 
 able to drive up the price again one or two per 
 cent. Meantime all the silver exchanges of the 
 world are affected by these comparatively unim- 
 portant transactions. But why should this in- 
 tolerable evil continue ? Short of the cutting out 
 of silver altogether as money, with all the conse- 
 quences which this would involve, there can be no 
 remedy but in the general adoption of bi-metallism. 
 Bi-metallism once established, the two metals 
 would be virtually one, each being equally con- 
 vertible into money at the fixed ratio, and the sale 
 price of silver would be on the same basis as that 
 of gold ingots is now. Silver would not then find 
 
CHAP. I. 
 
 32 Bi-metallism. 
 
 its way into the monetary mass only through the 
 narrow denies of the London market, requiring to 
 go there to have its value determined ; but in many 
 gentle streams it would quietly come in, not to 
 disturb, as at present, but to add, with its allied 
 metal, gold, to the general prosperity of the world. 
 
 I will now glance at the chief objections urged 
 against bi-metallism. Some persist in regarding 
 the thing as meaning two standards, and, under 
 this view, say it is incompatible with that unity 
 which the idea of a standard implies. They say 
 that the standard of value must be a unit, and, 
 therefore, that gold and silver cannot both be one 
 standard. They cannot see, in regard to these two 
 metals, that a thing may be duplex in its nature 
 and yet one in relation to the purposes for which 
 it is used. 
 
 For clearness of argument I state the matter 
 thus : 
 
 1. " The standard of value must be a unit." 
 
 2. Gold by itself can be thus used, and forms a 
 unit. 
 
 3. Silver by itself can be thus used, and forms a 
 unit. 
 
 4. Gold is an indestructible metal, and the 
 world's stock is the accumulation of ages, not 
 materially affected by the supply from year to year. 
 
 5. Silver is an indestructible metal, and the 
 
CHAP. I. 
 
 General View of the Question. 33 
 
 world's stock is the accumulation of ages, not 
 materially affected by the supply from year to year. 
 
 6. The value of gold mainly results from its 
 being used as money. 
 
 7. The value of silver mainly results from its 
 being used as money. 
 
 8. Suppose an area where gold was the standard 
 of value, and silver was never seen ; and suppose 
 another area adjoining where silver was the 
 standard of value, and gold was never seen. 
 
 9. Suppose that the value or purchasing power 
 of each metal in its respective area was found to 
 be at the ratio of 15 J of silver, in the silver area, 
 to 1 of gold, in the gold area. 
 
 10. Suppose now that the barrier between the 
 two areas was removed, and that the gold which 
 had circulated in the one, and the silver which had 
 circulated in the other, were each to have free 
 circulation over the combined area. 
 
 11. Before this was done an arrangement would 
 be made that the two metals should pass current, 
 say at the ratio of 15 j to 1 ; in other words be 
 freely coined at this ratio for the use of the whole 
 area, it being immaterial now how the two metals 
 distributed themselves. 
 
 12. This would be in accordance with their 
 already existing relative value, and, while being 
 confirmed by law, it would rest on those natural 
 conditions which fit both gold and silver for being 
 
34 Bi-metallism. 
 
 money, give them value, and mark out the respec- 
 tive ratio of the one to the other, as seen in 4 to 7. 
 
 13. We thus arrive at money, dual in its nature, 
 but one in relation to all other commodities, and 
 practically a unit. 
 
 14. The combined area which I have supposed 
 is the world. International law would secure all 
 that I have described. It is not a creation of law 
 that would be seen, but the regulative power of 
 law keeping order, and giving harmony to the 
 forces it controlled. 
 
 I would ask attention to the foregoing illustra- 
 tion, for not only does it meet the supposed diffi- 
 culty as to the unity of the standard, but it also 
 illustrates what bi-metallic law has done in former 
 times, and can as readily do again. The fixing of 
 a ratio is not the fixing of the price of silver any 
 more than it is the fixing of the price of gold, but 
 simply the fixing of the relation of the two metals 
 so that they may do their work in harmony. The 
 two metals form the money of the world, and if we 
 conceive a ratio fixed under the simple conditions 
 I have supposed, it will help to clear away the haze 
 of difficulty on this point which is so apt to dis- 
 courage inquirers. 
 
 In spite of the prevalence of what I consider 
 false views, and even when the preference of some 
 nations for a single gold standard has been work- 
 ing mischief, the two metals in their aggregate 
 
CHAr. I. 
 
 General View of the Question. 35 
 
 have always been practically one as the basis of 
 money. Neither can have an independent value 
 apart from the other ; and it is as vain to think 
 that England can have an independent standard in 
 one metal, unaffected by the value of the other, as 
 that the British Islands could have an independent 
 atmosphere. A thin india-rubber ball filled with 
 air will expand when the air surrounding it becomes 
 rarefied; and it will collapse if the surrounding 
 air becomes compressed. So with our fancied 
 perfect gold standard; its affinity to the general 
 volume of money outside cannot be restrained, and 
 its quality as a measure must be affected by outside 
 influences. 
 
 -It is often asserted also that, under bi-metallism, 
 the cheap metal would drive out the dear. There 
 is no meaning in this. The fact is that those who 
 make this assertion are living in the past, and 
 using the language of the earlier economists, who, 
 in the infancy of international commerce, neces- 
 sarily only viewed the matter from an insular 
 standpoint. They are thinking of particular bi- 
 metallism, that is, individual nations adopting it, 
 and the undoubted evils to which this would be 
 subject. I am no advocate of any one nation 
 becoming bi-metallic. It is international bi- 
 metallism that is wanted ; though, to secure this, 
 it is not necessary that every State should first 
 
CHAP. I. 
 
 36 Bi-metallism. 
 
 sign a convention. As I have said before, two or 
 three of the leading nations could at once bring it 
 into play, and give it all the force of universal law. 
 The advantage would be so manifest, however, that 
 every other nation which coined silver would also 
 quickly fall in with the general arrangement. In 
 the first seventy years of this century, the system 
 that then existed, as we have seen, practically 
 secured the free passage of gold and silver, and 
 universal bi-metallism would effectually do so. If 
 all nations, or only the leading nations, agreed to 
 freely coin silver and gold at a fixed ratio, there 
 would be no undue pressure on either metal. 
 There would be no cheap or dear market for the 
 one as compared with the other; and, therefore, 
 the supposed evils to which I have referred could 
 not arise.* 
 
 It is urged as a further objection that bi-metal- 
 lism would cause great change, and lead to great 
 confusion in England. This is altogether a 
 mistake. There would be no change evident to the 
 great mass of her people. Instead of all her silver 
 coins being simply token money, as at present, 
 she would have one genuine silver coin say a 
 double-florin or four shilling silver piece, as the 
 French, in their system, have their pure silver five- 
 franc piece. The small silver of England could 
 
 * Vide page 49. 
 
CHAP. I. 
 
 General View of the Question. 37 
 
 remain as at present. The only difference would 
 be that the reserve in the Bank of England would 
 be partly silver and partly gold. There might be 
 ten millions silver and twenty millions gold, fifteen 
 millions silver and fifteen millions gold, or twenty 
 millions silver and ten gold. Whatever the pro- 
 portion, the metallic reserve would be there, just as 
 effective as if all were gold; though I believe the 
 actual distribution of the metals over the world 
 would continue to be much as it is at present. 
 
 It may be well also to notice an objection that 
 has recently been urged against bi-metallism, or 
 rather, a charge that has been made against Bi- 
 metallists, viz., that they seek to raise the price of 
 silver with the view of raising the price of Indian 
 wheat, and thus protecting the British farmer. 
 
 In making this charge, our opponents do not 
 see that they practically concede one of the main 
 positions of the bi-metallic argument, viz., that 
 while silver has fallen in Europe, it has retained 
 its old purchasing power in the East, for it is only 
 in virtue of this fact that the Indian grain grower 
 has an advantage, in cheap silver, over the English 
 farmer. If gold were the only real standard 
 everywhere, as the mono-metallic theory implies, 
 then silver money, like inconvertible paper money, 
 would quickly adapt itself in its purchasing power 
 to its altered equivalence to gold money, and there 
 
38 Bi-metallism. 
 
 could be no permanent advantage favouring the 
 Indian grain-grower. 
 
 In the early days of the controversy, no charge 
 of Protectionism such as this was ever made, and 
 had bi-metallism been adopted when the evil 
 results of closing the French mints were first seen, 
 the fall in silver would at once have been arrested^ 
 and no advantage to the Indian, or disadvantage 
 to the British, farmer would have resulted. Bi- 
 metallists raised the alarm when they saw the 
 evils that were flowing from the demonetisation of 
 silver in Europe, but their counsels were derided, 
 and they were assured that there would be no per- 
 manent change in the relation of silver to gold 
 that what was happening " was only a momentary 
 accident, and not the permanent effect of lasting 
 causes." Now that silver has fallen, and the evils 
 which they predicted have been realised, they are 
 told that they must do nothing to undo these evils, 
 because, silver having fallen, any improvement in 
 its value must lessen the power of India to com- 
 pete, and thus enable the British farmer to get 
 better prices for his produce. He has, admittedly, 
 suffered from the fall in silver stimulating Indian 
 competition, but nothing must be done to check 
 that fall because it would interfere with Indian 
 competition. Is this a fair argument ? If the 
 ghost of Protection is present in this silver questio'n, 
 why was it not discovered while, all these years, 
 
CHAP. I. 
 
 General View of the Question. 39 
 
 through the depression of silver, it was helping and 
 protecting the Indian producer ? 
 
 Has it not often been a matter of congratulation 
 as regards India that the depreciation of silver was 
 helping her in this way ? It is only when the 
 British farmer seems likely to benefit by the re- 
 appreciation of silver that the phantom is dis- 
 covered, and held forth as a bogey before the eyes 
 of the British consumer. 
 
 It is admitted on all hands that differences from 
 variations in silver values are in a different category 
 from the ordinary factors that regulate prices. 
 They come in to perplex the producer and the 
 trader, and are due to defective monetary arrange- 
 ments. It is in the high interests of all nations 
 that there should be a reliable standard on which 
 international transactions can be based, and to 
 establish, or rather re-establish, such a basis, is 
 the aim and object of bi-metallism. Silver having 
 fallen since the upsetting of the old arrangements, 
 a just settlement of the question may have the 
 effect of restoring, more or less, what has been 
 lost ; but this is incidental, and it may come about, 
 as is happening to-day, from the individual action 
 of other nations. Sudden advances, however, are 
 only less hurtful to trade than sudden falls, and 
 bi-metallists wish to obviate both. 
 
 I have thus tried to give, briefly, a general idea 
 
CHAP. I. 
 
 40 Bi-metallism. 
 
 of the question. Now it is a silver question 
 affecting exchange; now a gold question affecting 
 values. We see it interfering with the movements 
 of capital. We see it causing a scramble for gold, 
 always and everywhere making itself felt, touching 
 all interests and affecting every class. The 
 remedy proposed is a simple one, and even our 
 opponents do not deny that it would be efficacious 
 if carried out. They can only rail at the proposal. 
 "Who is to draw the treaty?" "What power of 
 persuasion will induce all countries and Govern- 
 ments to accept this gospel ?" I would reply, 
 nations know their true interests, and can combine 
 for a common purpose as loyally as individuals ; 
 and if France, England, America, and Germany 
 were to adopt a common ratio, all the nations of 
 the world would necessarily and gladly accept it ; 
 and I can conceive of no reason, nor any probable 
 circumstance of war or civil commotion, that 
 would lead to its being disturbed. Every year it 
 existed it would become more firmly fixed. It 
 would be a common blessing, equally cherished by 
 all, and any single nation attempting to be hostile 
 supposing that possible could only show its 
 hostility at great cost to itself, without the likeli- 
 hood of doing much harm. There would be no 
 difficulty with the other nations if England con- 
 sented. All the difficulty lies in getting England 
 to take her proper part in the work. The sup- 
 
General View of the Question. 41 
 
 porters of bi-metallism, however, are rapidly in- 
 creasing, and a more correct appreciation of the 
 whole question is steadily growing. To many, 
 light on the subject often comes suddenly. In 
 looking through a stereoscope, we sometimes at 
 iirst see two confused pictures ; but we continue to 
 look and, gradually, our eyes adjust themselves to 
 the focus when, all at once, not two, but one beauti- 
 ful picture stands out boldly before our eyes. So 
 I trust it may be with many who will read these 
 pages. From regarding bi-metallism as a double 
 and confused standard, they will, I hope, come to 
 see that it brings into their proper bearings the 
 two sides of the picture " money " and unites 
 them in one harmonious whole. 
 -I have not referred directly to the ratio of 
 relative value which should be fixed, contenting 
 myself with asserting the necessity and practica- 
 bility of the principle of bi-metallism. The actual 
 rate would have to be settled by an International 
 Conference, in view of all the interests that would 
 be affected by the adjustment. 
 
CHAPTEK II. 
 THE NATUEE OF MONEY. 
 
 THE object sought by bi-metallists, viz., the promo- 
 tion of stability of values, is generally admitted to 
 be a good one. Why, then, does not bi-metallism 
 commend itself to all interested in commercial 
 enterprise, and to all students of Monetary Science ? 
 I answer, because of the prevalence of false ideas 
 as to the nature of money, and inadequate concep- 
 tions as to its functions. Certain axioms regarding 
 money which have been received as true, and as 
 embodying the whole truth, block the way for 
 many minds to the investigation of the subject. 
 
 " Money," say our opponents, " whether gold or 
 silver, or any other commodity, is a natural product 
 and subject to fluctuation, in accordance with the 
 law of supply and demand." 
 
 " Any endeavour to equalise the exchangeable 
 value of two or more commodities, being unscien- 
 tific, must result in loss, be fruitful of injustice, 
 and is therefore to be deprecated." 
 
 My first object will be to examine these state- 
 ments and see where the errors which they cover 
 lie, and then to indicate the more general scope of 
 the functions of money, which I think are too much 
 overlooked in the discussion of this subject. I 
 
CHAP. II. 
 
 The Nature of Money. 48 
 
 begin with the oft-repeated question : " What is 
 Money" ? Without tracing the history of money 
 from its earliest forms as a substitute for barter, it 
 will be sufficient for my purpose to take it up at 
 the point where National Law, formulating and 
 making obligatory what usage had already practi- 
 cally established, intervenes for the regulation of 
 money. And in examining the subject at this 
 point it will be useful to separate, for the purpose 
 of investigation, the nomenclature by which money 
 is known from the thing itself; the name or 
 rather the idea from the substance. The famous 
 question, asked by Sir Robert Peel in discussion, 
 " What is a pound ? " implies a distinction of this 
 kind, for it supposes an abstract idea, and its 
 embodiment in a material substance. The legis- 
 lation of 1816 might have fixed differently what 
 the latter should be. It might have fixed a few 
 grains more or less of gold than it actually did. 
 It might have fixed it to mean the silver pound of 
 the days of Elizabeth, or it might have restored, or 
 rather continued, the bi-metallic pound sterling of 
 the previous century. In every other country, 
 also, we find a unit of money corresponding to that 
 which we have in the pound sterling here. It may 
 be a dollar, a franc, or a mark, and in each case 
 we may also distinguish between the abstract idea 
 which such units implies, and the amount of gold 
 or silver which they at present denote, for these too 
 
CHAP. II. 
 
 44 The Nature of Money. 
 
 have been altered just as our pound sterling has 
 been. There is, therefore, the pre-existing abstract 
 idea of the unit in the first place, and in the second 
 the legislative act which determines definitely of 
 what substance, and of how much, that unit shall 
 consist. We see here, therefore, the full action of 
 Law. It singles out gold or silver, or both, to be 
 used as money, and gives them special functions 
 which it confers on no other commodity. In virtue 
 of this selection, the demand for these metals is 
 greatly increased, and as they are only of limited 
 production, their value is increased accordingly. 
 They are natural products, and as such are com- 
 modities. When coined into money, this money 
 as an article of value is also a commodity, subject, 
 like all other commodities, to variation in value, 
 according to the law of Supply and Demand. I 
 can, therefore, accept the first of the two proposi- 
 tions I have quoted as far as it goes, but I must 
 also give full prominence to Monetary Law as an 
 important factor affecting the demand for gold and 
 silver, both as metals and as coined money, and I 
 must further recognise the special functions which 
 these metals as money perform. 
 
 I am not speaking abstractly of what law can do, 
 or may attempt to do, in the matter of money ; I 
 am referring simply to what law actually does in a 
 country such as our own. It is something more 
 than a mere impressing of a certificate of weight 
 
CHAP. II. 
 
 The Nature of Money. 45 
 
 and fineness. The thing thus stamped as coin 
 becomes legal tender, and the measure of all other 
 commodities attributes which other commodities 
 do not possess and the selection of the precious 
 metals for these uses gives them a position which 
 dominates all other commodities. " Money/' as 
 has been said, " is wealth raised to its highest 
 power. He who has it in his hands can buy every- 
 thing. He who has only commodities has first to 
 sell them and obtain money." One service which 
 Lord Sherbrooke rendered in his cynical attack on 
 bi-metallism, was to show the power and the action 
 of law in this matter ; and although he made the 
 quotation for a purpose of his own, he re-quoted 
 the words of Aristotle, so often quoted by bi-metal- 
 lists, " that money is so called because it exists, 
 not by nature, but by law, and it is in our power to 
 change it, and make it useless for this purpose." 
 
 Besides this distinction there is another equally 
 important, which must be kept in view viz., the 
 indestructible nature of the precious metals. The 
 cost of production, which is so potent an element 
 in determining and equalising the value of other 
 commodities, is slow and imperceptible in its action 
 as affecting these metals. Price, Jevons, and other 
 mono-metallists all admit this to a degree which I 
 think quite inconsistent with the place they assign 
 to the cost of production as affecting money. Cost 
 of production is an element in the value of com- 
 
46 The Nature of Money. 
 
 modities which acts in inverse ratio to the duration 
 of any given article. In the case of other articles, 
 the stock may be no more than a year's or a couple 
 of years' production ; but the stock of the precious 
 metals is an abiding quantity, and instead of fresh 
 production having to renew the stock, as in the 
 case of other commodities, it simply, after deduct- 
 ing what is consumed in gilding, electro-plating, 
 abrasion of coin, &c., adds from year to year a 
 small percentage to the stock already existing. 
 
 John Stuart Mill clearly perceived the force of 
 this fact when he said, " From the durability of gold 
 and silver, the total quantity in existence is at all 
 times so great, in proportion to the annual supply, 
 that the effect on value, even with a change in the 
 cost in production is not sudden, a very long time 
 being required to diminish materially the quantity 
 in existence, and even to increase it very greatly 
 being no rapid process."* 
 
 "While, therefore, regarding metallic money as a 
 commodity, there are thus two most important 
 elements of the question which must be kept in 
 view. First The influence of Monetary Law ; and 
 Second The abiding nature of the precious metals, 
 resulting from the fact that they are practically inde- 
 structible. Any deductive reasoning which ignores 
 these facts cannot be expected to arrive at the 
 
 * " J. S. Mill's Principles of Political Economy," Book IIL, 
 chapter 7. 
 
The Nature of Money. 47 
 
 truth. The second proposition, or statement, which 
 I have quoted at the beginning of this chapter, does 
 ignore them, therefore it cannot be true as applied 
 to money. It is true as regards other commodities, 
 but these are not already interfered with by law, 
 nor are they indestructible like silver and gold; 
 and what would be unscientific and impossible in 
 the one case, becomes quite possible and the only 
 truly scientific course in the other. True science 
 is not blind to facts, and it must recognise these 
 facts, and also the further fact, that gold and silver 
 already unitedly constitute the money of the world ; 
 that they are interdependent, and act and react 
 upon each other. Their fitness for money has been 
 recognised in all ages and by all peoples, and has 
 constituted them, whether coined or uncoined, the 
 potential money of the world. But even when we 
 recognise the due position of law in the doctrine of 
 money, we must not exaggerate that position. It 
 simply selects metals already precious, and confers 
 upon them the attributes of money. In doing so, 
 however, and in making them legal tender, it gives 
 them, as we have seen, a position distinct from 
 that of all other commodities, and their natural 
 qualities and durability lend themselves to their 
 being dealt with in this way by law for the pur- 
 poses of money as no other commodity could. If 
 this money of the world formed one metallic mass 
 instead of being comprised of two metals, the 
 
48 The Nature of Money. 
 
 present difficulty would not, of course, exist. As 
 matters stand, however, we must either put both 
 under the segis of law, on which their use as money 
 depends, or see one of them gradually disappear as 
 money, to the enhancement of the value of the 
 other. 
 
 Law, which can make one metal legal tender, 
 can also make both silver and gold legal tender 
 at a fixed ratio. It did so in our own country for 
 a hundred and fifty years. It did so in France, with 
 absolutely free coinage of both metals for seventy 
 years, and bi-metallic law is still in force there, 
 and throughout the Latin Union, for all coined 
 money. 
 
 Let us suppose, therefore, that the object pro- 
 posed by bi-metallists was attained, and that all 
 the leading countries of the world agreed to coin 
 gold and silver at a fixed ratio. What forces 
 could neutralise the effect of this fixation? This 
 supposition assumes that both metals would become 
 money everywhere, and could be equally tendered 
 for any just debt. Where, then, could the in- 
 equality of demand for the one metal rather than 
 the other come from ? Or how could inequality of 
 supply of the one metal or the other have any 
 effect, if both practically lose their identity in the 
 thing called money ? Where would there be room 
 for bullion speculators moving either gold or silver 
 from one country to another for the sake of making 
 
CHAP. II. 
 
 The Nature of Money. 49 
 
 a profit in the exchange of the one metal for the 
 other ? Is it not as clear as any demonstration 
 can be, that if one ounce of gold is equal to 15i 
 ounces of silver in one country, which we will call 
 A, and exchangeable at exactly the same propor- 
 tionate value in another country, which we will 
 call B, there can be no inducement in arbitrage 
 differences to cause either the one metal or the 
 other to be moved from A to B, or vice versa ? On 
 the contrary, there would be an absolute barrier in 
 the cost of transit to such operations. The only 
 movement of metallic money from one country 
 to another would be for the legitimate purposes 
 of trade in the adjustment of international balances. 
 The demand would be for money, and money, 
 whether gold or silver, would satisfy that demand. 
 This would not prevent the question, "How will 
 you have it ? " being put, just as it is put every 
 day over a banker's counter, or the convenience of 
 the country, demanding payment, being as fully 
 considered and accommodated as that of the bank's 
 customer. The general convenience and prefer- 
 ences of different nations would, I think, practically 
 result in the distribution of the precious metals 
 over the world continuing to be much the same 
 as it is now. There would probably be no change 
 visible to the general public, either in the general 
 movements of bullion, or in the use of coin as we 
 at present see it, except that all movement of the 
 
 E 
 
50 The Nature of Money. 
 
 metals for purely arbitrage purposes would be 
 paralysed. The effect, I think, would be to stereo- 
 type the existing distribution, for I hold that it 
 has been the absence of international agreement, 
 and the force of circumstances through the action 
 of individual nations in self-defence against the 
 monetary legislation of other countries, that has 
 led to the changes we have seen. These causes, and 
 not any preference for the one metal as compared 
 with the other, have led to change of standards. 
 
 I think that much that has been written and 
 said as to the tendency towards a gold standard 
 being a result of advancing civilisation, is very 
 wide of the mark. Chevalier certainly had no idea, 
 when he recommended a silver standard, that he 
 was advocating something that would be regarded 
 as a mark of retrogression. There are rich and 
 poor in all nations, and the preference of the rich 
 for gold will assert itself independently of standard, 
 even in those nations which, under this view, would 
 be classified as barbarous. Indeed, a universal 
 bi-metallic standard, if there is anything at all 
 in this preference of the rich for gold rather than 
 silver, as affecting the distribution of the two 
 metals, would give fuller scope to its free and 
 legitimate play than any other arrangement. 
 
 Of course this argument is based upon the sup- 
 position of a general bi-metallic arrangement being 
 fully carried out. Is that possible ? I say most 
 
CHAP. II. 
 
 The Nature of Money. 51 
 
 distinctly, Yes, and if the way how were the only 
 difficulty, it would very quickly be solved. If there 
 were a desire on the part of England to see it carried 
 out, and if she sent representatives free to do so, 
 they would not be long in reporting that the way 
 was clear. Unfortunately, the present position of 
 England isexpressed by the words " We sha'n'tmove" 
 and this is the difficulty that has to be overcome. 
 
 As regards the varying supplies of the two 
 metals having any effect on the fixation, we may 
 also feel perfectly at rest. The demand being for 
 money, the aggregate production of the two metals 
 would go together to form the supply of fresh 
 money. During the regime of the French Bi-me- 
 tallic Law, as already pointed out, the important 
 varfations in relative supply which resulted from 
 the Californian and Australian gold discoveries 
 had practically no effect on the ratio, and if this 
 were the case in the past we may feel assured that 
 under more perfect bi-metallism no probable varia- 
 tion in the future would be likely to tell. The 
 table which I have already given (page 14) shows 
 the separate and aggregate supplies of the two 
 metals. There is no reason to expect greater 
 fluctuation in the future than in the past, and 
 keeping in view what I have said as to the dura- 
 bility of silver and gold, and the proportion that 
 these supplies bear to the existing stock, there is 
 nothing to fear. 
 
CHAPTEE III. 
 
 THE FUNCTIONS OF MONEY. 
 
 PROFESSOK JEVONS, in his book, entitled " Money 
 and the Mechanism of Exchange," already referred 
 to, indicates the functions of money as follows : 
 
 1. A medium of exchange. 
 
 2. A common measure of value. 
 
 3. A standard of value. 
 
 4. A store of value. 
 
 In discussions regarding money, I think it is all 
 important to keep fully in view these several func- 
 tions which money performs. It is very common 
 to regard money simply as a medium of exchange 
 and common measure of value, and absorbed in 
 this view of it, to say, as Lord Sherbrooke has 
 done, that "however the currency of a country may 
 be appreciated, it will always be able to perform 
 what has been shown to be its leading function, the 
 regulation of prices." Jevons also, forgetting the 
 other functions of money, as he himself has de- 
 scribed them, has said, " 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 haying 
 once settled themselves, it is only a question of 
 
CHAP. III. 
 
 The Functions of Money. 53 
 
 carrying a little more gold or a little less in our 
 pockets." Now, if we had to regard money simply 
 as a medium of exchange and common measure of 
 value, all this might be admitted. The value of 
 money might vary without much inconvenience if 
 all transactions were immediate exchanges in which 
 money simply prevented a resort to barter. But, 
 as we know, the whole structure of trade is based 
 on credit and time contracts, and in view of this 
 the medium of exchange, which is also a standard 
 of value, cannot vary without inflicting serious 
 injury either upon debtor or creditor. Stability of 
 value in our money standard, as these writers 
 otherwise clearly show, is an all-important element 
 of money, and it is strange to find Professor Jevons, 
 in ihe very same article* from which I have already 
 quoted, after estimating that bi-metallism, by ap- 
 proximating the value of silver and gold, would be 
 equal to a reduction in the value of money of 6 per 
 cent., saying that " the adoption of the bi-metallic 
 regime would be a coup d'etat affecting the value of 
 all past monetary contracts in a degree incapable 
 of estimation." Look on this picture and look on 
 that ! In the one case the Professor can calmly 
 contemplate the disappearance of silver as money, 
 meaning a difference in the value of money of 
 perhaps 50 per cent., but when it is a question of 
 restoring silver, meaning only a difference of 6 per 
 
 * Contemporary Review, May, 1881. 
 
54 The Functions of Money. 
 
 cent., he shrinks back from it as a revolutionary 
 coup d'etat! We do not disguise the fact that the 
 application of the remedy will have its disadvan- 
 tages ; but what of the injury that has been done 
 by the lowering of silver, and would we not be 
 exposed to the same drawbacks if silver without 
 bi-metallic agreement were to rise to the old level ? 
 We saw it rise in 1876-7 from 46|d. to 58d. in six 
 months, and in 1890 it rose from 42 J to 54 in a 
 still shorter period, and we may see variations as 
 violent again if nothing is done internationally. 
 The surgeon's probe may be painful, but it is 
 necessary to the cure. 
 
 Nor is the fourth function of money, viz., its 
 being a store of value, less important than the 
 others. In theoretic discussion it is too often 
 overlooked, but in practical life there is no func- 
 tion of money that is more fully recognised. What 
 do our bankers mean when they speak of the 
 necessity of keeping up their reserve? Is this 
 metallic reserve a myth ? Is it not real wealth, a 
 store of value which enables them to meet all 
 demands that may be made upon them ? Bi- 
 metallists do not believe, as Lord Sherbrooke in- 
 sinuated, that money and wealth are identical. 
 Wealth may exist in a thousand different forms ; 
 of these money is but one, but it is the most potent, 
 and the simple hind who hoards his two or three 
 gold sovereigns, and knows that they will always 
 
CHAP. III. 
 
 The Functions of Money. 55 
 
 be available as wealth wherever he goes, has per- 
 haps a juster conception of this function of money 
 as a store of value than the noble and learned lord 
 who tells us " that there is nothing more certain 
 than that the existence of these two phenomena 
 (money and wealth) is separated by an indefin- 
 able period "(!), language which I must confess 
 puzzles me, unless it be given to supply an illus- 
 tration of his phrase an " empty nothing that it 
 jerks one to kick at it." 
 
 It might be well here to look for a moment at 
 this cognate question, " What is wealth"? Without 
 going into it fully, we know that utility is a main 
 element of wealth in any article. Now, if we regard 
 money even only as a tool, a go-between, or medium 
 of* exchange, it serves a useful purpose, just as a 
 steamboat or railway does; and as these are things 
 in which wealth resides in virtue of their utility, so 
 also is money. It is altogether fallacious to argue, 
 that because money simply obviates barter it in 
 itself is nothing, and that real wealth only dwells 
 in the articles exchanged through the medium of 
 money. The world doubtless could get on, in a 
 way, without metallic money, just as it did get on, 
 and could still get on, without railways and steam- 
 boats ; but it has found out the convenience and 
 utility of money in the one case, no less than of 
 railways and steamboats in the other. We do not 
 eat money, nor can it of itself clothe us or carry 
 
CHAP. III. 
 
 56 The Functions of Money. 
 
 us, but in civilised society it has become a necessity 
 for its uses as a medium of exchange in procuring 
 what we require, and as an available store of value 
 which is easily movable. Besides, it provides a 
 stable basis for the great structure of credit, which 
 commerce has reared a basis as necessary as the 
 foundation of any building, and which must, like 
 the foundation, be adequate in proportion to the 
 size of the structure reared upon it. 
 
 We see here, therefore, the relation that money 
 bears to wealth in general. That it is a component 
 part of the world's wealth no one can doubt. An 
 excess of gold or silver, however, forced into the 
 currencies of the world, I readily admit, would not 
 mean more wealth to the world, if it were more 
 than these currencies could readily absorb in the 
 growing wants of trade just as the constructing of 
 a new line of railway to run alongside of an exist- 
 ing line, which was amply sufficient to convey all 
 the traffic, would not mean in reality an increase 
 of railway wealth. But railways are not so placed; 
 on the contrary, there is room sufficient in the 
 world for fresh railways, which will prove to be an 
 increase of marketable railway wealth, and which 
 will develop by their creation the general wealth 
 around them. And so with money ; the increase 
 of gold or silver brought to the mints of the world 
 does not necessarily force itself into the active 
 circulating currencies of the world beyond what 
 
CHAP. III. 
 
 The Functions of Money. 57 
 
 these can readily absorb. It may pass through the 
 mints, but it is simply, in the first place, to enter 
 the world's great storehouses of value, in bank 
 reserves and private hoards, and it may either 
 remain in these, giving fresh basis to the increased 
 credit it would create, or issue forth into new fields. 
 In either case it would become a creator of fresh 
 wealth in other things as well, and so make for 
 itself -a counterpoise, which would maintain the 
 equilibrium of value between these other things 
 and money itself. This characteristic of money in 
 its relation to general wealth has never been clearly 
 defined, but as to the fact of its having this charac- 
 teristic there can be no doubt. In his essay on the 
 "Battle of the Standards," M. de Laveleye says : 
 "Every atom of precious metal which issues 
 from the mine makes an opening for itself, 
 stimulating along its course fresh activities. 
 The proof of these curious phenomena will be 
 found in the very complete chapter devoted by 
 Tooke and Newmarch, in their ' History 
 of Prices/ to the influence of Australian and 
 Californian gold on social progress. . . . 
 After 1850 M. Michel Chevalier predicted that 
 gold would fall 50 per cent. Newmarch in- 
 sisted that the new gold would find employ- 
 ment, if only in the construction of railways, 
 and would consequently lose none of its value. 
 Newmarch has proved to be right." 
 
58 The Functions of Money. 
 
 Some people call this vivifying power of money 
 inflation, and shake their heads over it as some- 
 thing to be deplored, but this is mere cant. It is 
 no more inflation than the bounteous harvest, 
 which results from seed thrown into the ground. 
 Money is like seed, which must fructify. No one 
 is content to let money lie idle. If you cannot 
 employ it suitably yourself, you can lend it, and 
 get interest for it from some one who can, and this 
 general confidence that money direct from the 
 mine or otherwise must always command interest 
 is a confirmation of its wealth-creating power, 
 which the facts given by Newmarch attest. 
 
 It is, I think, in this aspect* of money in its 
 relation to general wealth that the professors who 
 at first opposed bi-metallism went wrong. They 
 had been so impressed with the reasoning of Adam 
 Smith and those who followed him in demonstrat- 
 ing the falseness of the theories regarding money, 
 embodied in the mercantile system which he over- 
 turned, that from regarding money as the only 
 permanent embodiment of wealth they went to the 
 opposite extreme, and in theory robbed it of the 
 attributes of wealth altogether. Smith's illus- 
 tration comparing the relations of money and 
 wealth to a road in the one case and houses at 
 either end in the other, powerful as it was for the 
 purpose for which he used it, means more than 
 Smith intended, if you take it literally as implying 
 
The Functions of Money. 59 
 
 that roads were not part of a nation's wealth. We 
 know that they are, and we know also that the 
 humble labourer breaking stones by the roadside is 
 a real contributor to the common weal, just as the 
 banker who takes toll on the monetary highway 
 performs a useful part in seeing that the way is 
 properly maintained. 
 
 Far be it from me to underestimate in the 
 slightest degree the great service which Adam Smith 
 rendered in freeing the world from the false views 
 which prevailed in his days, but the blaze of light 
 which he threw on the intermediary functions of 
 money must not be allowed to hide from our view 
 its other functions, and the practical bearing of 
 these on the great questions of our day, which 
 an altogether new era of international commerce 
 has raised. 
 
 Money is not simply a " tool " or medium of 
 exchange, but also a standard of value and a store 
 of value, and it is in the two latter aspects chiefly 
 that the question of bi-metallism becomes import- 
 ant ; for we say that this standard of value must 
 be a stable one, and uniform in all trading nations, 
 and that this store of value must be free to move 
 from country to country, as it may be required. 
 
 In the earlier years of this century, when Lord 
 Liverpool wrote, and when Sir Kobert Peel legis- 
 lated, international commerce was a comparatively 
 insignificant thing, and the idea of international 
 
CHAP. III. 
 
 60 The Functions of Money. 
 
 commercial legislation was never thought of. The 
 individuality of each nation was the dominant idea 
 in all law making, and except in the way of " Holy 
 Alliances," for purposes of war, combined action 
 was never taken. The foreign commerce of Eng- 
 land in the period from 1816 to 1820 averaged 
 
 Imports 20,660,000, 
 
 Exports 40,310,000, 
 
 and the foreign commerce of other nations was even 
 more insignificant. We know what the figures of 
 British commerce now amount to, and all nations 
 have shared in this progressive expansion of 
 foreign trade. There are also wheels within wheels 
 intertwining the interests of different countries, one 
 country becoming the paymaster of another, or the 
 pivot on which many others adjust their exchanges, 
 and in all this ramified movement of commodities, 
 and adjusting of interests, money has the chief 
 part to perform. The importance, therefore, of 
 unity in the standard of value, so that this move- 
 ment may be unhindered, becomes all the more 
 apparent. The legislator who, in 1820, scarcely 
 required to look beyond his own country in guiding 
 its commercial interests, and who, even when he 
 did so, never thought of the possibility of co-opera- 
 tive action with other countries, has now a wider 
 field to survey. He has become accustomed to 
 international action in a variety of ways, and never 
 doubts the validity and force of agreements made 
 
CHAP. III. 
 
 The Functions of Money. 61 
 
 in this way when once entered into. The great 
 men of the past had not to deal with the question 
 as it presents itself to us now, and I think that 
 Mr. Grenfell was perfectly justified in saying 
 he believed "that if Sir Kobert Peel and Lord 
 Liverpool were living at this moment, and were 
 as keenly alive as they were in their own days to 
 all the events passing around them, they would 
 have come to the conclusion that this question 
 (of standard) must be reconsidered." 
 
 It was only through the action of the French Bi- 
 metallic Law, practically conferring upon England 
 and the world the advantages of bi-metallism, that 
 the want of general agreement was not felt earlier. 
 When France ceased to do this work, under circum- 
 stances with which all are familiar, the anomaly of 
 present arrangements quickly showed itself, and I 
 cannot but think, that notwithstanding the present 
 apathy of England, her opposition to an agreement 
 will ere long disappear, and be as much a matter 
 of wonder to all, as it now is of regret to those who 
 see the mischief it is working. 
 
 Commercial England is the centre of a circle 
 whose circumference embraces the globe, and to 
 her of all others this question, involving as it does 
 the free circulation of capital and commodities, is 
 a matter of the first importance. Much of her 
 capital, to be suitably employed, must go abroad, 
 and devoted as she is to the doctrines of Free 
 
62 The Functions of Money. 
 
 Trade, she would allow nothing to stand in the 
 way of their full development. Linked also to 
 India with her silver standard, England forms 
 with her a vast confederacy united by the strongest 
 political and commercial ties, but with the anomaly 
 of what has been called bi-monometallisni prevail- 
 ing in the Empire, which should be one in its 
 money standard if the highest advantages of im- 
 perial unity are to be attained. 
 
 "Why limit ourselves to bi-metallism ? " asks 
 Lord Sherbrooke, showing that with all his pro- 
 fessed attempt to understand it, he is utterly 
 ignorant of what it means. Why Bi ? Simply 
 because we are dealing with a Bi. The world's 
 money consists of two metals, and we simply want 
 to regulate existing money, not to create anything 
 new. 
 
 " The essence of bi-metallism," says Lord Sher- 
 brooke, " is not plurality but inequality." The 
 essence of bi-metallism is neither plurality nor 
 inequality, but unity. The world's commerce, in 
 regard to its monetary power, is at present like a 
 twin screw steamer driven by two engines working 
 separately, swaying from side to side, and losing 
 force from the necessary effect of the helm trying 
 to keep it straight. Lock the two engines together, 
 and all this irregularity and retarding will cease. 
 So with the gold and silver money of the world'; 
 link the two together by the tie of a fixed ratio, 
 
CHAP. III. 
 
 The Functions of Money. 63 
 
 and you will have unity of action, and all the 
 advantages which must result therefrom. 
 
 I sometimes think that it is the very simplicity 
 of the bi-metallic proposal that excites the disdain 
 of so many of our supposed authorities, and leads 
 them to turn away from it, Naaman-like, " in a 
 rage." " Are not the great teachings of the past 
 on which their theories rest better than the modern 
 ideas which are now promulgated?" Eeverence for 
 the great names of the past, however, should never 
 lead us to stand still at the point where their 
 teachings left us. Truth at all times is like a 
 living germ working ever onward and upward in 
 the progressive development of human thought, 
 and the true use for us of the great teachings 
 of the past is not to bring them forward as fossils 
 incrusted in former surroundings, but to take the 
 essence of these teachings in its bearing on the 
 questions which we in our age have to deal with, 
 and to let it have its due effect. 
 
 Locke, Newton, and Adam Smith, with his fol- 
 lowers, have all differed from each other on many 
 points ; but through their writings truth has been 
 gradually evolved and economic science advanced, 
 which, dealing with the questions of their days, has 
 in our time to grapple with the fresh practical 
 problems that extended commerce and multiplied 
 communications have raised. 
 
 We are, indeed, forced to adapt ourselves to the 
 
64 The Functions of Money. 
 
 changes ever occurring around us. No one, for 
 instance, in the earlier years of this century, would 
 have thought of proposing that the true time of 
 each locality as marked by the sun-dial should be 
 interfered with ; but no sooner had railways and 
 telegraphs begun to be developed, than the neces- 
 sity of one uniform standard of time throughout 
 Great Britain became apparent, and Greenwich 
 time forthwith was adopted. Local time did well 
 enough in the days of stage-coaches, but the era of 
 railways required an artificial adjustment of time 
 to be made for the general convenience, which has 
 never since been objected to. 
 
 The Great Western Railway Company, backing 
 up the opinion of its great engineer, determined to 
 have its own way in the matter of gauge as against 
 what was otherwise being adopted throughout the 
 kingdom. All know what has been the result on 
 the fortunes of that railway. It was compelled in 
 a most complicated and expensive way, to put 
 itself in harmony with the general gauge of the 
 other railways of the kingdom, and its separate 
 broad gauge is now altogether abolished. I think 
 this experience should teach a salutary lesson, as 
 bearing on the present attitude of England towards 
 other nations in their attempts to solve the present 
 difficulty as to the monetary standard. Brunei at 
 first believed that there was no system like his 
 own, and that it must prevail, and even when 
 
, 
 
 The Functions of Money. - 
 
 actual facts in the general adoption of Stephenson's 
 gauge were against him, he still persevered. " What 
 have we to do with other nations in the matter of 
 standard ? Let us hold to our own system, which 
 suits us so well," say those whose voice still 
 prevails. Apart from the question whether it does 
 so or not, this attitude, besides being a selfish one, 
 is a dangerous one, in view of unexpected develop- 
 ments and changes in commerce, which are always 
 taking place. Our only safety is to keep well in 
 the general running, unembarrassed by any diffi- 
 culties of standard, if we are to maintain our place 
 in the great race of competition with other nations, 
 which is becoming every day more keen. 
 
 England is generous in the matter of Free Trade, 
 and- anxious to see other nations appreciating the 
 advantages which it brings, and thinks they are 
 selfishly blind in not following her example. But 
 how does she treat them in the matter of monetary 
 standard, which they are so anxious to see settled ? 
 In the one case she is all for the common good ; in 
 the other she is all for herself. The question, how- 
 ever, in all phases, I believe, affects England quite 
 as much as, if not more than any other nation, and 
 I fear we shall see no sustained revival of trade 
 until it is settled. The only hope of dealing with 
 the matter effectively is by international agree- 
 ment. If all hope of this were lost, the other 
 nations must steadily set their faces towards a 
 
CHAP. III. 
 
 66 The Functions of Money. 
 
 single gold standard. There could be no alter- 
 native but the gradual elimination of silver as 
 money, with the necessary enhancement of gold, 
 leading to a protracted fall in prices, when stag- 
 nation in trade would become more and more 
 intense. For when prices are continuously falling 
 from the enhancement in the value of money, 
 enterprise becomes impossible from the certainty 
 of loss in every investment, and the best thing for 
 the capitalist is to hold money, as its purchasing 
 power is always increasing. The continuous fall 
 in prices in the early years of the century, which 
 resulted from the enhancement in the value of 
 money, due mainly to the legislation of 1816 to 
 1819, furnishes a parallel to what we have lately 
 seen, and may further realise if nothing be done. 
 It is also a description of present times to read 
 in the pages of Sismondi, published in 1827, the 
 following : 
 
 "A cry of distress is raised from all the 
 manufacturing towns of the Old World, and 
 all the fields of the New World re-echo it. 
 Everywhere commerce is struck with the same 
 langour; everywhere it encounters the same 
 impossibility of selling. It is five years at 
 least since the suffering began ; far from being 
 allayed, it seems increasing with time. The 
 distress of the manufacturers is the -most 
 severe, because, unlike agriculturists, their 
 
The Functions of Money. 67 
 
 entire livelihood depends on exchanges. . . 
 At the same time farmers and landlords com- 
 plain of being ruined. They loudly cry for 
 protective laws, for monopolies; they declare 
 they cannot stand foreign competition."* 
 I would recommend the perusal of this pamphlet. 
 Headers will find in it a clear and philosphical 
 exposition of bi-metallism, and will also learn how 
 much commercial difficulties, and the great decline 
 in prices, which followed the resumption of specie 
 payments in England, were aggravated by the 
 decision to make gold alone the basis of our 
 currency. 
 
 * "International Bi-metallism, and the Battle of the Stan- 
 dards," by M. Emile de Laveleye. London : P. S. King. 
 
CHAPTEE IV. 
 
 THE VALUE OF MONEY. 
 
 THE lending of money, and the parting with money 
 in exchange for commodities or property, are very 
 distinct operations, and the value of money for the 
 one purpose in discount rates or interest is no 
 measure of its value for the other. A man lends 
 his money because he does not wish to part with 
 it, and he does not wish to part with it because he 
 finds that its value in relation to commodities is 
 appreciating. The higgling process which deter- 
 mines value goes on between the holders of money 
 on the one hand and the holders of commodities 
 on the other, and in depressed times the advantage 
 is all on the side of the former, tending to their 
 making the best bargain. The potentiality of 
 money thus becomes intensified when prices are 
 falling, and apart from its use as a medium of 
 exchange, the desire to hold it as the most avail- 
 able form of wealth becomes stronger. The holders 
 of it, however, do not wish to let it lie idle, and 
 while retaining their hold upon it are anxious to 
 lend it, so that in the meantime they may gain 
 interest. 
 
 There is another feature of the case which, from 
 
CHAP. IV. 
 
 The Value of Money. 69 
 
 a banker's point of view, also comes into play. 
 The banker can only lend upon ample security, 
 and when values are declining, and wealth where 
 it once existed is slipping away, he finds his area 
 for lending circumscribed, and this, it may be, at 
 a time when deposits are being poured in upon him 
 more freely. Causes adverse to trade may therefore 
 tend to low rates for loans, while at the same time 
 the exchangeable value of money as against com- 
 modities may be appreciating. 
 
 These remarks may appear to be mere truisms, 
 but it is well to mark fully the distinction between 
 these two senses in which the terms " value of 
 money " are employed, and it may help to a clearer 
 understanding of the subject. Money is not simply 
 a fool, as some economists would have us believe, 
 but a tangible something desired by all, not merely 
 for immediate use, but also to retain for prospective 
 use. What, then, is money ? Is it simply the coin 
 and bullion which make up the currencies of the 
 world ? No, and yes. None of the fiduciary money 
 of the world in bank notes and other credit docu- 
 ments can stand alone. Apart from convertibility, 
 these are simply shadows without substance ; only 
 metallic money can stand by itself as money. 
 Given the condition of convertibility, however, 
 fiduciary money is to the holder of it as real as 
 metallic money. But though by the intervention 
 of credit documents the power of the world's money 
 
CHAP. IV. 
 
 70 The Value of Money. 
 
 for exchange purposes may thus be increased a 
 hundredfold, the metallic basis is after all the main 
 determining element in the value of money. This 
 basis is the only real store of value in money, and 
 it is on this that all the holders of fiduciary money 
 believe that they have an ultimate and absolute 
 lien. It bears a mathematical relation to the vast 
 superstructure of fiduciary money resting on it, 
 and to the exchange work it has to do. If this 
 work increases, and there is no corresponding in- 
 crease in the mass of the metallic basis, the value 
 of the basis its purchasing power must increase. 
 If, on the other hand, the mass of metallic money 
 increases in relation to the exchange work, then it 
 falls in value, that is, its purchasing power de- 
 creases. It is to be noted, however, that in both 
 cases a concurrent modifying action comes into 
 operation. In the former, the fall in prices of com- 
 modities from the increased value of money, checks 
 commercial transactions; and in the latter, from 
 the stimulus to trade which advancing prices give, 
 commercial transactions increase. The one process 
 means decaying trade ; the other, prosperous times 
 such as were experienced, with only slight inter- 
 ruptions, during the long spell of expanding com- 
 merce which followed the gold discoveries. The 
 process of adjustment is more rapid in the latter 
 case than in the former, and some maintain that 
 the value of money did not in the period that 
 
CHAP. IV. 
 
 The Value of Money. 71 
 
 followed the gold discoveries materially decline 
 owing to the greater amount of exchange work 
 which from the expansion of commerce had to be 
 done.* 
 
 Prior to 1874 the world's metallic money in silver 
 and gold practically formed one metallic mass. 
 Now, however, the two have become disjoined, and 
 gold is now more fully the supreme standard. 
 When Germany and other nations discarded silver, 
 an increased demand for gold naturally set in, and 
 there has since been a greater scramble for it. A 
 given supply and stock of gold has now to do a 
 larger amount of exchange work for the nations, 
 and can only do so by an alteration of its value, 
 hence the appreciation of gold. 
 . Let us now follow out the effect of this change 
 on the prices of commodities. Take the total 
 money of the world at the figures given in 1870, 
 say 1,400,000,000, 700,000,000 of which was 
 gold and 700,000,000 silver. Let us represent 
 these two amounts by the figures 7 and 7, and let 
 these figures also represent the then purchasing 
 power of each. Owing to the demonetisation of 
 silver, the purchasing power of the world's money 
 in that metal fell, say to 6, while the purchasing 
 power of gold advanced in equal proportion, aay 
 to 8. Our coin, however, remains the same, and 
 we still regard 7 sovereigns as equal to 140s., but 
 
 * See Annual Commercial Review in Economist, March, 1872. 
 
72 The Value of Money. 
 
 the purchasing power of these sovereigns is now as 
 8 to 7, and the power of each shilling is likewise 
 increased, so that 17s. 6d. is equal in purchasing 
 power to 20s. formerly (8:7:: 20s. : 17s. 6d.). 
 Take now 8s. as the value formerly of a given 
 article under the old level ; the price from enhance- 
 ment of the value of gold, under the same propor- 
 tions, will run out at 7s. (8:7:: 8s. : 7s.). While 
 I give these figures for illustration, I would not 
 dogmatise as to the extent of the appreciation of 
 gold. The fact that it has appreciated to an im- 
 portant extent, and that this is due to the causes I 
 have pointed out, are, I think, sufficiently obvious. 
 It is very obvious also that if silver were further or 
 altogether demonetised as a standard, the apprecia- 
 tion of gold would be greatly intensified. 
 
 Property as well as commodities must, of course, 
 be affected to the extent to which the appreciation 
 of gold has actually taken place, and this is seen 
 everywhere. The decline is intensified, however, 
 as regards property in many localities from local 
 causes, and cannot in these cases be taken as a 
 measure of the appreciation of gold. Everywhere, 
 however, there is a shrinkage in value from this 
 cause, making the weight of charges in ground 
 rents and mortgages much heavier. Mills and 
 machinery have been affected in the same way. A 
 new mill also can be built to-day much cheaper 
 than formerly, and its existence at once depreciates 
 
CHAP. IV. 
 
 The Value of Money. 73 
 
 the value of existing mills equally good in quality. 
 This fact of the newest always being cheapest 
 furnishes a lever to promoters in floating new 
 concerns for which, in view of the actual condition 
 of the given trade, there may be no need. Every- 
 where we have evidence, in these and similar 
 things, that the value of money has undergone 
 an important change, and is still becoming 
 appreciated. 
 
 While money, as identified with gold, and as the 
 international measure of commodities, has thus 
 undoubtedly advanced in value, the question arises 
 whether silver, as the internal measure of value 
 where it alone is the standard, has fallen in rela- 
 tion to general commodities. Has it not, owing to 
 the general decline in prices, practically conserved 
 nearly all its old purchasing power for every 
 purpose except the purchase of gold ? 
 
 The experience of India, to which I refer further 
 on, points conclusively to this ; and it is now 
 evident that the enhancement of the value of gold 
 rather than the depreciation of silver has mainly 
 resulted, thus far, from what has taken place. 
 The gold-miner, with an ounce of gold can, to-day, 
 command much more of everything, including 
 silver, than he could fifteen years ago. The silver- 
 miner, with an ounce of silver can, to-day, com- 
 mand perhaps about as much of all commodities, 
 except gold, as he did formerly. 
 
CHAP. IV. 
 
 74 The Value of Money. 
 
 As long as silver maintains its position as the 
 money of the East, it may be that the process of 
 demonetising silver in Europe and America will 
 always tend more to appreciate gold than to 
 depreciate silver. 
 
 It is evident, however, that this divergence 
 cannot go on indefinitely, and the present action of 
 India, in trying to give the Eupee an exchange 
 value apart from the value of silver, shows the 
 difficulties which the present situation is creating. 
 If India, however, in common with the other 
 Eastern countries, will not and cannot have gold 
 for its internal circulation, as the best authorities 
 declare, silver must hold its old place there and 
 the present experiment ere long prove abortive, 
 showing afresh that there can be no effective 
 settlement of the difficulties but by International 
 Bi-metallism. 
 
CHAPTER V. 
 INTERNATIONAL TRADE. 
 
 FOREIGN commerce, viewed from the English stand- 
 point, embraces three main classes of transactions 
 the importing of foreign products, the exporting 
 of English manufactures and products, and the 
 lending of English money. Foreign merchants are 
 often both importers and exporters. Formerly they 
 nearly always combined both classes of business, 
 but of late years there has been an increasing 
 tendency to separate the two. To the importer, 
 the matter of exchange variations wears a different 
 aspect from what it does to the exporter. The 
 former, we will say, is a merchant importing tea 
 from China, or cotton from India. In going into 
 any transaction, the rate of exchange enters into 
 his estimate as an element of cost, but he is in a 
 sense indifferent to what the rate may be, as it 
 affects him and all his competitors alike ; and the 
 simple question he has to decide is whether he can 
 buy the produce he has in view, at a price that 
 will run out in sterling either on board or de- 
 livered in England at the figure he has prescribed 
 to him, or fixed for himself, as his limit. The same 
 merchant, however, or another, selling English 
 
CHAP. V. 
 
 76 International Trade. 
 
 goods, is in a different position. He sells them in 
 the currency of the foreign country where he is 
 trading, and prices there are regulated by demand 
 and supply, not by the cost price in currency, 
 whether as affected by home cost or by difference of 
 exchange rate, until these have gradually affected 
 the supply. His selling price therefore does not 
 move with the fluctuations of exchange, and when 
 he sells on credit he is exposed to further loss from 
 any fall in exchange which might take place before 
 his sales mature. In consequence of the disturb- 
 ance of exchange with silver countries, when the 
 matter first became acute, instructions were every- 
 where sent to foreign correspondents, " Sell on 
 prompt terms, or, if you must give credit, discount 
 sales and remit proceeds, so as to avoid risks of 
 exchange/' 
 
 The effect of this, in another view of the matter, 
 was to restrict the facilities of our foreign cus- 
 tomers, and this is one of the many ways in which 
 they were crippled by the withdrawal of English 
 capital from foreign enterprise. 
 
 In more recent years the whole system of our 
 business with foreign countries has been under- 
 going a change, under the pressure of this exchange 
 difficulty. Merchants now try, as far as they can, 
 to throw the risk upon the native dealers, by selling 
 to them in sterling ; and Exchange banks or other 
 intermediaries are availed of for forward exchange 
 
CHAP. V. 
 
 International Trade. 77 
 
 contracts, as an insurance against the risk. But, 
 however the thing may be guarded against, when a 
 sudden drop occurs, a real loss is usually made in 
 some quarter. If the merchant escapes, the native 
 dealer, who cannot safeguard his interests so well 
 as the merchant can, looks aghast when he has to 
 pay for sterling invoices with rupees at a lower 
 sterling value than he had calculated upon ; while 
 perhaps his competing neighbour, by buying in 
 rupees, is free from this loss. The banks also, 
 which must look after their own interests, may at 
 the most critical moment refuse to contract, from 
 inability to make contra contracts, and so leave the 
 merchant in the lurch. Even the produce buyer 
 (the importer from the English standpoint), who 
 has contracted for the sale of his exchange at a less 
 favourable rate for him than he could have secured 
 if he had kept the matter open, cannot feel com- 
 fortable under the knowledge that competitors who 
 have acted differently will have the pull over him 
 in the lower sterling cost of their produce. He is 
 rightly judged to have acted more prudently than 
 they, but the operation of securing by forward con- 
 tract is scarcely less speculative than leaving the 
 matter open, and the risks of importing are no 
 doubt also greatly increased by this exchange diffi- 
 culty, no matter how it may be met. 
 
 As regards the lenders of money, they simply 
 decline to have anything to do with silver exchange, 
 
78 International Trade. 
 
 and will only lend in gold, making it impossible for 
 India and other silver countries to borrow to any 
 extent in their own currency. Nor have English 
 banking companies established in silver countries 
 any freedom in lending money. In discharging 
 this function of banking, they must act simply as 
 native bankers, that is, they can only lend money 
 which they hold on loan locally; for English share- 
 holders will not permit their capital to be exposed 
 to the risks of loss which lending it in silver cur- 
 rency would involve. 
 
 I have referred to these different aspects of this 
 exchange matter for the sake of those not engaged 
 in foreign commerce, so that they may see that 
 there are different standpoints from which even 
 foreign merchants may regard it. They will thus 
 understand how it is that Manchester, which sees 
 the difficulty mainly from the exporter's point of 
 view, is much more alive to it than London, where 
 the importer's view of the matter is perhaps more 
 generally before the commercial mind, where also 
 the money-lending interests feel assured that they 
 can make their own terms in gold, and be indepen- 
 dent of silver currency risks. Some among this 
 last class also may take the selfish, if not immoral 
 view, that it does not matter though debtors may 
 lose from the rise in gold, seeing that they, as 
 creditors, will make a gain from this. 
 
 Theorists of the old school look complacently 'on 
 
CHAP. V. 
 
 International Trade. 79 
 
 these difficulties, assuring us that " international 
 trade (importing and exporting) is simply an ex- 
 change of commodities, and that alterations in the 
 value of money do not permanently affect the com- 
 mercial intercourse of nations." That alterations 
 in the value of money may temporarily affect the 
 commercial intercourse of nations, they inferentially 
 admit. That we have had such changes, the tem- 
 porary effect of which, at least, has been injurious, 
 no one who has watched our Eastern trade of late 
 years will deny. Now, an effect which in its nature 
 should only be temporary, if it occurs frequently, 
 may become practically as bad as if it were perma- 
 nent, and this, I hold, is what has actually been 
 the case. If it were only one change in the value 
 of money that we had to deal with, the above state- 
 "ment could be accepted, for money, in international 
 trade, is simply the measure of commodities, and 
 prices once adjusted to the altered measure, trade 
 would go on without interruption. But if the 
 measure is constantly changing, and fresh inter- 
 ruption to trade ever and anon occurring, the effect 
 must be in the highest degree injurious. The 
 scales, so to speak, are out of order, and the trader 
 has no certainty that just weight will be meted out 
 to him, and this uncertainty is no doubt seriously 
 affecting international trade, and spoiling results 
 which the trader has a fair right to expect. 
 
 Some mono-metallists make light of the difficulty 
 
CHAP. V. 
 
 80 International Trade. 
 
 arising from these exchange variations, and one 
 who has been prominent in his opposition to bi- 
 metallism has committed himself to the following 
 statements regarding the matter. 
 
 " The benefits of great facility of exchange may 
 themselves be readily exaggerated 
 
 " 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 exchange 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 the country even in this country, perhaps, 
 only a sixth or an eighth part of its whole trade. . 
 
 "Thus, fluctuations in change are neither so 
 formidable to trade as they are frequently repre- 
 sented, nor are the exchanges so likely to be 
 unsteady, as a rule, without bi-metallism, as its 
 advocates have been in the fashion of maintain- 
 ing."* 
 
 The mere recital of these statements is, I think, 
 sufficient to condemn them, and I question whether 
 the writer of them would repeat them now. 
 Practical merchants know better than the mere 
 
 * The case against Bi-metallism : "Essays in Finance,"- by 
 E. Giffen, pp. 294, 295. 
 
International Trade. 81 
 
 statistician what these violent fluctuations of ex- 
 change have meant ; and few Englishmen will 
 admit that the foreign commerce of their country 
 is of so little importance as the estimate here given 
 of its relative extent would imply. I think we all 
 realise that it is a much more important matter. 
 Suppose Lancashire, for instance, deprived of her 
 foreign commerce, which takes off at least three- 
 fourths of the products of her staple industry, 
 where would her trade be ? and it is not only the 
 direct foreign trade that would be affected, but 
 also our home trade to the extent to which it 
 depends upon the spending of wages and profits 
 derived from foreign trade. Cut off the foreign 
 trade of England, and I believe one-half of the 
 people would require to emigrate, while the remain- 
 ing half would require to redistribute their occupa- 
 tions so as to provide by tillage for the bare 
 necessaries of life and other things which they 
 could not import from abroad. It is indeed sur- 
 prising that such a line of argument should be 
 adopted in trying to minimise the difficulties of 
 exchange with silver countries. We all know that 
 England's foreign trade is of the highest import- 
 ance to the great mass of her people, and not only 
 so, but we also know that her wealth has resulted 
 largely from the fruitful employment of her capital 
 in foreign enterprise. She cannot live within 
 herself, and if she attempts to hoard her capital, 
 
CHAP. V. 
 
 82 International Trade. 
 
 or employ it unduly in home enterprise, it will 
 disappear as effectually as if lent to rotten Govern- 
 ments. The revulsion against foreign enterprise 
 which set in some years ago, supplied the capital 
 and gave the power to promoters of manufacturing 
 and mining companies, which resulted in the 
 unwise and undue expansion of so many industries 
 which we see overdone and prostrate to-day. 
 Foreign commerce, like mercy, is " twice blessed." 
 It has blessed England, and it blesses those 
 countries with which England has traded. Her 
 capital has permanently developed their productive 
 powers, and enabled them to pay for English 
 manufactures, and this not .only by public enter- 
 prises, but also, and far more largely, by the 
 individual action of British merchants scattered 
 over the globe. We have established ourselves 
 often where there seemed, at first, nothing to pay 
 for what we could supply ; but, by patient and 
 kindly aid, we have seen industries grow apace 
 which, ere long, gave a rich reward for our prudent 
 outlay. England cannot remain indifferent to the 
 prosperity of her foreign commerce, nor to the 
 removal of the hindrances which, in the difficulties 
 of this monetary question, at present exist, to the 
 free circulation of her capital and its investment 
 in silver countries, such as India, where it is so 
 much needed. 
 
 It is usual for those who oppose bi-metallism to 
 
International Trade. 83 
 
 argue against the ratio of 15J to 1. But the 
 principle of bi-metallism is the fixing of a ratio. 
 Bi-metallists would be perfectly content to leave 
 what that ratio should be to a conference, in which 
 all interests affected by the matter were duly 
 represented. The purely silver interests are little 
 compared with the far mightier interests of inter- 
 national trade which the question involves. When 
 we think of it, indeed, is it not an anomaly that 
 these comparatively petty movements of silver, 
 indicating little or no change in supply, should tell 
 so disastrously upon commerce and the welfare of 
 nations everywhere ? I make bold to say that 
 whenever England wakes up to the importance of 
 the subject, and shows a real desire for an inter- 
 national agreement, all difficulty as to what the 
 ratio should be will disappear. The prospect of 
 England taking a due part in the arrangement 
 would immediately affect the price of silver, and 
 make it tend towards the rate which investigation 
 would prove to be the just one ; and, I believe, 
 that even before the necessary laws could be passed, 
 bi-metallism on the accepted basis would practi- 
 cally be in force. 
 
 Manchester industries perhaps, at first, suffered 
 more than any others by these disturbances; but 
 now, all the industries are feeling them. Bankers 
 looked on complacently, under the belief that they 
 were able to keep themselves right whatever hap- 
 
CHAP. V. 
 
 84 International Trade. 
 
 pened, though they, also, are beginning to realise 
 that there is danger for them too. Merchants 
 tried, as far as they could, to secure themselves by 
 their contracts. But manufacturers and producers, 
 from the necessity they are under to keep their 
 works going, have had less freedom ; and when mer- 
 chants, from a sudden drop in exchange, cannot 
 continue to pay old rates, they have to accept lower 
 prices, whether they can afford to do so or not. 
 All are, however, really in the same boat ; and the 
 anxieties of the banker, as well as those of the 
 merchant and manufacturer, would be greatly 
 lessened were these difficulties to disappear. 
 
CHAPTEE VI. 
 
 FOREIGN COMPETITION. 
 
 FOREIGN competition is often referred to in connec- 
 tion with the depression of the cotton trade. 
 Some people are impressed with its importance, 
 while others are inclined to make light of it, point- 
 ing to the gigantic strides which have been made 
 in our cotton industries during the last thirty 
 years, and asking " What reason have we to fear? 
 May we not expect that our present difficulties will 
 ere long pass away, as those of previous periods of 
 depression have done ? " 
 
 It is matter for hopefulness that the energy and 
 enterprise of those engaged in the cotton trade 
 have fully kept pace with all the improvements in 
 cotton manufacturing which recent years have 
 witnessed, and that our mills, in effective, and 
 economical out-turn, both of goods and yarns, are 
 second to none in the world, and in the struggle 
 with competing nations there should be no reason 
 to fear. There is no doubt, however, that we have 
 recently seen a check to the expansion of our 
 trade, and, though a comparison of thirty years 
 shows an immense advance, recent years show 
 greatly diminished progress in our foreign trade. 
 
CHAP. VI. 
 
 86 Foreign Competition. 
 
 It is the contrast between these years, and the 
 rapid progress in the long series of years preceding, 
 that demands attention. 
 
 Whatever the cause or causes, we must all admit 
 that trade everywhere has lost much of the elasticity 
 of former times. Continental nations have suffered 
 from this as much as, if not more than, England 
 has done; and, mainly to protect themselves 
 against the competition of England, they have, 
 one by one, imposed restrictive tariffs. Whether 
 or not they will benefit much by this course of pro- 
 cedure remains to be seen, for the higher level of 
 prices in those countries which must necessarily 
 result will disable them more and more from 
 competing with us in neutral markets, for any 
 nation, to have the fullest power in competing as 
 a seller, must have the fullest freedom in buying. 
 As regards Continental nations, therefore, in 
 relation to the staple industry of the Manchester 
 district, there is not much to fear. We shall still, 
 in spite of tariffs, do an important amount of 
 business with them, and, perhaps, regain more than 
 we lose in other quarters where we compete with 
 them. The necessities, also, of their own export 
 trades will drive some of them ere long to modify 
 their tariffs. 
 
 As regards the United States of America, there 
 was a time, well within the memory of the present 
 generation, when the trade in cotton staples with 
 
CHAP. VI. 
 
 Foreign Competition. 87 
 
 that country was a thing of great importance. All 
 this, however, has for some time been a matter of 
 the past ; and, whilst some in this country may be 
 hoping for the advance of Free Trade doctrines in 
 America, I fear that neither the actual course of 
 opinion there, nor the policy and plans of her 
 statesmen, really warrant any great advance in 
 this direction. The Great Kepublic is a world 
 within herself, and until the distant time when the 
 crowding of population upon her territories will 
 lead her to care more for foreign trade, there is, I 
 fear, little hope of any complete modifications 
 being made in her present policy. My chief 
 reason for referring to the United States, how- 
 ever, is to note the influence which her example 
 ^may have upon our own colonies such as Canada 
 and Australia- where the same desire of promoting 
 local industries by protective duties is already in 
 full play. No doubt, as in Canada, this policy has 
 led (as it must always do periodically) to glut and 
 over-production. Such has often been the case in 
 the United States ; but, though these periodic 
 crises occur, the mills, once erected, remain. 
 Times change, trade again improves, and on they 
 go again in a new period of expansion, displacing 
 foreign goods more and more. As regards our own 
 colonies, therefore, whatever our views may be as 
 to the wisdom or unwisdom of the economic theories 
 by which they are guided, as a matter of fact with 
 
88 Foreign Competition. 
 
 our older colonies, such as Canada, we must be 
 prepared to lose more and more of our trade with 
 them. 
 
 We come now to the great Eastern markets, 
 which take off such a large proportion of the pro- 
 duction of our Lancashire mills. These markets, 
 as also a portion of those in South America, have 
 all a currency based on silver. Before examining 
 the exact relation which this fact has to the matter 
 under consideration, I would first glance at the 
 position which our great dependency, India, is 
 beginning to occupy as a producer of cotton goods. 
 Hitherto our trade with her has been one of con- 
 tinued progress, and her resources as a country in 
 which all kinds of tropical produce can, with the 
 aid of her teeming population, be almost indefinitely 
 expanded, marks her out as a field where our trade, 
 in supplying manufactured cotton goods in return 
 for her produce, may be equally expanded. With 
 all the great yardage of cotton goods which we 
 already supply, a division of the same by the 
 figures denoting the millions of her population will 
 show what a large margin there is still to be 
 supplied before, according to the most moderate 
 estimate, what is needful for adequate human 
 clothing can be overtaken. There is, therefore, in 
 India, I think, still wide room for a larger con- 
 sumption of cotton manufactures ; and, in spite of 
 what the cotton mills in Bombay are doing, or may 
 
CHAP. VI. 
 
 Foreign Competition. 89 
 
 yet do, unless they continue to be stimulated in a 
 way which I will presently point out, there is every 
 reason to believe that the prosperity of India will 
 continue to be, as it has been, a great factor in 
 determining the prosperity of Lancashire. As 
 regards these Bombay mills, it should perhaps be 
 borne in mind that India was the birthplace of the 
 cotton manufactures, and that for ages the spinning 
 and weaving of cotton have formed a part of the 
 industry of her population, and that against foreign 
 competition, in rough and heavy goods, native pro- 
 duction has always held a place. It was natural, 
 therefore, that the power loom should follow in the 
 wake of the hand loom, and in this department 
 there is a fair field for the increase of cotton mills, 
 which might not for many years materially inter- 
 fere with our trade. The import duty on cotton 
 goods from England, which was abolished some 
 years ago, no doubt acted as a stimulus to the 
 increase of these mills, but I think a stronger 
 element has been, and is still, at work in giving to 
 them what amounts practically to Protection, both 
 as regards the supply for India herself, and in con- 
 ferring special advantages in competing with 
 England for the supply of adjacent countries. I 
 refer to the special position in this respect which 
 the unsatisfactory state of the silver question has 
 produced. 
 
 India, China, Japan, and other Eastern countries 
 
CHAP. VI. 
 
 90 Foreign Competition. 
 
 have a silver standard, the variations of which, in 
 relation to our own gold standard, have in recent 
 years been very violent. While the value of silver, 
 however, has fallen, and the rupee, in its exchange 
 value with England, has also fallen, the currency of 
 India for internal purposes has not materially 
 changed, it being generally asserted by those 
 acquainted with India that the rupee, as regards 
 the necessaries of life, has not yet lost much of its 
 old buying power ; and the Government of India, 
 we know, still clings to the old average rate of 2s. 
 per rupee as a basis for the adjustment of its 
 accounts. Such being the case, looking at the 
 matter from the Indian standpoint, the fall in 
 silver affected only the external value of the rupee, 
 leading to the increased cost in rupees of all im- 
 ported articles. To illustrate what would take 
 place when the fall first began, and what is fre- 
 quently happening, let us take, for example, an 
 article which cost 100 rupees on the old basis, and 
 suppose that a dealer in India has the option of 
 importing the article from England or of buying it 
 from a Bombay mill. While he is debating where 
 he should purchase, a sudden fall in silver takes 
 place, say of 3 per cent. This would make it 
 impossible for him to bring the article from Eng- 
 land without a payment of 103 rupees., while for 
 the payment of 100 rupees he could still buy it 
 from the Bombay mill. Take now the further 
 
Foreign Competition. 91 
 
 example of a dealer in Japan who is in the habit 
 of importing yarn from India or from England, 
 as the price in silver dollars laid down in Japan 
 may suit him best. For 100 dollars he can com- 
 mand a certain quantity of yarn from either place, 
 but a fall of say 3 per cent, in exchange intervenes, 
 and, while the cost in silver from India remains 
 unchanged, he must now pay 103 dollars if he 
 brings the yarn from England. There is no doubt, 
 under these circumstances, to which country the 
 order would go. The fact, therefore, of Japan and 
 India both being silver countries, practically gives 
 India an advantage in dealing with the former 
 similar to what would result from a differential 
 duty being in force in Japan in favour of India as 
 against England ; for in Japan and China the 
 buying power of the silver dollar, like the rupee in 
 India, has remained unchanged for internal pur- 
 poses ; while for importing from England it has 
 lost about 25 per cent, of its old purchasing power, 
 the rupee having lost in this respect to a similar 
 extent. I by no means say that all this remains 
 in favour of the Bombay mill owner, but a consider- 
 able part of it does; and when sudden changes 
 take place, such as I have indicated, the immediate 
 effect upon existing stock is nearly altogether to 
 the extent of such change in his favour. 
 
 As regards cotton, we know that the competition 
 of Europe will raise its price in rupees in proportion 
 
CHAP. VI. 
 
 92 Foreign Competition. 
 
 to any fall in exchange, and the machinery, which 
 has to be imported for new mills, will also be 
 enhanced in its rupee value, but wages and other 
 elements of production will remain unchanged, 
 and when the levelling up, as regards cotton and 
 other imported articles which the millowner re- 
 quires, is completed, there still remains a consider- 
 able difference in his favour owing to the fall in 
 silver from its old value. Besides this, also, the 
 comparative steadiness of his price, both as a seller 
 in India and an exporter to China or Japan, gives 
 him a great advantage as against his English 
 competitor, who is continually hampered by the 
 fear of sudden fluctuations in exchange not the 
 simple fluctuations which are common between all 
 trading nations from the swaying tendency of the 
 balance of trade, but from the varying relations of 
 the metals upon which the exchange is based. 
 Between India and China the basis is upon one 
 common metal silver. Between England and 
 India or China the par of exchange itself is vari- 
 able, from the varying relation of silver, the 
 standard of India and China, to gold, the standard 
 of England. 
 
 Some people, looking at these matters theoreti- 
 cally, and regarding foreign trade as simply an 
 exchange of commodities, are apt to sink the 
 individual who must depend on money as the 
 medium of his business, but in practical operations 
 
Foreign Competition. 93 
 
 the individual cannot sink himself. It is no con- 
 solation to the Lancashire manufacturer, upon 
 whom falls the necessity of accepting 3 per cent, 
 less for his shirtings, in consequence of a drop in 
 exchange, to be told that the cost of tea imported 
 to this country will be 3 per cent, cheaper, or that 
 the importer of indigo, or any other class of Indian 
 produce, will get the benefit of what he is losing. 
 Money is the measure of his commodities, and the 
 article in which he gets his returns, and it is purely 
 a loss from the international scales being out of 
 order, and not a necessary condition of business, 
 from which he suffers. 
 
 What is the meaning of the cry that we now so 
 frequently hear from India, " The Indian Govern- 
 ment must buy all its stores as far as possible in 
 India ! " The object is to avoid loss in exchange ; 
 and if there is a saving to India from buying in 
 India, and if there is a desire on the part of the 
 Indian officials to give the preference to articles 
 manufactured there, what is this but Protection, 
 brought about by the necessity of avoiding loss 
 from the ever-increasing difficulties of this silver 
 question ? 
 
 I think this fact alone is conclusive, and com- 
 pletely proves the statement I have made; but I 
 can also appeal to official figures, the inference 
 to be drawn from which cannot be mistaken. There 
 is little direct data obtainable showing the dis- 
 
94 
 
 Foreign Competition. 
 
 placement of British manufactures in India itself 
 by the Bombay mills. As negative evidence, how- 
 ever, the almost stationary figures of the imports 
 from England, as shown in the Indian statistics, 
 which give fuller details than our own Board of 
 Trade Eeturns, are very suggestive. For the last 
 thirteen years, the quantities imported from the 
 United Kingdom were as shown on the opposite 
 page. 
 
 THE DECLARED VALUES OF THESE IMPORTS WERE AS 
 FOLLOWS, SHOWING IN THIS RESPECT A HEAVY 
 DECLINE : 
 
 
 GOODS. 
 Rupees. 
 000 omitted. 
 
 YARNS. 
 Rupees. 
 000 omitted 
 
 Average 
 Exchange 
 for year. 
 
 STERLING VALUES. 
 
 GOODS. 
 
 
 YARNS. 
 
 
 
 1880-81 
 
 22,09,34 
 
 3,62,09 
 
 1/7.96 
 
 18,374,356 
 
 3,011,413 
 
 1881-82 
 
 20,22,36 
 
 3,15,02 
 
 1/7.90 
 
 16,768,785 
 
 2,612,045 
 
 1882-83 
 
 20,74,92 
 
 3,30,86 
 
 1/7.53 
 
 16,884,717 
 
 2,692,410 
 
 1883-84 
 
 20,95,63 
 
 3,38,76 
 
 1/7.54 
 
 17,061,988 
 
 2,758,084 
 
 1884-85 
 
 20,48,40 
 
 3,27,23 
 
 1/7.31 
 
 16,481,154 
 
 2,632,851 
 
 1885-86 
 
 20,a7,90 
 
 3,11,41 
 
 1/6.25 
 
 15,496,565 
 
 2,368,034 
 
 1886-87 
 
 25,10,02 
 
 3,25,19 
 
 1/5.44 
 
 18,239,545 
 
 2,363,079 
 
 1887-88 
 
 22,96,06 
 
 3,51,67 
 
 1/4.90 
 
 16,168,101 
 
 2,476,364 
 
 1888-89 
 
 26,79,92 
 
 3,68,85 
 
 1/4.38 
 
 18,290,476 
 
 2,517,406 
 
 1889-90 
 
 25,44,78 
 
 3,41,78 
 
 1/4.57 
 
 17,569,634 
 
 2,359,756 
 
 1890-91 
 
 26,26,07 
 
 3,68,12 
 
 1/6.09 
 
 19,794,060 
 
 2,774,736 
 
 1891-92 
 
 24,10,73 
 
 3,43,20 ' 
 
 1/4.74 
 
 16,814,854 
 
 2,393,876 
 
 1892-93 
 
 21,84,81 
 
 2,60,64 
 
 1/3 
 
 13,655,077 
 
 1,629,051 
 
CHAP. VI. 
 
 Foreign Competition. 
 
 95 
 
 il 
 
 111 
 
 2 
 
 o 
 
 CO 
 
 CO 
 O 
 
 2 
 
 $ 
 
 
 
 -3 
 
 5 1 
 
 g 
 
 
 ,0 2 
 
 6 
 
96 
 
 Foreign Competition. 
 
 As regards the increase of exports from India, 
 the following figures speak for themselves : 
 EXPORTS OF YARNS FROM INDIA TO CHINA, JAPAN, &c. 
 
 (From Indian Trade and Navigation Returns.) 
 
 YEAR. 
 
 QUANTITY. 
 Ibs. 
 
 VALUE. 
 Rupees. 
 000 omitted. 
 
 Average 
 Exchange 
 for year. 
 
 STERLING 
 VALUE. 
 
 
 
 
 
 
 s. d. 
 
 
 1876-77 
 
 7,926,710 
 
 36,73 
 
 1/8.51 
 
 313,891 
 
 1877-78 
 
 15,600,201 
 
 68,20 
 
 1/8.79 
 
 590,833 
 
 1878-79 
 
 21,333,508 
 
 88,64 
 
 1/7.79 
 
 730,972 
 
 1879-80 
 
 25,862,474 
 
 ,10,92 
 
 1/7.96 
 
 922,512 
 
 1880-81 
 
 26,901,346 
 
 ,28,25 
 
 1/7.96 
 
 1,066,675 
 
 1881-82 
 
 30,786,304 
 
 ,36,88 
 
 1/7.90 
 
 1,134,993 
 
 1882-83 
 
 45,223,000 
 
 ,81,68 
 
 1/7.53 
 
 1,478,435 
 
 1883-84 
 
 49,876,606 
 
 ,92,61 
 
 1/7.54 
 
 1,568,216 
 
 1884-85 
 
 65,897,183 
 
 2,44,11 
 
 1/7.31 
 
 1,964,068 
 
 1885-86 
 
 78,241,721 
 
 2,75,52 
 
 1/6.25 
 
 2,095,139 
 
 1886-87 
 
 91,803,444 
 
 3,33,68 
 
 1/5.44 
 
 2,424,766 
 
 1887-88 
 
 113,451,375 
 
 4,07,73 
 
 1/4.90 
 
 2,871,158 
 
 1888-89 
 
 128,906,764 
 
 5,20,70 
 
 1/4.38 
 
 3,553,845 
 
 1889-90 
 
 141,962,242 
 
 5,74,92 
 
 1/4.57 
 
 3,969,382 
 
 1890-91 
 
 169,275,304 
 
 6,54,33 
 
 1/6.09 
 
 4,932,060 
 
 1891-92 
 
 161,253,234 
 
 5,77,10 
 
 1/4.74 
 
 4,025,295 
 
 1892-93 
 
 189,174,726 
 
 6,77,34 
 
 1/3 
 
 4,233,392 
 
 EXPORTS OF PIECE GOODS FROM INDIA TO CHINA, 
 JAPAN, &c. 
 
 YEAR. 
 
 YARDS. 
 
 VALUE. 
 Rupees. 
 000 omitted. 
 
 Average 
 Exchange 
 for year. 
 
 STERLING 
 VALUB. 
 
 
 
 
 
 
 S. d. 
 
 
 1876-77 
 
 15,544,168 
 
 37,36 
 
 1/8.51 
 
 319,165 
 
 1877-78 
 
 17,545,464 
 
 37,23 
 
 1/8.79 
 
 322,508 
 
 1878-79 
 
 22,661,231 
 
 42,01 
 
 1/7.79 
 
 346,448 
 
 1879-80 
 
 25,800,501 
 
 44,43 
 
 1/7.96 
 
 369,516 
 
 1880-81 
 
 30,424,032 
 
 54,07 
 
 1/7.96 
 
 449,691 
 
 1881-82 
 
 29,911,017 
 
 55,64 
 
 1/7.90 
 
 461,355 
 
 1882-83 
 
 41,563,000 
 
 68,63 
 
 1/7.53 
 
 558,206 
 
 1883-84 
 
 55,613,763 
 
 86,19 
 
 1/7.54 
 
 701,758 
 
 1884-85 
 
 47,968,017 
 
 81,86 
 
 1/7.31 
 
 658,685 
 
 1885-86 
 
 51,577,727 
 
 81,34 
 
 1/6.25 
 
 618,589 
 
 1886-87 
 
 53,416,097 
 
 88,21 
 
 1/5.44 
 
 641,008 
 
 1887-88 
 
 69,485,747 
 
 1,06,74 
 
 1/4.90 
 
 751,656 
 
 1888-89 
 
 70,265,379 
 
 1,08,48 
 
 1/4.38 
 
 740,384 ' 
 
 1889-90 
 
 59,496,551 
 
 90,45 
 
 1/4.57 
 
 624,529 
 
 1890-91 
 
 67,665,939 
 
 1,04,20 
 
 1/6.09 
 
 785,448 
 
 1891-92 
 
 73,383,941 
 
 1,13,42 
 
 1/4.74 
 
 791,110 
 
 1892-93 
 
 79,791,494 
 
 1,22,58 
 
 1/3 
 
 766,175 
 
CHAP. VI. 
 
 Foreign Competition. 97 
 
 It will be noticed that this increase has been 
 developed during the period of the silver difficulty, 
 1876 having been the year when it began to tell 
 with full force upon exchange rates. 
 
 When we talk of developing the resources of 
 India as tending to increase our trade relations 
 with that country, it is, of course, agricultural de- 
 velopment that is mainly thought of ; but with 
 this element favouring the native manufacture of 
 articles she is now getting from England, is there 
 not danger that the development may also take a 
 form very different from what we are thinking of? 
 Anyone who has looked over the Indian census list 
 of occupations must have been struck with the vast 
 number of artisans, workers in every department 
 of human industry, which that list gives. There 
 the workers are to be found in millions. On the 
 other hand, of what is the soil of India not capable ? 
 Hitherto it has only produced short staple cotton, 
 and even this, we know, has been gradually im- 
 proving ; but will it stop there ? Is it not probable 
 that ere long the finer and longer grades of cotton 
 will also be produced ? And then we must look 
 for further advance in the competition of her mills 
 with ours. The initiating of the native population 
 into factory work has, no doubt, been difficult, but 
 already a large nucleus has been formed, and is 
 rapidly growing. Private capital also, which can- 
 not be got to aid agriculture or for public works, 
 
 H 
 
CHAP. VI. 
 
 98 Foreign Competition. 
 
 comes forth readily for these mills, so that there 
 are all the elements for a wide and rapid develop- 
 ment of a trade wh'ich must compete keenly with 
 Manchester, and, if we allow the special advantage 
 which I have been pointing out to continue, it must 
 go on developing. So far as we have seen, it is 
 chiefly in coarse goods and yarns that she has 
 become our competitor, and in these her natural 
 advantages and position must in any case favour 
 her. But why, to our own disadvantage, should 
 we allow a state of matters to continue which is 
 giving her practically all the advantages of Protec- 
 tion within her own borders, and conferring a pre- 
 ferential position, as against us, in competing for 
 the trade of adjacent countries ? 
 
 I am not unmindful that this depreciation of the 
 currency for outside purposes, whilst retaining its 
 old internal value, stimulates agriculture as well as 
 manufactures. In recent years we have seen that 
 grain has been exported much more freely from 
 India in consequence of the low exchange rates at 
 which it can be shipped. No doubt there is a real 
 and immediate advantage in this to the grain 
 grower, and India may gain from the false basis 
 thus created; but would she not gain something 
 that would be of far more permanent value, even 
 to the grain grower, if English capital could be 
 freely employed in developing the resources of 
 India, and in improving facilities for communica- 
 
Foreign Competition. 99 
 
 tion in roads and railways, which are so much 
 needed ? Besides, we do not wish to see the Indian 
 agriculturist practically protected as against the 
 British agriculturist, any more than we wish to 
 see Indian manufactures practically protected as 
 against British manufactures. 
 
 This is only one phase of a question that has 
 been working mischief all these years ; and while 
 placing it side by side with the prohibitive tariffs 
 of foreign countries, which were avowedly enacted 
 to shut out British manufactures, we have only 
 been noting one of the evils with which it is charge- 
 able. I believe the unsettled relation of silver and 
 gold is at the root of the general contraction, or 
 want of elasticity, from which trade everywhere 
 has been suffering. It is stifling Free Trade, not 
 merely in becoming the ally of Protection, in the 
 way I have pointed out, but also as an element 
 which is adversely affecting trade on the Continent, 
 and leading Continental nations to adopt protective 
 duties. Besides, it is hindering the free movement 
 of money and capital, which is as necessary for the 
 general well-being as the free movement of com- 
 modities. 
 
 The foregoing remarks bearing on the trade with 
 China and Japan are given just as they appeared 
 in the third edition. Now, owing to the closing of 
 the Indian mints, and the creation of an artificial 
 value for the rupee apart from silver, while the 
 
CHAP. VI. 
 
 100 Foreign Competition. 
 
 dollar in China and Japan is still based upon the 
 price of that metal, India is in turn handicapped 
 in her trade with these countries. The export trade 
 in cotton yarns and piece goods from Bombay has 
 been checked, and an impetus given to the estab- 
 lishment of new mills in China and Japan. There 
 is, therefore, now, the same thing coming into play 
 against the Bombay mills as Manchester felt from 
 the former stimulus given to these in consequence 
 of exchange differences. 
 
 In former editions I did not refer to the develop- 
 ment of Jute manufacturing which has also been 
 stimulated in India as against Dundee by the silver 
 difficulty. The following table will show the ad- 
 vance in this respect that has been made : 
 
CHAP. VI. 
 
 Foreign Competition. 
 
 101 
 
 EXPORTS OF JUTE MANUFACTURES FROM INDIA TO ALL 
 
 PARTS. 
 Twelve months, 1st April to 31st March. 
 
 Year. 
 
 GUNNY 
 
 CLOTH. 
 YARDS. 
 
 GUNNY 
 
 BAGS. 
 NUMBER. 
 
 VALUE. 
 Rupees. 
 000 
 omitted. 
 
 Average 
 Exchange 
 for year. 
 
 STERLING 
 VALUE. 
 
 
 1881-82 
 
 988,796 
 
 42,072,819 
 
 1,09,60 
 
 s. d. 
 1/7.90 
 
 908,788 
 
 1882-83 
 
 4,601,247 
 
 60,737,651 
 
 1,48,59 
 
 1/7.53 
 
 1,209,199 
 
 1883-84 
 
 7,049,165 
 
 63,645,984 
 
 1,33,16 
 
 1/7.54 
 
 1,084,189 
 
 1884-85 
 
 15,344,279 
 
 82,779,207 
 
 1,54,03 
 
 1/7.31 
 
 1,239,365 
 
 1885-86 
 
 20,154,251 
 
 63,760,546 
 
 1,12,82 
 
 1/6.25 
 
 857,937 
 
 1886-87 
 
 12,799,225 
 
 64,574,657 
 
 1,14,93 
 
 1/5.44 
 
 835,217 
 
 1887-88 
 
 13,682,912 
 
 74,367,620 
 
 1,74,09 
 
 1/4.90 
 
 1,225,833 
 
 1888-89 
 
 15,160,592 
 
 99,790,587 
 
 2,56,01 
 
 1/4.38 
 
 1,747,305 
 
 1889-90 
 
 37,144,007 
 
 97,415,895 
 
 2,76,04 
 
 1/4.57 
 
 1,905,828 
 
 1890-91 
 
 29,854,029 
 
 98,749,416 
 
 2,46,28 
 
 1/6.09 
 
 1,856,352 
 
 1891-92 
 
 37,289,300 
 
 106,250,612 
 
 2,50,90 
 
 1/4.74 
 
 1,750,065 
 
 1892-93 
 
 40,060,110 
 
 123,974,986 
 
 3,23,18 
 
 1/3 
 
 2,019,927 
 
CHAPTEE VII. 
 
 THE PERVERSE RUPEE. 
 
 IN replying to an address from the bi-metallists of 
 Manchester, Mr. Goschen said : 
 
 "One of the most extraordinary points of 
 the whole of this case is that the rupee in 
 India has not acted as according to the laws 
 of political economy the rupee ought to have 
 acted. It has remained stationary while it 
 ought to have followed the prices of silver in 
 other countries, and it is the perverseness of 
 the rupee in India which has caused so much 
 of this difficulty." 
 
 To appreciate fully the delicate irony of these 
 remarks, and the direction in which they were 
 meant to tell, it is necessary also to quote the 
 following words from the same speech : 
 
 "Now, for my part, I have held and on 
 
 NOTE. In this chapter I have also thought it well to make 
 no change from what appeared in the third edition as published 
 in 1890, the entire argument being based upon the conditions in 
 India as they existed prior to the closing of the mints on 26th 
 June last. In the following chapter the new condition of affairs 
 as regards India is fully dealt with. 
 
CHAP. VII. 
 
 The Perverse Rupee. 103 
 
 that point I have understood I am on the side 
 of bi-metallists that the question of the value 
 of silver and gold was not a simple question of 
 natural supply and demand, and that position 
 on my part, I dare say, is looked upon as a 
 heresy by the extreme disciples of the mono- 
 metallic school." 
 
 I proceed to examine this perverseness. Is the 
 rupee simply sulking, and like some rebel local 
 authority, defying for the time the general laws to 
 which it must ultimately submit ; or is there some 
 error regarding these so-called laws of political 
 economy, and their application to the case in 
 question ? 
 
 In pursuing this inquiry it is well, first of all, to 
 define the standpoint from which this perverseness 
 is determined How are we measuring the rupee ? 
 It has no independence as a coin apart from the 
 metal of which it is composed, and is in no sense a 
 token as our English shilling is. You may take 
 any quantity of silver to the mints of India, and 
 get it turned into rupees, or you may melt these 
 rupees and still be no loser from holding bars of 
 silver in place of rupees. It is certainly, therefore, 
 not in relation to silver that the rupee is perverse. 
 Is it, then, in relation to general commodities ? 
 Here, also, the answer is, No. For the rupee 
 to-day, in common with silver everywhere, remains 
 
CHAP. VII. 
 
 104 The Perverse Rupee. 
 
 practically unchanged in its purchasing power as 
 regards general commodities, and keeps in line 
 with these. There is only one thing towards 
 which its relation is changed, and that is gold; 
 and it is in looking at the rupee from the gold 
 standpoint alone, and measuring it with gold, that 
 it is pronounced perverse. 
 
 I will now enquire further. What are the specific 
 laws of political economy that are set at nought by 
 this perverse action of the rupee ? Mr. Goschen's 
 remarks, in the second quotation from his speech, 
 dispose of the idea that the natural laws of supply 
 and demand are the only operating force here, 
 so that the laws which the rupee ought to obey, 
 and does not obey, must be something besides 
 these. I find it difficult to make out what the 
 laws are to which he refers. I presume that all 
 that is meant is, that gold being now the supreme 
 standard of value in Europe and America, the 
 power of silver should everywhere conform to the 
 altered relation of the two metals there. This, 
 however, is simply an assumption, not a law, and 
 the admitted fact that the rupee maintains an 
 independent course, shows that the assumption is 
 not a correct one. It points, moreover, to the pro- 
 bability of there being some misunderstanding as 
 to the facts by which the matter is governed. 
 
 Let us examine these facts. It seems to me that 
 the way in which the two monetary metals are 
 
CHAP. VII. 
 
 The Perverse Rupee. 105 
 
 actually distributed over the world is an important 
 factor in the case, and one which requires full 
 consideration. 
 
 If gold and silver were equally distributed over 
 all the nations of the world, and amongst all the 
 trading classes of these nations, the ideas of the 
 European nations as to their relative value would, 
 no doubt, more readily make themselves felt over 
 the whole area ; but the precious metals are not 
 equally distributed in this way, the actual fact 
 being that the nations of the world are practically 
 divided into two classes in this respect, one of 
 which has silver money, and knows little or noth- 
 ing of gold, and the other gold money with little 
 silver, or practically gold money only. While in 
 ^Europe, therefore, we may regard silver as the 
 inferior metal, and think of gold in the monetary 
 system as an element whose superior gravity, so to 
 speak, should necessarily control the power of silver, 
 we are overlooking the fact that gold and silver are 
 still to a very large extent co-ordinate powers. 
 
 The demonetisation of silver in Europe, while it 
 has led to the alteration of the relation of the two 
 metals there and where they come into contact, has 
 not affected the power of silver money over the 
 enormous areas and among the vast populations 
 of the East, where silver alone is the sole standard 
 of value, and where there is no contact with gold 
 valuations. 
 
CHAP. VII. 
 
 106 The Perverse Rupee. 
 
 The two monetary metals are like two orbs 
 moving in different planes. While the rending of 
 the tie of the bi-metallic ratio, which France main- 
 tained, and which kept their relative power in 
 Europe steady, has led to the divergence of the 
 two valuations there, silver in its own sphere, 
 where it alone is supreme as money, remains un- 
 affected by what has happened. The Eastern 
 races in their internal transactions, in all the 
 small channels of trade, and in the numerous 
 bazaars throughout the East, know nothing of gold 
 as money. The East also is always absorbing 
 silver money, never requiring to export it. What 
 it receives is no more than is required for its 
 expanding trade, and for hoarding. Every ounce 
 of fresh silver imported by the East has the same 
 purchasing power as any other ounce of the existing 
 monetary mass, and nothing happens to shake the 
 confidence which the hundreds of millions of the 
 world's population there, who still use silver, have 
 in its power as money. The quantity of silver also 
 in use throughout the East is immense, say, at 
 least equal to .400,000,000, and the fact that this 
 silver money, and the silver ornaments which the 
 people possess, and which are akin to it, are actu- 
 ally in the hands of the people, gives a potentiality 
 to silver valuations there, which enables them to 
 hold their own against gold valuations. The ideas 
 which may prevail in Europe regarding silver 
 
CHAP. VII. 
 
 The Perverse Rupee. 107 
 
 count for nothing in the matter, so long, at least, 
 as Eastern Governments do nothing in attempting 
 to interfere with existing laws, or existing usages 
 with regard to it. 
 
 I believe that in these facts we have the 
 explanation of what Mr. Goschen has styled 
 " the perverseness of the rupee ;" and if so, 
 what an uncomfortable prospect of continued 
 disorganisation of the money of the world does 
 the consideration of them present ! 
 
 When this monetary difficulty first began to 
 perplex merchants, the mono-metallic school to 
 which Mr. Goschen refers, as I have indicated in 
 the Introduction, was unanimous in assuring us 
 that if left alone matters would right themselves ; 
 but experience has proved that these assurances 
 were wrong, and when fully analysed it is seen 
 that the conditions are such that the disorganis- 
 ation arising from the conflict of the two valuations 
 must inevitably continue, and become more aggra- 
 vated unless something is done to put the matter 
 right. 
 
 The central idea of what is known as the bi- 
 metallic movement is to restore the unity of money; 
 to re-establish unity between the two centres of 
 valuation the gold valuation and the silver valua- 
 tion so that they may again do their work in 
 harmony. 
 
 Unfortunately, the name " Bi-metallic " does 
 
CHAP. VII. 
 
 108 The Perverse Rupee. 
 
 not clearly convey this idea, and instead of seeking 
 restoration and unity, the movement is too often 
 supposed to be one for the initiation of something 
 new, and an attempt to create an impossible duality. 
 
 It is necessary, therefore, to question history 
 regarding the matter ; and when this is done, it is 
 found that it is gold mono-metallism, and the ideas 
 regarding money which are identified with it, that 
 are the novelties. The dual basis of money in 
 gold and silver always existed, and still exists. 
 Formerly, the two metals were linked together, and 
 formed practically one thing for the purposes of 
 money. The triumph of mono-metallic ideas has 
 brought with it the duality of money from which we 
 are now suffering. The overthrow of these ideas 
 will lead to the restoration of the unity and har- 
 mony which formerly existed. 
 
 When England first adopted gold mono-metallism, 
 in 1816, it was a new departure in the history of 
 money a distinct innovation made on former usage. 
 In her early history, England's standard was silver, 
 and for 150 years prior to 1816 she had had a 
 bi-metallic standard, both metals being freely 
 coined, and their relative value legally declared. 
 The coinage of silver was suspended in 1797, 
 as it is suspended in France at the present moment, 
 but this did not affect existing coin and its legal 
 relation of twenty-one shillings to the gold guinea, 
 say, equal to a ratio of 15*21. 
 
CHAP. VII. 
 
 The Perverse Rupee. 109 
 
 Other nations were bi-metallic at the same time 
 that England was under bi-metallic law, and con- 
 tinued to be so after England made the innovation 
 of adopting gold mono-metallism. Owing to this, 
 and to these nations keeping their mints open to 
 all the world for the free coinage of gold and silver 
 at the fixed ratio of 15 J to 1, the parity of value 
 between the two metals was still everywhere main- 
 tained. 
 
 The mono-metallic school, all unconscious of the 
 lateral support which the English gold standard 
 was thus receiving, preached up the example of 
 England, until other nations began to follow it, 
 vainly imagining that gold might be the supreme 
 standard for all nations, and that silver, in a sub- 
 ordinate position, would still maintain its old rela- 
 tive value. Experience has proved how fallacious 
 these views were. The old parity was maintained 
 solely by the action of France and the Latin Union, 
 and as soon as the support which their free coinage 
 laws gave was withdrawn, the two valuations began 
 to diverge. The gold standard never was, and 
 never can be, an independent standard of value, 
 unless in the now admittedly impossible case of 
 silver being everywhere abolished as legal tender. 
 Short of this, the presence, and in a large degree 
 the independence of silver must always be counted 
 upon, and whether we will or no, must make itself 
 felt. 
 
CHAP. VII. 
 
 110 The Perverse Rupee. 
 
 In seeking unity of standard in one metal, the 
 mono-metallic school has, in effect, brought about 
 the destruction of the unity of money. It ignored 
 the actual conditions of money throughout the 
 world, and overlooked the inter-dependence which 
 must necessarily exist between the gold money and 
 the silver money of the world. These form in their 
 aggregate, whether working together or separately, 
 the basis of monetary valuations, and although to 
 a large extent, as we have seen, moving in different 
 orbits, they act and react upon each other. When 
 silver is demonetised, gold must take its place, and 
 more work must consequently be thrown upon gold. 
 This leads to the appreciation of gold, and creates 
 the conflict of valuations now going on between 
 Europe and the East. 
 
 Here, then, is the true position of this monetary 
 question. The inono-metallist is the partisan of a 
 school of innovators, whose idea of setting up a 
 standard of value in one metal which would be 
 a true measure of value has lamentably failed, and 
 has resulted in the monetary confusion which we 
 see to-day. The bi-metallist, on the other hand, 
 seeks to arrest this confusion by returning to the 
 old paths, and restoring the unity of money by 
 again linking gold and silver together, and making 
 them virtually one by the tie of a fixed ratio. 
 
 I would not, for a moment, charge the mono- 
 metallic school with any intentional purpose of 
 
CHAP. VII. 
 
 The Perverse Rupee. Ill 
 
 bringing about the results which we see to-day, 
 even though some of the interested partisans of 
 that school regard the injustice as between debtor 
 and creditor, which this confusion is causing, with 
 indifference, if not with satisfaction, because the 
 money-lending interests of England are identified 
 with gold, and are benefited by the changes. The 
 mono-metallic school, however, whose theories re- 
 garding money brought about these changes, had 
 no ideas of this kind when they were carrying on 
 their propaganda. Their aim was pure and high. 
 They had in view the need which the world has of 
 a true standard of value, which will measure 
 always and everywhere the same. Their object 
 was to make more perfect the unity of money, and 
 they thought that by having one metal only as the 
 standard of value in all nations, this object would 
 be secured. 
 
 The mono-metallic school, though basing its 
 ideas on what England had done in 1816, and 
 justifying its agitation by the apparent success of 
 the English system, had, by the middle of the 
 century, formulated ideas regarding money and the 
 single gold standard far in advance of anything 
 entertained by the statesmen under whose auspices 
 the gold standard was established in England. 
 These statesmen had no intention of virtually out- 
 lawing silver by the measures which they adopted. 
 The Act of 1816 itself is described as " An Act to 
 
CHAP. VII. 
 
 112 The Perverse Rupee. 
 
 provide a new silver coinage, and to regulate the 
 currency of gold and silver coins ; " and the 
 message of the Prince Regent referring to it speaks 
 of it as "a measure to remedy the defective state 
 and inadequate amount of the silver coinage of the 
 realm/' 
 
 The anti-silver views, and the idea that the 
 advance of civilisation required that all civilised 
 nations should have the unit of value fixed in gold 
 alone, culminated in the Conference of 1867, and 
 a reference to the proceedings of that Conference 
 will show how a metrical uniformity of the unit of 
 value, and an exact mathematical definition of it, 
 were the prevailing ideas of that Conference ; as if 
 it could be defined for all the world on the same 
 lines as a measure of length or as a measure of 
 quantity. The Latin Union, instituted two years 
 before, had been a success, and this success had 
 been secured by taking into account the actual 
 conditions of the money of the contracting powers, 
 and basing the agreement upon the existing ratio of 
 value for the two metals forming their currencies ; 
 but in suggesting monetary uniformity for the 
 whole world, the conditions of money over the 
 world-wide area that was contemplated were 
 ignored, and the fallacy that a true unit of value 
 could be found in one metal alone was endorsed 
 and recommended by the representatives of all the 
 Powers of Europe. This in due time, as we know, 
 
CHAP. VII. 
 
 The Perverse Rupee. 113 
 
 resulted in Germany decreeing a gold currency. 
 The consequent sales of German silver money in 
 turn led first to the restriction and, finally, to the 
 closure of the French mints for the coinage of 
 silver, and to the destruction, in this way, of the 
 parity of value which was thereby maintained 
 between the two monetary metals which the world 
 uses. 
 
 The mono-metallic school believed that the unit 
 of value could be fixed in one metal, and be inde- 
 pendent of all national law beyond that which fixed 
 the fineness and weight of the coin identified with 
 that unit. They thought that the relative values of 
 silver and gold were affected solely by the laws of 
 supply and demand, in the same way as ordinary 
 commodities were, and they did not contemplate 
 ^divergence of value between the two metals in 
 Europe or anywhere else from other causes. They 
 seem further to have believed that if the relative 
 value of the two metals did diverge to any extent, 
 silver as money, in all lands where it was used, 
 would conform, in its purchasing power, to its 
 altered relation in Europe to gold, just as incon- 
 vertible paper money everywhere does. 
 
 Now, the perverse rupee is the witness that 
 comes into court to show the fallacy of these views. 
 Its reduced value in Europe in relation to gold 
 shows the effect which the demonetisation of silver 
 has had in producing a wide divergence from its 
 
 i 
 
CHAP. VII. 
 
 114 The Perverse Rupee. 
 
 old relation to gold, and its unimpaired purchasing 
 power in the East shows that it has maintained its 
 independence in its own sphere, and remains un- 
 affected by these changes. 
 
 Our mono-metallic friends cannot, surely, be 
 content with the present position of affairs. Their 
 dearest aim was to secure the perfect unity of 
 money in the high interests of trade and commerce 
 everywhere, and surely when their schemes have 
 failed, and only confusion and greater difficulty 
 in trading have resulted from the attempt to realise 
 their ideal, the time has come when they must 
 either show how their cherished ideal of the unity 
 of money is now to be secured, or stand aside and 
 cease to obstruct the efforts of those who seek for 
 the restoration of the monetary unit in the two 
 metals, with a fixed parity of value between them. 
 
 I have so far, in this chapter, referred chiefly to 
 the evils resulting from the want of parity between 
 the two monetary metals, and to the varying diver- 
 gence that now exists. In forming a judgment on 
 the general question, it is necessary also to ascer- 
 tain clearly whether this divergence marks an 
 appreciation of gold or a depreciation of silver. It 
 is a self-evident fact to many minds, and, I think, 
 should be to all, that if the general level of prices 
 in Europe has fallen a thing now universally ad- 
 mitted the medium in which they are measured, 
 i.e., gold, must have acquired greater purchasing 
 
CKAP. VII. 
 
 The Perverse Rupee. 115 
 
 power. Commodities measure money, just as 
 money measures commodities, and if it requires 
 the surrender of a larger quantity of commodities 
 to obtain a given amount of money, it is evident 
 that the relation that formerly existed between 
 them has become altered, and this is just another 
 way of saying that gold has become appreciated. 
 If it be said that improved appliances and new 
 discoveries have led to cheaper production, you 
 have to admit that these improvements and dis- 
 coveries have not equally affected gold ; so that, 
 even in view of this exception, you are forced to 
 the conclusion that gold has become appreciated in 
 value. 
 
 The fall in the value of commodities in relation 
 to gold, and what we call the fall of silver in rela- 
 tion to gold, have been about equal. Silver now 
 being ranked as simply a commodity in Europe, 
 it keeps in line with commodities, and, though 
 its relation to gold has altered, its relation to com- 
 modities remains the same as formerly. Its pur- 
 chasing power where it is money, and its value 
 against other commodities where it is not, continue 
 practically unchanged. In this we have further 
 conclusive proof that the divergence between the 
 two metals results in the main from the apprecia- 
 tion of gold, and that silver has not so far in any 
 real sense fallen in value. 
 
 In his speech Mr. Goschen said that there were 
 
CHAP. VII. 
 
 116 The Perverse Rupee. 
 
 still some who disputed the appreciation of gold. 
 We know that he does not do so, and he has given 
 us, on former occasions, good reasons for its ap- 
 preciation in showing the greater work that gold 
 has now to perform as money in consequence of 
 the demonetisation of silver. I have already in- 
 cidentally referred to this, but there are also other 
 ways, not so obvious, in which matters have been 
 working to bring about this result ; and these, 
 though more subtle and more difficult to trace, are 
 perhaps even more powerful as effective causes in 
 the matter. 
 
 To find the exact value of an article at any given 
 moment, the process of higgling between buyer 
 and seller has to be gone through. Apart from 
 actual transactions made in this way, all declared 
 values are only estimates based on experience of 
 what has formerly been done. When general 
 business is flowing smoothly, the record of actual 
 sales forms the basis of what is called market 
 price, and becomes the guide for fresh transactions, 
 but it is simply a guide, for values may be upset at 
 any moment, and the past is no certain guarantee 
 of what the next sale may be. Commercial men 
 all know say, for instance, in the stock market 
 that, when something unusual has happened, busi- 
 ness is, for the moment, interrupted, until a price 
 is made by an actual transaction taking place, which 
 immediately forms the basis of other transactions. 
 
CHAP. VII. 
 
 The Perverse Rupee. 117 
 
 The forces that come into play in making a price 
 in this way, cannot be definitely gauged. They 
 include all the motives by which man is swayed 
 prejudice, and vague hope or fear, as well as logical 
 reasons, not infrequently influencing his action. 
 Though not generally so observable as in the case 
 instanced, this process is always going on. It is 
 fully at work when prices with the East are un- 
 settled by a sudden fall in silver, and a new price 
 has to be made in consequence of the altered rela- 
 tion of the currencies for the articles which the 
 East requires, and a new price has also to be made 
 in the produce markets, where Eastern produce 
 can from the same cause be offered more cheaply. 
 
 Over the entire area of commerce the repeated 
 unsettlement of values from these silver variations, 
 and the necessary effort to bring buyer and seller 
 again to a point, are constantly tending, by the 
 cutting down of price, to the enhancement of the 
 metal (gold) in which European prices are mea- 
 sured. The disfavour also with which silver, as 
 money, is now regarded, makes itself felt by caus- 
 ing everyone to look more and more to gold as the 
 only monetary equivalent in which security against 
 depreciation can be found, and all the ups and 
 downs of silver throw it more completely into the 
 line of ordinary commodities, making the possession 
 of gold more desired. 
 
 Even, therefore, though there may be no great 
 
CHAP. VII. 
 
 118 The Perverse Rupee. 
 
 quantitative difference in the relative amounts of 
 gold and silver money still in use in the world, 
 these disturbances in the relation they bear to each 
 other all tend to the enhancement of gold. It is 
 the one exception to the general fall in value that 
 is going on, and beyond this, from carrying in itself 
 the premium of continual appreciation, which is 
 now generally recognised, it is the more eagerly 
 coveted. Not that people take to hoarding, for so 
 long as there are securities, such as Consols, that 
 are practically equal to gold, they do not need to do 
 so; but everybody wishes that someone else should 
 take the risk of commercial and industrial under- 
 takings, or if money is lent for these, care is taken 
 that it is secured by a large margin of capital, 
 which must first disappear before the loan can be 
 imperilled. 
 
 One of the fundamental propositions of political 
 economy is that " capital is kept up not by preser- 
 vation, but by perpetual reproduction,* and if this 
 perpetual reproduction, through industrial enter- 
 prise, cannot be safely pursued, what becomes of 
 the capital which these industrial enterprises 
 represent ? Silent mills are of no value, and 
 concerns that are yielding no adequate return upon 
 the capital invested in them must quickly come 
 into the same category; and if we add the fact that 
 
 * "J. S. Mill's Principles of Political Economy," Book I,,, 
 chap. 5, sec. 6. 
 
CHAP. VII. 
 
 The Perverse Rupee. 119 
 
 land is going out of cultivation, because in some 
 cases, even without rent, it cannot now be culti- 
 vated profitably, surely we have a state of matters 
 that ought to give rise to the deepest concern, and 
 which cries loudly for the fullest investigation by 
 our statesmen. They must not be misled by the 
 abundance of capital seeking for safe investment. 
 This is not altogether the result of increased accu- 
 mulation. It means the desire to avoid commercial 
 risks, and is a direct result of the appreciation of 
 gold that is now going on. 
 
 It is well for the Chancellor of the Exchequer to 
 avail of these circumstances to reduce the burden 
 of interest which our National Debt entails ; but it 
 would be more satisfactory for the nation if they 
 did not exist ; and the necessary tendency to effect 
 're-arrangements of this kind shows how every in- 
 terest in turn, even those supposed to be most 
 secure, must suffer from the present monetary 
 confusion unless it is brought to an end. 
 
 In the speech to which I have been referring, 
 Mr. Goschen, in the character of candid friend of 
 the bi-metallists, pointed out that when dealing 
 with the fall in price a, and referring to the evils 
 resulting therefrom, there was danger of the bi- 
 metallic movement being regarded as an advocacy 
 of Protection. We have to thank Mr. Goschen for 
 giving this warning ; but did he or any other 
 person ever hear of a movement touching the per- 
 
120 The Perverse Rupee. 
 
 sonal interests of men, where it could not be 
 plausibly shown that some individuals or classes 
 would be protected in this sense to the disadvan- 
 tage of others ? The repeal of the Corn Laws 
 was avowedly for the purpose of protecting the 
 consumer against the landlord interests of the 
 country, and every reform has to fight against 
 vested interests that would be affected by it. 
 Common sense, however, will not long sit on the 
 rail and remain inactive because such things can 
 be urged. It will examine them, and give due 
 weight to all that can be said; but if the movement 
 be necessary for the vital interests of the country 
 and for the true interests of trade everywhere, and 
 moreover is based on justice and equity, such ob- 
 jections will not long prevail. 
 
 Tn*e mere assumption that prices will be affected 
 by the restoration of the parity of value between 
 gold and silver is a practical admission that prices 
 have been affected and have fallen through want 
 of that parity ; but to raise prices is not the objec- 
 tive aim of the bi-metallic movement. The primary 
 aim, as I have already indicated, is to restore the 
 unity of the world's money. Knowing that the 
 continuous fall in prices which has been going on 
 is mainly due to the appreciation of the gold 
 standard in which prices are measured, and recog- 
 nising in this a great evil, they seek to arrest this 
 fall by correcting the standard to the variations in 
 
CHAP. VII. 
 
 The Perverse Rupee. 121 
 
 which it is due. The restoration of the unity and 
 smooth working of the two monetary metals, while 
 it would check the fall, would no doubt also tend 
 to raise prices again, not, I believe, owing to any 
 quantitative difference that it would produce in the 
 actual volume of money, but rather from the 
 general effect on trade which the removal of the 
 present conflict of the two valuations would pro- 
 duce. Consumers have not really benefited by the 
 unnatural fall in values that has taken place, 
 because all have suffered in their resources from 
 the effects of that fall. Manufacturers would will- 
 ingly pay rather more for their raw materials, and 
 could work more profitably even on a higher basis 
 of cost for these, if the conditions of trade were 
 steadier, and the necessity that now exists for the 
 continuous scaling down of values were removed.* 
 It is a poor argument, as Mr. Goschen puts it, to 
 say that " if you raise the value to the owner of 
 
 * At present anyone embarking in any industrial undertaking 
 has to keep in view that besides providing for depreciation from 
 tear and wear, and the effect that the progress of new inventions 
 may have upon existing machinery, must also take into account 
 the scaling down of values over and above all this from the appre- 
 ciation of the gold standard in which the property is measured. 
 The Oldham spinning mills, erected of late years under the 
 Limited Liability Act, were at first supposed to be successful, 
 but in a statement lately made by the secretary of the Masters' 
 Association for Oldham, he declares that taking the whole of 
 these mills at first cost with actual dividends paid, and apprais- 
 ing the property at its present value, they have been making 
 nothing at all for the last ten years. 
 
CHAP. Til. 
 
 122 The Perverse Rupee. 
 
 the property, you are raising it to those who wish 
 to buy that property." Notwithstanding low prices, 
 where are buyers of property at present to be 
 found ? Will not the buyer quickly find himself in 
 as bad a position as he who now wishes to sell, if 
 the continuous depreciation now going on is not 
 arrested ? Buyers and sellers everywhere have a 
 common interest in the re-establishment of a true 
 measure of value that will not change as our gold 
 standard under the present conditions is doing. 
 
 Mr. Goschen also referred to the interests of 
 India, and to the effect which a change in the pre- 
 sent conditions might have upon her power to com- 
 pete as she is now doing with Manchester in cotton 
 goods and yarns, and in grain with the growers of 
 this country. No doubt the action of the perverse 
 rupee has been giving her an important advantage 
 in these respects. Manchester is already concerned 
 at the competition of the Bombay mills, not only 
 in supplying India, but also in competing with her 
 for the trade of other Eastern countries, such as 
 China and Japan. The low sterling prices also at 
 which India can export wheat, have perhaps as 
 much as any other cause tended to the low rates 
 for grain which our farmers here must accept. 
 
 From the Indian standpoint these considerations 
 may be regarded complacently, but England's in- 
 terest in the matter cannot be ignored. If it be 
 that this double-faced value or power of the rupee 
 
CHAP. VII. 
 
 The Perverse Rupee. 123 
 
 its stationary value towards India, and its re- 
 duced and fluctuating value towards Europe, is 
 due, not to anything that has come about naturally, 
 but to a positive error that has been committed in 
 attempting to establish the unit of value in gold 
 alone, England would be perfectly within her right 
 in seeking to undo the effects of this error by re- 
 storing the old parity of gold and silver, even 
 though India should have to forego the incidental 
 advantage in these respects which England's error 
 has given her. 
 
 This is one way of looking at the position. But 
 does India on the whole gain by the present state 
 of matters ? I hold that she is a loser, and that 
 she would benefit greatly, in common with all the 
 world, by the re-establishment of the parity of 
 value between gold and silver. 
 
 No one denies that the fluctuations of exchange, 
 due to the uncertainty of silver valuations in 
 Europe, are a great hindrance to trade. They 
 involve risk and loss, no matter what arrangements 
 bankers and merchants may adopt to overcome 
 them. Even the mere cost of such arrangements 
 is a heavy burden on trade. 
 
 India also needs English capital for its develop- 
 ment ; but, under present conditions, the risks and 
 the uncertainty as regards silver stand in the way 
 of this ; and not only is capital withheld, but it is 
 actually being withdrawn. In a speech at a meet- 
 
124 The Perverse Rupee. 
 
 ing of the Bankers' Institute, Mr. Gwyther, of the 
 Chartered Bank of India, Australia, and China, 
 referring to this, said : 
 
 " What do we find ? Not that capital goes to 
 India and I speak advisedly but the converse; 
 and that has been going on for the last fifteen 
 years. When the Latin Union stopped the coin- 
 ing of silver on the old ratio, people who had 
 money in the East scarcely realised the effect. 
 Then, when they found that the exchange on 
 England fell continuously, they got into a de- 
 spairing mood, and said : " Things are so bad 
 they cannot become worse/' and they allowed 
 their money to remain ; but for the last three or 
 four years I have noticed that they have finally 
 made up their minds to cut the knot, and have 
 their capital back coute que coute." 
 As regards the Bombay mill industries, they are 
 a mere fraction in relation to the general interests 
 of India. Though bereft of the special advantage 
 which the perverse rupee at present gives them, 
 they would still have a fair field. The natural 
 advantages of their position, and the proximity 
 of cotton which they enjoy, would enable them to 
 a large extent still to hold their own, especially in 
 supplying India herself. It is the vast agricultural 
 interests of India, however, which have mainly to 
 be considered. She has, no doubt, an advantage 
 where she competes with Europe in any article of 
 
CHAP. VII. 
 
 The Perverse Rupee. 125 
 
 produce, through being able, from exchange differ- 
 ences, to sell at lower European prices; but she 
 loses the advantage that results from this, and 
 probably much more, by the general fall of prices 
 in Europe, which affects the whole of her produce. 
 The great increase of railway communication in 
 India, which late years have witnessed, would, I 
 believe, have tended far more than it has done to 
 the advancement of India, but for the fall in values 
 in Europe that has taken place. 
 
 Viewing the whole commercial position of India, 
 the advantages she has derived from her indepen- 
 dent silver currency have been rather negative than 
 positive. She has been saved from much of the 
 suffering that gold-standard countries have ex- 
 perienced, but I believe the restoration of the old 
 parity of value between gold and silver, besides 
 removing the difficulties that have so harassed 
 Europe, would also give increased impetus to the 
 trade of India. The interests of India, also, are 
 bound up with the interests of the great comity of 
 trading nations, and what would contribute to the 
 general prosperity of the whole would undoubtedly 
 in the main be for her benefit. 
 
 Everyone knows how the finances of the Indian 
 Government have been affected by the losses in 
 exchange, for which it has to provide. To get rid 
 of these losses, and the difficulties to which they 
 give rise, would no doubt be a great boon to India, 
 
CHAP. VII. 
 
 126 The Perverse Rupee. 
 
 and would leave her statesmen much more free to 
 promote and extend those industrial works which 
 are so necessary for her progress. 
 
 There are some commercial writers in the London 
 press who try to make out that these exchange 
 differences, which the Indian Government have to 
 meet, are not real losses. I think it would be very 
 hard to convince those who have to deal practically 
 with the matter in India of this. If the rupee in 
 India has remained stationary, then a rupee there 
 must still mean what it has always meant. No 
 more rupees are paid in taxes in consequence ^of. 
 the altered value of the rupee in Europe, and the 
 Government cannot, by any legerdemain, make 
 these rupees go further in meeting the increased 
 amount in rupees which it now takes to defray the 
 interest on gold loans and other gold charges for 
 which it has to provide. 
 
 The fact that the debts of the Indian Govern- 
 ment are actually discharged by the shipment of 
 commodities makes no difference. Values cannot 
 be denned, or even expressed, without reference to 
 the standard of value, and India's silver standard 
 measures equally what goes into India and what 
 goes out. The silver money of India, like all true 
 money, is an equivalent value in itself of the 
 articles for which it is exchanged, and measures 
 quite independently of any other standard. The 
 mono-metallist can never get rid of the habit of 
 
CHAP. VII. 
 
 The Perverse Rupee. 127 
 
 looking at values in India through the eye of gold, 
 regarding her money as if it were simply like 
 inconvertible paper money. Hence the confusion 
 of thought and the erroneous ideas of the writers 
 to whom I have referred. They are not even con- 
 sistent in applying the gold measure. If they 
 were, they would be bound also to conclude that 
 the actual wealth of India in silver money, and 
 silver ornaments had been enormously affected by 
 the change in the relative value of silver to gold 
 which has taken place. I have seen the total 
 amount of silver thus existing in India estimated 
 at 600,000,000. Upon this, on the hypothesis 
 supposed, India must have lost about 150,000,000, 
 and alongside such loss any supposed gain other- 
 wise would appear as insignificant. Fortunately 
 for India, however, the East has not bowed down 
 before the golden idol which the West has set up. 
 Silver, as we have seen, maintains its independence, 
 and the effect which the full triumph of mono- 
 metallic ideas must have had upon India in this 
 respect has been averted. But apart from this, and 
 taking the position of silver as it at present stands, 
 I think that no one who looks at the whole of the 
 interests of India as they would be affected by a 
 bi-metallic arrangement can doubt that it would be 
 greatly to her advantage that it should be carried 
 out. 
 
 I would only further remark here that, while it 
 
CHAP. VII. 
 
 128 The Perverse Eupee. 
 
 is necessary to consider the interests that have 
 been affected by the present disorganisation of the 
 world's money, and the interests that would be 
 affected by the steps necessary to restore monetary 
 harmony, no clear conception of the real nature of 
 the question can be gained by merely comparing 
 and balancing these different interests. A malaise 
 admittedly exists, and it is the duty of those who 
 seek for a remedy not merely to discuss the com- 
 parative importance of the different symptoms, but 
 to diagnose the disease, and to understand fully 
 the monetary dislocation that is the cause of it. 
 
 We have often been told by economists that 
 money is a tool. It is meant to be the servant of 
 man ; but how often do those who oppose monetary 
 reform practically invest our gold standard with 
 far higher attributes, and regard it as a sacred 
 thing that must on no account be touched? It 
 was meant to be a true measure of value, that 
 would be a just equivalent for property and services 
 everywhere. But when it is found that it has lost 
 its stationary quality, and is only a measure of 
 things in relation to itself, then we are told that 
 we must be content to adjust everything else to its 
 altered equivalence. Wages must come down, rents 
 must fall, mortgages and settlements must be 
 revised, but we must not touch our sacred gold 
 standard. Does not this involve the reversing of 
 the proper order of things ; the tail wagging the 
 
CHAP. VII. 
 
 The Perverse Rupee. 129 
 
 body, the tool, in place of being a servant, becoming 
 master? The intelligence of the country will, I 
 believe, ere long see all this, and, with omnipotent 
 voice, demand that the matter be put right. 
 
CHAPTEE VIII. 
 
 HISTORICAL ASPECT AND PRESENT 
 POSITION OF THE QUESTION. 
 
 THE mono-metallists' favourite mode of dealing 
 with this monetary question, is to treat it alto- 
 gether as an abstract question, ignoring monetary 
 history, and the great fact that gold and silver 
 unitedly constitute the world's money. The State, 
 they say, does nothing more than impress a stamp 
 indicating weight and fineness of the gold coin 
 which has been chosen for our standard. This 
 done, the action of supply and demand must have 
 free course, and we are powerless to interfere. 
 The theory thus indicated is beautiful in its sim- 
 plicity, and if we were living in an ideal world, 
 where only one monetary metal existed, there 
 would be nothing to say against it. Unfortunately 
 for the theory, however, our actual world has two 
 metals on which value is based, and the theory 
 which takes cognisance of one only as the basis of 
 value is altogether inadequate as a true represent- 
 ation of the doctrine of money. The solidarity of 
 the world's money cannot be ignored, and, as I 
 have endeavoured to show, it is impossible for any 
 
CHAP. VIII. 
 
 Historical Aspect 131 
 
 one nation to have a standard of value in the one 
 metal unaffected by what may befall the other. 
 
 The older economists, who cherished and idolised 
 the beautifully simple theory to which I have 
 referred, seemed to have England's experience for 
 the first sixty years of her gold standard history in 
 their favour, because the corrective action of the 
 laws of other nations rendered the individual action 
 of England powerless to destroy the steady ratio 
 of value between the two metals. Now, however, 
 that this steady ratio is gone, through other nations 
 trying to follow the example of England, the true 
 value of this vaunted theory is being seen, and it is 
 satisfactory that the professors who now take the 
 lead in economic science are gradually ranging 
 themselves on the bi-metallic side. 
 
 Professor Sidgwick, of Cambridge, in a work 
 published in 1883, concludes his remarks on the 
 question of standard in the following words : * "So 
 far we have been considering the controversy of 
 the standards, as though the question were one of 
 establishing a currency de novo. Of course it is 
 not in this form that it comes within the range of 
 practical politics. The trade of the world even I 
 may say the internal trade of the British Empire 
 is actually carried on under bi-metallic conditions ; 
 and no one doubts that this will continue to be the 
 
 * " The Principles of Political Economy," by Henry Sidgwick, 
 pp. 455-6. 
 
CHAP. Till. 
 
 132 Historical Aspect 
 
 case for an indefinite period. Indeed, the most 
 eager mono-metallists do not appear to desire a 
 universal adoption of a gold currency, at the risk 
 of a great rise in the value of the medium of 
 exchange. The practical issue, therefore, so far as 
 international trade is concerned, lies not between 
 mono-metallism and bi-metallism, but between 
 rated and unrated bi-metallism." He previously 
 explains that by rated bi-metallism he means " the 
 two metals made legal tender at a fixed ratio," 
 and by unrated bi-metallism the present condition 
 of things. 
 
 Since the publication of Professor Sidgwick's 
 work, we have seen Professor Nicholson, of Edin- 
 burgh, and Professor Foxwell, of Cambridge, boldly 
 avowing bi-metallic views, and entering into the 
 controversy with all the force and earnestness which 
 strong conviction gives, and almost nowhere do we 
 now find any serious academic opposition to bi- 
 metallic views. 
 
 In the " Silver Pound,"* by Mr. Dana Horton, 
 we have also recently had an important addition 
 made to our knowledge of the monetary history of 
 England, and the painstaking care with which he 
 has investigated all the leading points of that 
 history and the views associated with the great 
 names identified with it, entitles him to our 
 warmest thanks. 
 
 * Macmillan & Co., London. 
 
CHAP. VIII. 
 
 and Present Position of the Question. 133 
 
 The historical aspect of the question is well 
 worthy of the fullest consideration. Till the 
 present difficulties arose, we in England were in 
 a dream about our supposed perfect gold currency, 
 unconscious that the theories and historical sanc- 
 tions upon which it was based were false and 
 misleading. Unfortunately, our dream was shared 
 very generally by other nations, as was seen in 
 the resolutions of the Monetary Conference of 1867, 
 and a perusal of the documents in connection with 
 same (extracts from which will be found in the 
 Appendices) will show how the unsettlement and 
 mischief from which we have been suffering were 
 set agoing by the decisions arrived at in that 
 Conference. The data given bearing upon English 
 monetary legislation will also help the reader to 
 understand this.* 
 
 Those who have believed the assertion so often 
 made that law has nothing to do with the matter, 
 may be surprised to find the extent to which law 
 has actually had to do with it ; not merely in the 
 choice of the standard, which mono-metallists must 
 admit, but in regulating the matter all through. 
 
 The Mint Indentures of Elizabeth, prescribing 
 that the pound troy of silver should be cut into 
 sixty-two shillings, was a fundamental law of Eng- 
 lish money up to the time that it was set aside by 
 the statute of 1816. The standard for gold coin 
 
 * Appendices N and O. 
 
CHAP. Till. 
 
 134 Historical Aspect 
 
 was fixed in the time of Charles II. at 44J guineas 
 to the pound troy. These guineas continued at 
 first to vary in value, but were ultimately fixed 
 in the year 1717 by proclamation of George I., 
 under the advice of Parliament, at twenty-one 
 shillings in England's then standard silver money, 
 and thus a fixed bi-metallic basis was formed 
 which, whatever coin happened to prevail in Eng- 
 land, was her real standard of value. (Clause llth 
 of the statute of 1816 recognises this.) 
 
 Gold, as will be seen, was still undervalued ; and 
 as a necessary consequence, under particular bi- 
 metallism, the cheap money, gold, drove or rather 
 kept out the dear money, silver, so that for more 
 than three-quarters of a century gold was the chief 
 coin current in England. But the Mint Indentures 
 of Elizabeth and Charles II., and the proclamation 
 of George I., were still in force, potent though 
 passive, just as the law of gravitation is no less 
 potent while controlling the stationary boulder 
 than it is in controlling the falling stone. And 
 this bi-metallism at once showed its vitality when 
 in 1798 the outside price of silver fell to a point 
 that made it suitable to exchange silver for gold at 
 the English ratio. Then silver began again to be 
 brought to the English Mint for coinage; but 
 under a false idea as to the meaning and conse- 
 quences of this movement, the English Mint fdr 
 the coinage of silver was closed. 
 
CHAP. VIII. 
 
 and Present Position of the Question. 135 
 
 With the suspension of specie payments at the 
 Bank of England, which happened about the same 
 time, inconvertible paper money became, and for a 
 long period continued to be, the chief money of 
 England, and during that time the true basis of 
 her currency was lost sight of. When this inter- 
 regnum in the reign of metallic money came to an 
 end, gold was enthroned as the supreme standard 
 of England's money. The old laws were all re- 
 pealed by the statute of 1816. Silver, instead of 
 being coined at the rate of sixty-two shillings to 
 the pound, was henceforth to be coined at the rate 
 of sixty-six shillings, and not to be a legal tender 
 for more than forty shillings, while the pound 
 sterling of English money was declared to be a 
 'hundred and twenty-three and a quarter grains of 
 standard gold containing a hundred and thirteen 
 grains of pure gold, and nothing else. 
 
 No law in the matter ! Are these enactments 
 mythical ? 
 
 The extracts which I have given from Mr. Dana 
 Horton's able paper, examining the Bullion Eeport 
 of 1810, on which the legislation of 1816 was 
 founded, will show how, in pursuing the primary 
 object of restoring the convertibility of England's 
 paper money, the Committee failed to perceive the 
 full import of the change in standard which they 
 recommended. Even Lord Liverpool himself, whose 
 views were carried out, could not have had this 
 
CHAP. VIII. 
 
 136 Historical Aspect 
 
 fully before him, if we judge from the way in which 
 he wrote regarding the matter.* 
 
 No doubt a due supply of gold and silver coin for 
 the internal currency of England was effectually 
 secured by the legislation of 1816. As a theoretical 
 arrangement for the " coins of the realm " it suited 
 admirably, and for sixty years, as we have seen, it 
 had no apparent drawbacks ; but it was none the 
 less a revolutionary measure in other respects, 
 though it was so long in bearing its necessary fruits. 
 
 It is often asserted, in supposed disparagement 
 of bi-metallism, that it means the alternation of 
 the two monetary metals, and that in France, 
 under bi-metallic law, there was an alternating 
 demand, now for the one metal and now for the 
 other, leading to her stock of money consisting at 
 times of more gold and less silver and at other 
 times of less gold and more silver. But what harm 
 did this do ? The mass of her people never suf- 
 fered inconvenience from these changes, and the 
 basis of value (the standard) was never affected by 
 it. It is indeed of the very essence of bi-metallism 
 that it automatically affords play for this alterna- 
 tion, and that whatever may be the strain upon 
 either the one metal or the other, a compensatory 
 action takes place which neutralises any disturb- 
 ing effect upon the standard resulting from it. 
 
 The full history of the question since 1874 would 
 
 * See " Standard of Value," by Leightoii Jordan. 
 
CHAP. VIII. 
 
 and Present Position of the Question. 137 
 
 form an interesting chapter, but I will only notice 
 a few of the more important circumstances which 
 have bulked out in the public view as the contro- 
 versy has been proceeding. 
 
 The United States of America under the influence 
 of the old gold craze, and in what is now admitted 
 to have been a surreptitious way,* had in the year 
 1873 practically demonetised silver when she was 
 codifying her coinage laws. As soon, however, as 
 the American people realised what had been done, 
 a strong movement in favour of the re-establish- 
 ment of that metal began, and quickly became very 
 powerful. This movement resulted in the passing 
 of what was known as the Bland Act, under which 
 silver to the amount of about 5,000,000 per 
 -annum was coined into legal tender dollars. At that 
 time also (1878) America called together a conference 
 of the leading European nations at Paris with a 
 view of getting them to join with her in re-estab- 
 lishing silver on an international basis, but this 
 conference failed. Again in 1881 she called another 
 conference ; this time France joined with her 
 in sending out the invitations. More progress was 
 made in this than in the first conference, but still 
 it adjourned with no definite result. After this the 
 tendency of the price of silver continued down- 
 wards, and the fall became accelerated in the year 
 1885 when a bill was brought into the American 
 
 * Appendix L. 
 
 . 
 
CHAP. VIII. 
 
 138 Historical Aspect 
 
 Congress to repeal the Bland Act. The promoters 
 of that bill were bi-metallists, but seeing that 
 Europe would not listen to persuasion, they judged 
 that the only way to force the question upon its 
 attention was to let Europe feel the effect of the 
 stoppage of the American silver purchases upon the 
 value of that metal. Though the repeal of the Act 
 was not then carried out, the mere fear of this led 
 to silver falling from 49d. in July, 1885, to 46d. in 
 January, 1886. In the latter year a very hopeless 
 feeling prevailed regarding silver, and in August 
 the price had fallen to 42d., carrying with it 
 Eupee exchange to Is. 4Jd. 
 
 The Koyal Commission on the Depression of 
 Trade was then sitting, and that Commission, in 
 prosecuting its investigations, was forced to the 
 conclusion that the change in the relative value of 
 the precious metals was an important element 
 among the causes of that depression, and upon its 
 recommendation a further Commission known as 
 the " Gold and Silver Commission " was appointed 
 specially to examine this change. 
 
 After a laborious and protracted investigation, 
 this Commission in the year 1888 presented its 
 report in three parts the first, signed by all the 
 twelve members, in which the main facts insisted 
 upon by bi-metallists as to the depreciation of 
 silver and the appreciation of gold, and the evils 
 resulting therefrom, are fully admitted ; the 
 second, signed by six members, who, while admit- 
 
CHAP. VIII. 
 
 and Present Position of the Question. 139 
 
 ting the evils, express themselves as unable to 
 recommend the remedy proposed by bi-metallists ; 
 and the third, signed by the remaining six, who 
 express themselves in favour of the bi-metallic 
 remedy, and answer the arguments urged against it.* 
 Lately Mr. Leonard Courtney, one of the six who 
 signed the second part, has declared himself to be 
 now in favor of Bi-metallism, making seven out of the 
 twelve Commissioners who now adhere to the third 
 report. Although the London press took little 
 notice of this report, its importance was none the 
 less significant, and it placed the question in this 
 country upon quite a new footing. Nor was it only 
 in England that it told. On the Continent of 
 Europe the investigation was also earnestly 
 'watched ; and in America a similar interest was 
 taken in the proceedings of the Commission, and 
 there is no doubt that it had a decided influence in 
 determining the new and bold policy regarding 
 silver in 1890 when the Sherman Act was passed.! 
 Our financial writers in England have all along 
 failed to gauge the true meaning of the silver 
 movement in America. They have seen in it 
 nothing more than the result of the intrigues of 
 the silver mine owners, and under this view they 
 have only sneered at it. The American people, how- 
 ever, have looked upon the matter very differently. 
 They have seen in it a currency question of the 
 
 * Appendix R. f Appendix M. 
 
CHAP. VIII. 
 
 140 Historical Aspect 
 
 highest moment, and her most prominent statesmen 
 recognise the necessity of reinstating silver as the 
 co-partner of gold. America is permeated with bi- 
 metallic ideas, and the various attempts that she has 
 made to secure an international settlement shows 
 how earnestly she has sought this solution. The 
 Sherman Act of 1890, besides having the purpose 
 of supplying increased currency, was carried out 
 under the belief that America would have power, 
 by herself through this Act, so to raise the price 
 of silver that it would advance to nearly the 
 old relation to gold, and with this secured, that it 
 would then be more easy to induce the European 
 nations to join in fixing the ratio internationally at 
 the old rate. The intention was good, but the 
 effect was only temporary ; and the evanescent 
 nature of the improvement which took place in 
 that year, with the subsequent heavy fall in silver 
 and silver exchanges, we all know led to times 
 of great difficulty in our Eastern trade, and to the 
 paralysation of industry from the increased severity 
 of monetary dislocation which resulted. So gene- 
 rally were these evils felt that the late Government 
 was induced to consent to take part in a further 
 Conference of the leading nations upon monetary 
 affairs, which the United States' Government again 
 proposed to call together, and which assembled at 
 Brussels in November, 1892.* 
 
 * Appendix I. 
 
CHAP. VIII. 
 
 and Present Position of the Question. 141 
 
 Unfortunately, the present government, to whom 
 it had fallen to complete the arrangements for the 
 British representation at this Conference, did not 
 look upon it with the same favour as their pre- 
 decessors had done, and to make sure of their 
 own ideas being fully represented, they added to 
 those already appointed to represent English and 
 Indian interests the names of two other gentlemen, 
 one being a government official whose action dur- 
 ing the course of its meetings and whose premature 
 declarations on behalf of the English government 
 in an absolutely mono-metallic sense, destroyed all 
 hope of the Conference agreeing upon any concerted 
 action, and it was generally feared when the ad- 
 journment took place at Christmas, 1892 (and the 
 result has so far justified the fear) that it would 
 'not meet again. The failure of this Conference 
 owing to the attitude of England, gave a great 
 blow to the prospects of an international agreement. 
 
 Meantime the extreme financial difficulties of the 
 Indian government, resulting from the fall in the 
 exchange value of the rupee, had forced the English 
 government to take cognisance of this aspect of the 
 question. 
 
 The Indian government had for many years been 
 urging the home government to procure a settle- 
 ment of the questions by means of international 
 bi-metallism, and had declared that if this were 
 unattainable it should be allowed to act for itself, 
 
CHAP. VIII. 
 
 142 Historical Aspect 
 
 and either close the Imperial mints in India against 
 silver, or treat directly with the United States 
 government regarding it, so as to prevent the 
 further fall of Eupee exchange. 
 
 After the Brussels' conference adjourned, a 
 committee, under the presidency of Lord Herschell,* 
 which had been appointed by the home govern- 
 ment to consider the first of the two alternatives 
 suggested by the Indian government the second 
 being ignored was pressed for its decision, and in 
 an evil hour, contrary to the weight of evidence which 
 it had taken, that committee decided to recommend 
 the closing of the mints. The Indian government 
 now giving up hope of getting England to favor the 
 settlement of the difficulty by international agree- 
 ment, and fearing that the American government 
 might in the meantime precipitate a fresh crisis by 
 repealing the Sherman Act, at once carried out the 
 recommendation of the Herschell committee. 
 
 The immediate effect of closing the Indian mints 
 was that silver at once fell from 38d. to 30d., 
 while rupee exchange rose from Is. 2Jd. to near 
 Is. 4d. But, alas for the necessities of the Indian 
 government, the exchange rate again began to give 
 way, and there has never since been an exchange 
 market upon which the sale of Council drafts could 
 have been pressed without the certainty of a still 
 greater fall taking place. 
 
 * Appendix J. 
 
CHAP. VIII ~ 
 
 and Present Position of the Question. 143 
 
 Hoping that general trade conditions might, sub- 
 sequently, become more favourable for the sale of 
 these drafts, the government has seen seven months 
 pass over without these hopes being realised, and 
 now finds itself in such financial difficulty that 
 power to borrow in England to the extent of ten 
 millions sterling has had to be taken to meet the 
 pressing wants for Indian payments on this side. 
 
 One thing which has tended to turn the balance 
 of trade, and prevent the improvement in exchange 
 which the Indian Government expected from the 
 closing of the mints, has been the fact that silver 
 has continued to go to India in as large or larger 
 quantities than ever ; but, in place of going through 
 the Imperial mints, it has got into the hands of 
 the people through the silversmiths, and largely 
 "also as coin through the mints in the native states, 
 with which the Imperial Government has no power 
 to interfere. Mainly to meet this difficulty it is 
 understood that the Indian officials were lately 
 strongly urging the imposition of a heavy duty on 
 silver, but the home government decided against this. 
 If it had been imposed, it would only have been 
 another doubtful step to fortify the first false one: 
 like America, finding the Bland Act ineffective in 
 maintaining the price of silver, following it up by 
 the larger purchases of the Sherman Act, only to 
 land that country in greater difficulty. 
 
 The last-named Act in America was finally 
 
CHAP. VIII. 
 
 144 Historical Aspect. 
 
 repealed, after long discussion, in the American 
 Congress in November last ; and, at the present 
 moment, what were formerly the two great outlets 
 for silver, viz., the open doors of the Imperial 
 Mints in India, and the American monetary 
 absorption of silver, have disappeared. Yet, as 
 we have seen, silver still continues to go to the 
 East, and must continue to do so, as the Eastern 
 nations must have silver, and silver only, for their 
 internal transactions. 
 
 At the moment all is confusion, doubt, and 
 uncertainty in the business relations of these 
 countries, and what bi-metallists have been so long 
 urging as the only possible solution of the difficulty 
 is now being recognised pretty generally as the one 
 that must, ultimately, be adopted. 
 
 The legislation in America, which stopped the 
 purchase of silver under the Sherman Act, re- 
 affirmed on behalf of that country its unabated 
 confidence in international bi-metallism. France 
 also has not changed from her former attitude 
 toward it. In Germany a monetary commission is 
 now sitting with the view of joining in this remedy, 
 and I believe we may now confidently hope that the 
 opposition of permanent officials and of influential 
 bankers in England, which has been so powerful in 
 influencing our English statesmen to oppose bi- 
 metallism, will, ere long, be forced to give way before 
 the rising opinion of the country in its favour. 
 
APPENDICES. 
 
 APPENDIX A. 
 
 FKENCH MONETARY LEGISLATION.* 
 
 MONETARY LAW OF 1803. 
 
 Law relating to the Fabrication and Verification of Coins 
 of the 7-17 Germinal, Year XI. of the French Re- 
 public (1803). 
 
 DECREE. 
 
 GENERAL DISPOSITIONS. 
 
 Five grammes of silver, nine-tenths of fine, constitute the 
 monetary unit, which retains the name of franc. 
 
 TITLE I. 
 OF THE FABRICATION OF COINS. 
 
 ARTICLE I. The Silver Coins shall be the quarter 
 of a franc, half-franc, three-quarters of a franc, one- 
 franc, two-franc, and five-franc pieces. 
 
 ARTICLE II. Their fineness is fixed at nine-tenths 
 fine and one-tenth alloy. 
 
 ARTICLE III. The weight of the quarter of a franc 
 piece shall be one gramme twenty-five centigrammes. 
 
 That of the half -franc piece, two grammes five de"ci- 
 gramrnes. 
 
 That of the three-quarters of a franc piece, three 
 grammes seventy-five centigrammes. 
 
 That of the one-franc piece, five grammes. 
 
 * "International Monetary Conference, &c., 1878." Wash- 
 ington, 1879. Page 155. 
 
146 Appendix A. 
 
 That of the two-franc piece, ten grammes. 
 
 That of the five-franc piece, twenty-five grammes. 
 
 AKTICLE IV. The tolerance of fineness for silver 
 money shall be three-thousandths, outside as well as 
 within. 
 
 ARTICLE V. The tolerance of weight shall be for 
 the quarter of a franc piece, ten thousandths outside 
 as well as within ; for the half -franc and three-quarters 
 of a franc piece, seven thousandths outside as well as 
 within ; for the one-franc and two-franc piece, five 
 thousandths outside as well as within ; and for the 
 five-franc piece, three thousandths outside as well as 
 within. 
 
 ARTICLE VI. There shall be coined gold pieces of 
 twenty francs and of forty francs. 
 
 ARTICLE VII. Their fineness is fixed at nine-tenths 
 fine and one-tenth alloy. 
 
 ARTICLE VIII.- The twenty-franc pieces shall be 
 struck at the rate of a hundred and fifty-five pieces to 
 the kilogramme, and the forty-franc pieces at that of 
 seventy-seven and a half. 
 
 ARTICLE IX. The tolerance of fineness of the gold 
 coins is fixed at two thousandths outside, the same 
 within. 
 
 ARTICLE X. The tolerance of weight is fixed at two 
 thousandths outside, the same within. 
 
 ARTICLE XI. The expense of coinage alone can be 
 required of those who shall bring material of gold or 
 silver to the Mint. 
 
 These charges are fixed at nine francs per kilogramme 
 of gold, and at three francs per kilogramme of silver. 
 (The rates here fixed were changed several times). . 
 
APPENDIX B. 
 
 VAEIATIONS IN THE PRICE OF SILVER PRIOR TO 
 1873. 
 
 Keferring to table on page 14, it is proper to note 
 that while the decennial and yearly averages there 
 given show such remarkable steadiness of ratio, 
 the variations within these periods have been at 
 times more important than these averages indicate. 
 There is no doubt that between 1827 and 1872 the 
 price of silver in London touched the extreme 
 points of 58d. and 62Jd. per ounce, which is a 
 difference of seven per cent., or three and a half 
 per cent, on either side of the central point. From 
 these facts mono-metallists have argued that the 
 action of the French law did not actually maintain 
 the steadiness that is claimed for it that increased 
 supplies, now of the one metal, now of the other, 
 asserted their power in determining the relative 
 prices of silver and gold in spite of the French law. 
 They do not altogether deny that it had a steadying 
 power. The fact is too patent for this ; and if they 
 would patiently examine the whole circumstances 
 of these variations of price, they would also be 
 forced to admit that the variations in the supplies 
 
148 Appendix B. 
 
 of the metals had little to do with the matter; 
 that they were, in fact, caused by 
 
 "The French Mint charges, the capacity of the 
 French Mints for coining, the state of the French 
 silver coinage, and by the circumstance that, because 
 universal bi-metallism did not obtain, silver must 
 often pass between France and England against the 
 current of the exchange between these countries." 
 
 The same writer, Mr. J. N. Soderholm, also 
 
 says : 
 
 " Morio-metallists have seen in the price of silver in 
 London not only a proof of the impossibility of all bi- 
 metallism, but also a proof of the silver coins, say, in 
 France, are not worth the gold with which they are 
 actually circulating at par. We know that nothing 
 can be more erroneous. The price of silver in London 
 is nothing else than it pretends to be the price of 
 that silver which has been sold in that place at the 
 time when the price is given. It is by no means the 
 price of all silver in all places. And it is therefore 
 also erroneous to strike an average of the London 
 silver prices for a number of years, and offer the same 
 as the true value of silver in general during those 
 years." 
 
 These remarks sum up a most careful and accu- 
 rate analysis of this matter, by the writer whom I 
 have named.* It is impossible to do justice to his 
 argument by any extracts from it, and I can only 
 recommend my readers to peruse his work, in the 
 
 * "The Ratio of Value beteen Gold and Silver as Money,-" -by 
 J. N. Soderholm. London : J. N. Soderholm & Co., 72, Bishops- 
 gate Street, E.G. 
 
Variations in the Price of Silver. 149 
 
 sixteenth and seventeenth chapters of which the 
 matter is referred to. 
 
 Mr. H. H. Gibbs also deals with the same point 
 in his Colloquy,* and Mr. Tidman in his book, 
 " Gold and Silver Money," gives a detailed table 
 showing the actual variations.! 
 
 * " A Colloquy on Currency," by Henry H. Gibbs. London : 
 Effingham. Wilson & Co., Royal Exchange. 
 
 t " Gold and Silver Money," by Paul F. Tidman. London : 
 Kegan Paul, Trench, & Co. 
 
APPENDIX C. 
 
 THE LATIN UNION. 
 
 Monetary Treaty, concluded December 23rd, 1865, betiveen 
 France, Belgium, Italy, and Switzerland* 
 
 His Majesty the Emperor of the'French, His Majesty 
 the King of the Belgians, His Majesty the King of 
 Italy, and the Swiss Confederation, equally animated 
 by the desire to effect a more perfect harmony in 
 their Monetary Legislation, and to remedy the in- 
 convenience to trade between their respective coun- 
 tries resulting from the diversity of their small silver 
 coins, and to contribute to the uniformity of weights, 
 measures, and coins by forming a Monetary Union, 
 have therefore resolved to conclude a Convention 
 for that purpose, and have named their Commis- 
 sioners Plenipotentiary as follows : .... 
 ARTICLE 1. Belgium, France, Italy, and Switzer- 
 land unite to regulate the weight, title, form, and 
 circulation of their gold and silver coins. No change 
 is made for the present in legislation relative to copper 
 coins for the four countries. 
 
 ARTICLE 2. The high contracting parties bind them- 
 selves not to coin, or permit to be coined, any gold 
 other than in pieces of 100, 50, 20, 10, and 5 francs in 
 weight, tolerance, and diameter, as follows : All these 
 coins shairbe of the fineness or standard of 900, with a 
 tolerance of two thousandths above or below the legal 
 
 * ''International Monetary Conference, &c., 1878." Wash- 
 ington, 1879. Page 787. 
 
The Latin Union. 151 
 
 standard. The tolerance in weight shall be for the 
 100 and for the 50 franc pieces, one thousandth above 
 or below ; for the 20 and 10 franc pieces, two thou- 
 sandths ; for the 5 franc pieces, three thousandths. 
 The weights and diameters are these : 
 
 Gold coins 100 francs, weight 32-258-06 grams, dia- 
 meter 35 millimetres ; 50 francs, weight 16* 129 '03 
 grams, diameter 28 millimetres 20 francs, weight 
 6'451'61 grams, diameter 21 millimetres; 10 francs, 
 weight 3'225'80 grams, diameter 19 millimetres ; 5 
 francs, weight 1 -612-90 grams, diameter 17 millimetres. 
 
 The different States will receive all the above coins 
 when not worn to one-half per cent, or the devices 
 effaced. 
 
 ARTICLE 3. The contracting Governments bind 
 themselves not to coin, or permit to be coined, silver 
 pieces of five francs, except in the following weight, 
 standard, tolerance, and diameter. The weight of each 
 5 franc piece shall be 25 grams ; its tolerance in weight, 
 three thousandths ; its fineness, 900 ; its tolerance in 
 standard, two thousandths ; and its diameter, 37 milli- 
 metres. 
 
 They will receive the above pieces at par, unless 
 reduced one per cent, by wear or the device is worn off. 
 (These arrangements were based on the established 
 ratio of 15 to 1.) 
 
 Articles 4 and 9 arrange the size and fineness of 
 the smaller silver pieces which are not full-value 
 coins, the quantities of these which each State is 
 to issue, and the extent to which they are to be 
 received as legal tender between individuals and at 
 the public banks. 
 
152 Appendix C. 
 
 The remaining clauses refer to further details, 
 one of which provides that any other nation can 
 join the Convention by accepting its obligations 
 and adopting the monetary system of the Union 
 in regard to its gold and silver coins. (Under this 
 article Greece afterwards joined). 
 
 The treaty was first made for fifteen years, ex- 
 piring in 1880, but it was arranged in 1878 that it 
 should be continued five years longer. Since 1885 
 it has been continued from year to year on the 
 footing of a year's notice being given of the inten- 
 tion of any of the Powers to withdraw. 
 
APPENDIX D. 
 
 INTERNATIONAL MONETARY CONFERENCE, 1867. 
 
 This Conference was convened by the French 
 Government, on the suggestion of the leading men 
 who originated the Latin Union. The object is 
 indicated in the following sentences from the 
 French Minister's circular to the United States 
 Government proposing the Conference. " After 
 having brought about the disappearance of diver- 
 gencies of which they recognised the inconveni- 
 ences, the delegates of France, of Belgium, of 
 Italy, and of Switzerland, seeing a population of 
 seventy millions of souls thenceforth endowed with 
 the same monetary system, must quite naturally 
 have been led to fix attention on an interest more 
 general. Without entering on the examination of 
 a question which it was not their mission to solve, 
 they expressed in the name of their Governments 
 the desire to see the Union, as yet restricted to 
 four countries, become the germ of a Union more 
 extended, and of the establishment of a general 
 monetary circulation among all civilised States." 
 
 The Conference met in Paris, and was attended 
 by representatives from all the leading nations, 
 including England, which was represented by 
 
154 Appendix D. 
 
 Mr. Thomas Graham, Director of the Eoyal Mint, 
 and Mr. Eivers Wilson, attached to the Treasury. 
 Mr. Eivers Wilson stated 
 
 "That while consenting to be represented in this 
 Conference, the English Government has found it 
 necessary to place the most careful restriction upon 
 its delegates ; their part is simply to listen to the 
 different arguments, to study the situation as deve- 
 loped in discussion, and to report to their Government. 
 Thus far they have found no difficulty in voting in 
 favour of all the propositions adopted by the Confer- 
 ence, because their principles agreed with the system 
 now in force in England." 
 
 The following extracts from the final report of 
 the Conference show fully its main decision : 
 
 " By a most singular coincidence, when only two out 
 of twenty States had gold for a standard, your Confer- 
 ence decided upon it for the standard, with silver as a 
 transitory companion ; and this was done because the 
 double standard was necessary in certain States that 
 were used to it, or where silver was the exclusive 
 standard. 
 
 " This valuable unanimity on a question so import- 
 ant, tending to perfect the monetary system of the 
 Convention of 1865, will certainly influence public 
 opinion, and certain men in the interior of States who 
 may have retained any doubt on the question. 
 
 "In thus adopting gold as a basis for the desired 
 union, it was only in a common denominator above the 
 franc that it was possible to realise the useful equa- 
 tions and frequent coincidences in the systems to be 
 brought together ; for, in gold coins, the very minute 
 
International Monetary Conference, 1867. 155 
 
 differences could not be distinguished with precision 
 by the process of coinage, and already the mere dis- 
 tance of five francs may be sometimes difficult to ex- 
 press sufficiently in the external form of the monetary 
 discs. 
 
 " The weight of five francs in gold of nine-tenths 
 fineness, the standard which was unanimously ap- 
 proved, and also one of the conditions of the Convention 
 of 1865, then appeared to be the proper denominator 
 for the basis of the desired assimilation between the 
 monetary systems of the twenty States represented. . 
 
 "If the germs of our collective, enlightened, and 
 benevolent aspirations, freed from the unpleasant 
 compensations that sometimes attend the most seduc- 
 tive reforms, in which we are all animated by the 
 true spirit of civilisation and modern progress, shall 
 come to fructify around you, I hope, gentlemen, you 
 will pleasurably recall the honourable memories of the 
 part you have taken in these delicate scientific discus- 
 sions, with the satisfaction of their joint pursuit, under 
 a presidency so memorable (Prince Napoleon), and with 
 a facility and harmony as perfect as that of delegates 
 from a single nation in its ordinary deliberations." 
 
 The displacement of silver was thus decreed, 
 and pour-parlers between the different Govern- 
 ments were begun with the view of carrying out 
 the decision arrived at. We get a glimpse of these 
 in their relation to our own country from a speech 
 made on the 6th August, 1869, by Mr. Kobert 
 Lowe (Lord Sherbrooke), then Chancellor of the 
 Exchequer, in which he said : 
 
 " Well, the French Government have put themselves 
 
156 Appendix D. 
 
 into communication with us. They have written to 
 me on the subject of international coinage, and wish to 
 know what steps the Government of England are will- 
 ing to take in the matter And so I 
 
 ventured to say, in answer to the question, that it 
 would be impossible to hold out hopes of assimilation 
 until France made up her mind to give up the silver 
 standard and have only a gold standard; and I am 
 happy to say that France is favourable to the abandon- 
 ment of her silver standard, as I gather from the report 
 of a commission on the subject which I have received." 
 
 The Franco-German war intervened, and the 
 curtain for a time dropped on the monetary drama. 
 When it again rose it was Germany, not France, 
 that was seen making the first move. 
 
APPENDIX E. 
 GERMAN MONETARY LEGISLATION. 
 
 The following is extracted from Exhibit A, pre- 
 sented by Baron von Thielmann at the first session 
 of the International Monetary Conference of 1881. 
 
 I. 
 
 The introduction into Germany of the single gold 
 standard in the place and stead of the silver standard, 
 which prevailed up to 1871 in most of the German 
 States, was enacted by the laws of 4th December, 1871, 
 and 9th July, 1873. The mark of the gold is the ^-fe 
 part of a pound of gold (of 500 grammes) at nine- 
 tenths fine, and is coined in gold pieces of 20, 10, and 
 5 marks. The right of private coinage exists in so far 
 that every individual is entitled to require the coinage 
 for his own account of gold pieces of 20 marks upon 
 payment of the cost of mintage at the rate of three 
 marks on the pound of fine gold. 
 
 The coins of silver, nickel, and copper perform the 
 functions of subsidiary coins. 
 
 In the Imperial silver coins (pieces of five and three 
 marks, and of one mark, and of 50 and 20 pfennings) 
 100 marks are coined from the pound of fine silver ; 
 the proportion of alloy being of 900 parts of silver to 
 100 parts of copper, 90 marks in coined silver weighing 
 a pound. Under the law, as it stands, the sum total 
 of Imperial silver coin must not exceed 10 marks per 
 capita of the population of the Empire. 
 
 No one can be compelled to accept payment of a sum 
 exceeding twenty marks in Imperial silver coins. On. 
 
158 Appendix E. 
 
 the other hand, these coins are received in payment, with- 
 out limitation as to amount, by the Treasuries of the 
 Empire and of the German States; and may, at 
 pleasure, be exchanged for gold ^at certain offices 
 officially designated for that purpose. 
 
 As it was not possible at once to withdraw from 
 circulation the former coins of the different States, and 
 to introduce immediately the new Imperial coinage 
 the laws in question established, as a transitory con- 
 dition, a system analogous to that of the double stand- 
 ard, and under which the old coins of the State were 
 recognised as legal tender, at the rate of one thaler for 
 three marks of gold, a rate based upon the proportion 
 of 1 to 15 for the relative value of the two metals. . . 
 
 The sales of silver were suspended in May, 1879, and 
 have not been resumed since then. 
 
 The sale of these 7,104,896 pounds of fine silver 
 (comprising the 2,034 pounds above mentioned, as 
 delivered to the Mints upon payment of the value 
 thereof), was made as shown in the table on the next 
 page : 
 
 IV. 
 
 If the provisions of the present monetary statutes 
 should be completely carried out, and if, by reason 
 thereof, the sales of silver should be resumed, the Im- 
 perial Government would need to dispose of only, so 
 much of the 410 or 500 millions of marks in thalers 
 now in circulation, as well as of the bar silver which it 
 has held since 1879, as might not be required for the 
 augmentation of the circulation of subsidiary silver 
 coins. 
 
German Monetary Legislation. 
 
 159 
 
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 CM CO OS O CS Oi ^* 
 
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APPENDIX F. 
 
 ACTION OF FRANCE AND THE LATIN UNION IN 
 CONSEQUENCE OF GERMAN LEGISLATION. 
 
 The following extracts from note appended to 
 Exhibit B, presented at the twelfth session of the 
 International Monetary Conference of 1881 by M. 
 Cernuschi, show the course first of the restriction 
 and then of the stoppage of the coinage of silver 
 in France and the Latin Union States : 
 
 The late legislation of the German Empire produced, 
 after 1873, a great afflux of silver in Belgium and 
 France. The French Mints which, in 1872, had re- 
 ceived less than a million of francs' worth of silver to 
 coin, received 173 millions' worth of it in 1873. 
 
 A Ministerial order of 6th September, 1873, directed 
 that the mintage of silver five-franc pieces should 
 henceforth be restricted to 200,000 francs per day in 
 Paris, and 80,000 francs per day in Bordeaux ; and by 
 a third order (28th May, 1874) it was settled that on 
 and after 1st January, 1875, there should be accepted 
 of silver for coinage no more than 75,000 francs a day 
 at Paris, and 25,000 francs a day at Bordeaux. 
 
 The system of limited coinage of silver with a con- 
 tingent for each State, was inaugurated in the Latin 
 Union by the treaty of 31st January, 1874. . ... 
 
Action of France and the Latin Union. 161 
 
 Although limited by the Ministerial orders, the 
 deliveries of silver bullion for mintage accumulated 
 more and more in the mints. To preclude the mintage 
 of a sum greater than the contingent allowed to France, 
 a law was passed 5th August, 1876, which ordained 
 that the mint should be closed to further delivery of 
 silver. 
 
 By the treaty of 5th November, 1878, the States of 
 the Latin Union put an end to the system of limited 
 coinage, which cannot be resumed before 1st January, 
 1886, unless by common consent. 
 
 Since that date the same restriction has been 
 maintained from year to year. 
 
APPENDIX G. 
 INTERNATIONAL MONETARY CONFERENCE OF 1878. 
 
 This Conference was convened by the United 
 States Government, and held its sittings in Paris. 
 The support of France was expected, but this was 
 only feebly given. Germany was not represented ; 
 she first refused the invitation of the Washington 
 Cabinet, and afterwards refused an invitation 
 addressed to her from Paris from the Conference 
 itself. England was represented by Mr. Goschen 
 and by Mr. Henry Hucks-Gibbs; but they went 
 into the Conference on the understanding that, in 
 doing so, it was understood that England did not 
 commit herself to any of the conclusions which 
 might be reached. 
 
 After holding seven sessions, the Conference was 
 closed by the adoption of the following resolutions : 
 
 1. That it is necessary to maintain the monetary role 
 of silver in the world as well as that of gold, but that 
 the choice between the employment of one or other of 
 the two metals, or the simultaneous employment of 
 both, should be governed by the special situation of 
 each State or group of States. 
 
International Monetary Conference of 1878. 163 
 
 2. That the question of the limitation of the coinage 
 of silver should also be left to the free decision of each 
 State or group of States, according to the particular 
 conditions in which they maybe placed, and this the more 
 so as the perturbations which have arisen of late years 
 in the silver market have variously affected the mone- 
 tary situation of the different countries. 
 
 3. That in view of the divergencies of opinion which 
 have been manifested, and of the impossibility even 
 for the States which have the double standard to take 
 any engagement relative to the unlimited coinage of 
 silver, there is no ground for discussing the question 
 of an international ratio of value to be established 
 between two metals. 
 
 These resolutions show that a different view as 
 regards the role of silver from that which pre- 
 vailed in the Conference of 1867 was now taken. 
 -Indeed, one of our own representatives (Mr. 
 Goschen) declared that a universal gold standard 
 was a " Utopia altogether visionary." True, he said 
 the same thing of the American propositions 
 involving the universal double standard which 
 were submitted. We must be content meantime 
 with the declaration he has made regarding the 
 gold standard. He cannot let these declarations 
 be his final utterances on the subject, but must 
 indicate some possible system that is not Utopian, 
 if both of these are to be thus characterised. 
 What is that system ? This work-a-day world 
 must have something which is not merely negative 
 for its guidance. 
 
164 Appendix G. 
 
 As regards our other representative, Mr. Hucks- 
 Gibbs, we know the decided position he has since 
 taken as a supporter of the movement to restore 
 the legal tender of both metals at a fixed ratio. 
 
 Although Mr. Goschen has not yet put himself 
 alongside Mr. Gibbs, he has made important 
 advances in that direction, and his speech in the 
 House of Commons, on the 18th of April, 1890, 
 was a most important contribution to the debate 
 on bi-metallism. More recently he has gone still 
 further in the same direction. 
 
APPENDIX H. 
 INTERNATIONAL MONETARY CONFERENCE OF 1881. 
 
 This Conference was convened by the French 
 and American Governments issuing simultaneous 
 invitations to the other Powers. France was quite 
 at one with America as to the objects proposed to 
 be attained, both countries being represented by 
 declared bi-metallists. Germany, as well as all 
 the leading States, was represented at this Con- 
 ference, and her representatives took an active 
 part in the discussions. The English represent- 
 atives were 
 
 For GREAT BRITAIN. Mr. Fremantle, Deputy-Master 
 
 of the Mint at London. 
 For BRITISH INDIA. Sir Louis Mallet, Under-Secre- 
 
 tary of State, and Lord Keay. 
 For CANADA. Sir Alexander Gait, High Commissioner 
 
 of Canada, at London. 
 
 These representatives took their seats at the 
 Board under the same conditions of reserve as 
 those whom England had sent to the former con- 
 ferences. Thirteen sessions were held, and a vast 
 amount of monetary information regarding all the 
 different countries represented was supplied. In 
 this Conference England showed her desire to 
 further its object by undertaking that if the other 
 Powers came to any definite arrangement as 
 regards silver, she would put in force the powers 
 of the Bank Act, by which one-fourth of the me- 
 
166 Appendix H. 
 
 tallic reserve may be silver. She also indicated, 
 as regards India, that during a certain period, 
 the duration of which would be afterwards settled, 
 the Indian Government would engage to maintain 
 its existing system of the free coinage of silver. 
 Germany also showed a strong disposition to fur- 
 ther the objects of the Conference, but no definite 
 resolution was arrived at. 
 
 The Conference was closed with the following 
 resolution : 
 
 The Conference, considering that, in the course of 
 its two sessions, it has heard the speeches, declarations, 
 and observations of the delegates of the States here- 
 after enumerated : .... 
 
 Considering that the declarations made by several of 
 the delegates have been in the name of their Govern- 
 ments ; 
 
 That these declarations all admit the expediency of 
 taking various measures in concert, under reservation 
 of the entire freedom of action of the different Govern- 
 ments. 
 
 That there is ground for believing that an under- 
 standing may be established between the States which 
 have taken part in the Conference ; 
 
 But it is expedient to suspend its meetings ; 
 
 That, in fact, the monetary situation may, as to some 
 States, call for the intervention of Governmental 
 action, and that there is reason for giving an oppor- 
 tunity, at present, for diplomatic negotiations ; 
 
 Adjourns to Wednesday, 12th April, 1882. 
 
 The Conference did not meet on the date to 
 which it was adjourned, nor has it since done so. 
 
APPENDIX I. 
 
 THE BRUSSELS INTERNATIONAL MONETARY CONFERENCE 
 OF 1892. 
 
 This conference was convened by the American 
 government after preliminary correspondence with 
 the English and some of the other European 
 governments. The memorandum of instructions 
 states : . 
 
 "The Government of the United States have now 
 proposed a Conference of the Powers for the purpose 
 of considering what measures, if any, can be taken to 
 increase the use of silver in the currency systems of 
 nations. 
 
 "Her Majesty's Government have accepted the in- 
 vitation conveyed in these terms, taking note of the 
 statement of the Government of the United States 
 that it does not interpose any conditions which will 
 embarrass any Government willing to confer generally 
 upon the subject of the proper and most advantageous 
 relation of silver to the coinage of the world." 
 
 Twenty-one states sent delegates to the Conference, 
 say : Austria, Hungary, Belgium, Denmark, France, 
 Germany, Great Britain, British India, Greece, 
 Italy, Mexico, the Netherlands, Norway, Portugal, 
 Eoumania, Kussia, Spain, Sweden, Switzerland, 
 Turkey, and the United States of America. Lieu- 
 
168 Appendix I. 
 
 tenant -General Strachey, and Sir Guilford L. 
 Molesworth, K.C.I.E., represented British India. 
 Lord Salisbury's government was in power when the 
 Conference was first agreed to, and before it resigned 
 had drafted the instructions and named the dele- 
 gates whom it chose to represent Great Britain, 
 viz. : 
 
 The Honorable Sir Charles Fremantle, K,C,B., 
 
 Deputy Master of the Mint ; 
 Sir William Houldsworth, Bart,, M.P. ; and 
 Mr. Bertram Currie. 
 
 Mr. Gladstone's government ultimately con- 
 firmed these appointments and instructions, but 
 added to the Delegation two other gentlemen, 
 viz. : 
 
 Sir C. Kivers Wilson, K.C.M.G., Secretary and Comp- 
 troller General of the National Debt Office ; and 
 Mr. Alfred de Rothschild. 
 
 the former an official, and the latter a pro- 
 nounced mono-metallist. Mr. Alfred de Eoth- 
 schild showed himself sincerely anxious that the 
 Conference should accomplish something on the 
 lines indicated in the memorandum of instructions, 
 but Sir Kivers Wilson, and also Mr. Bertram Currie, 
 who were supposed more specially to represent the 
 views of the existing administration, did not conceal 
 their want of sympathy with the object of the 
 conference. At the beginning of the fifth session 
 Sir Eivers Wilson interposed in the discussion on 
 
International Monetary Conference, 1892. 169 
 
 the report of the Committee with a declaration 
 embracing the following words : 
 
 " In order to avoid all misunderstanding, I desire, on 
 behalf of Sir Charles Fremantle and myself, to make 
 in the face of this assembly our profession of faith. 
 Our faith is that of the school of mono-metallism pure 
 and simple. We do not admit that any other system 
 than the single gold standard would be applicable in 
 our country," 
 
 This was made before the discussion on Bi- 
 metallism, which was included among the alter- 
 natives that might be considered, had com- 
 menced, and necessarily took away all interest 
 from that when it came on. 
 
 The attitude of the official delegates supposed 
 . specially to represent the British Government was 
 also indicated on the motion for adjournment when 
 they and Mr. Bertram Currie expressed strong doubts 
 as to the possibility of any useful purpose being 
 served if the Conference were to meet again. Sir 
 Eivers Wilson even intimated that if the Conference 
 were called together again at a future time, the 
 British Government might consider it " unneces- 
 sary to renew the mission which it has entrusted 
 to its Delegates." 
 
 Notwithstanding these " sceptical declarations " 
 as the Delegate of Kussia called them, and for 
 which he added the English Delegates "would 
 have to bear the responsibility/' all the other 
 
170 Appendix I. 
 
 members of the Conference were in favor of an 
 adjournment to a fixed day, viz.: 30th May, 1893. 
 The motion was, therefore, adopted, the Bureau con- 
 tinuing in existence as a " means of communication 
 between the Delegates/' 
 
APPENDIX J. 
 LOED HEESCHELL'S COMMITTEE, 1892-3. 
 
 The following letter will show the purpose for 
 which this Committee was formed : 
 
 THE SECRETARY OF STATE FOR INDIA TO THE LORD 
 
 HIGH CHANCELLOR, DATED INDIA OFFICE, 
 
 21sT OCTOBER, 1892. 
 
 MY LORD, I enclose, for your Lordship's perusal, a 
 copy of a correspondence which has recently passed 
 between the Secretary of State for India in Council 
 and the Government of India, in which, as you will 
 observe, that Government submits proposals for stop- 
 ping the free coinage of silver in India, with a view to 
 the introduction of a gold standard. 
 
 It is unnecessary for me to dwell upon the grave 
 difficulties with which the Government of India are 
 confronted in consequence of the heavy fall in the gold 
 value of silver, or upon the serious nature of the 
 measures which they propose. 
 
 It is on account of the great importance of these 
 measures, the effect of which, if they are adopted, will 
 by no means be confined to India, that I have decided 
 to request your Lordship to preside over a Committee 
 for the purpose of considering the proposals of the 
 Government of India as contained in this correspond- 
 ence, and to advise whether it is expedient that Her 
 Majesty's Government should allow them to be carried 
 into effect. 
 
172 Appendix J. 
 
 In case the Committee should be of opinion that 
 there is no sufficient ground for over-ruling the Govern- 
 ment of India, but that the measures by which they 
 propose to attain the object which they have in view 
 require modification, I shall be glad to receive any 
 suggestions which the Committee may have to offer. 
 
 The Committee will meet at this office, and its pro- 
 ceedings must, for obvious reasons, not be open to the 
 public ; but, subject to this condition, the Committee 
 will proceed in the matter which they think best. 
 
 Your Lordship having already intimated to me that 
 you will accede to my request, the Committee will be 
 constituted as follows : 
 
 The Lord High Chancellor. 
 
 The Right Honourable Leonard H. Courtney, M.P. 
 
 Sir Thomas Henry Farrer, Bart, (now Lord Farrer). 
 
 Sir Reginald Earle Welby, G.C.B. 
 
 Arthur Godley, Esq., C.B. 
 
 Lieutenant-General Richard Strachey, C.S.I. 
 
 Bertram Wodehouse Currie, Esq. 
 
 I trust that, as the matter is urgent, and as the 
 inquiry will be confined to the points which I have 
 mentioned, the Committee may be able to report upon 
 an early day, and that their meetings may be arranged 
 accordingly. 
 
 It is now understood that the Monetary Conference 
 will meet at Brussels on the 22nd of November, and it 
 would be very advantageous if I could receive the 
 report of the Committee before that date. 
 
 KlMBERLEY. 
 
 The correspondence submitted to the Committee 
 extended from 23rd March to 2nd August, 1892, 
 and embraced not only the specific proposal upon 
 
Lord Herschell's Committee. 173 
 
 which Lord Kimberley asked the Committee to 
 report, but also set forth the views of the Indian 
 Government upon the general question, and indi- 
 cated clearly the preference of that government for 
 a settlement of the difficulty by an international 
 monetary agreement. It also indicated as a second 
 alternative that India might be allowed to make a 
 direct agreement regarding silver with the United 
 States. Both of these ideas, however, were ignored 
 in Lord Kimberley's letter. 
 
 The scope of the correspondence submitted fully 
 warranted the Committee in examining a large 
 number of important witnesses, and a blue book 
 (C. 7060 11) has been compiled, the evidence in 
 which would go far to prove that the international 
 .agreement for which the government of India 
 pleaded was the only true solution of the difficulty ; 
 but so far as the Committee was concerned in 
 coming to a decision as to the reply to give to the 
 government, all this was labour lost. It either 
 assumed, or was made to understand, that inter- 
 national bi-rnetallism was a barred question, and 
 on this assumption to answer the definite question 
 put by the government. The following are extracts 
 from letter No. 3 : 
 
 "In our Financial Despatch, No. 68, dated 23rd 
 March, 1892, we requested your Lordship to lend your 
 support to any proposals that might be made by the 
 United States of America, or by any other country, for 
 
174 Appendix J. 
 
 the settlement of the silver question by international 
 agreement 
 
 We have learnt with satisfaction that Her Majesty's 
 Government have accepted the invitation of the United 
 States to take part in an international Conference to 
 consider measures having for their object the more ex- 
 tended use of silver as currency, and that your Lord- 
 ship agrees with us in the importance of Indian 
 interests being properly represented. 
 
 At the same time, we cannot overlook the strong 
 opposition to the introduction of the system of double 
 legal tender into Great Britain that has been manifested 
 in certain quarters ; and we observe with regret that 
 the Conference has been summoned to consider the 
 question of the more extended use of silver as currency, 
 and not for the purpose of considering the adoption of 
 an international agreement for the free coinage of gold 
 and silver, and the making of both gold and silver 
 coins legal tender at a definite and uniform ratio- . . 
 
 We have carefully reviewed all the circumstances of 
 the case, and we desire to place on record, for your 
 Lordship's information, our deliberate opinion that, if 
 it becomes evident that the International Conference is 
 unlikely to arrive at a satisfactory conclusion, and if a 
 direct agreement between India and the United States 
 is found to be unattainable, the Government of India 
 should at once close its mints to the free coinage of 
 silver, and make arrangements for the introduction of 
 a gold standard 
 
 We forward, as an enclosure to this despatch, a 
 minute by our honourable colleague, Sir David Barbour, 
 which gives an outline of the method he would propose 
 to adopt for the introduction of a gold standard into 
 India, if such a measure should become necessary. It 
 
Lord Herschell's Committee. 175 
 
 will be seen that he does not support the proposal to 
 stop the free coinage of silver if the Conference fails 
 and a direct agreement between India and the United 
 States is found to be unattainable, but that he would 
 adopt that measure as soon as it it is evident that the 
 United States will not adopt the free coinage of silver. 
 
 The Committee reported to the Government on 
 31st May, 1893, making the following recommenda- 
 tions : 
 
 Recommendations of the Committee. 
 
 155. It remains for us to state the conclusions at which 
 we have arrived. While conscious of the gravity of the 
 suggestion, we cannot, in view of the serious evils with 
 which the Government of India may, at any time, be con- 
 fronted if matters are left as they are, advise your Lordship 
 to overrule the proposals for the closing of the mints and 
 the adoption of a gold standard, which that Government, 
 with their responsibility and deep interest in the success of 
 the measures suggested, have submitted to you. 
 
 156. But we consider that the following modifications of 
 these proposals are advisable. The closings of the mints 
 against the free coinage of silver should be accompanied by 
 an announcement that, though closed to the public, they 
 will be used by Government for the coinage of rupees in 
 exchange for gold at a ratio to be then fixed, say Is. 4d. per 
 rupee; and that at the Government treasuries gold will 
 be received in satisfaction of public dues at the same ratio. 
 
 157. We do not feel ourselves able to indicate any special 
 time or contingency when action should be taken. It has 
 been seen that the difficulties to be dealt with have become 
 continually greater; that a deficit has been already created, 
 and an increase of that deficit is threatened j that there are 
 at the present moment peculiar grounds for apprehension ; 
 
176 Appendix J. 
 
 and that the apprehended dangers may become real with 
 little notice. It may also happen that, if action is delayed 
 until these are realized, and if no step is taken by the 
 Indian Government to anticipate them, the difficulty of 
 acting with effect will be made greater by the delay. It is 
 obvious that nothing should be done prematurely or with- 
 out full deliberation ; but, having in view these considera- 
 tions, we think that it should be in the discretion of the 
 Government of India, with the approval of the Secretary of 
 State in Council, to take the requisite steps, if and when 
 it appears to them and to him necessary to do so. 
 
 LEONARD COURTNEY. 
 T. H. FARRER. 
 REGINALD E. WELBY. 
 ARTHUR GODLEY. 
 R. STRACHEY. 
 
 B. W. CURRIE. 
 Henry Waterfield, 
 
 Secretary. 
 
 Lord Farrer and Sir Reginald E. Welby jointly, 
 and Mr. Leonard Courtney and Mr. Bertram W. 
 Currie individually, added memoranda qualifying 
 their approval of some of the details. 
 
APPENDIX K. 
 EARLY AMERICAN MONETARY LEGISLATION. 
 
 The following is taken from a pamphlet by M. 
 Cernuschi, entitled, "The 'Bland' Bill: its 
 grounds its alleged dishonesty its imperfections 
 its future " : 
 
 The first monetary law of the United States was 
 passed in 1792 it was bi-metallic. Silver and gold 
 were admitted to mintage without restriction of 
 quality, and were legal tender without restriction of 
 amount. The silver dollar weighed fifteen times as 
 much as the gold dollar. This law remained in force 
 till 1834. 
 
 In 1834 a new monetary law was passed. Bi-metal- 
 lism was maintained, but at the ratio of 16 instead of 
 15 This law remained in force till 1873. 
 
 In 1803 the French Government while substituting 
 francs for livres maintained the old bi-metallism of 15 
 to one of gold. 
 
 Until 1871 the German Government adhered to its 
 old silver mono-metallism. 
 
 In 1816 the English Government, preparing for the 
 withdrawal of paper money, instituted gold mono- 
 metallism, leaving to silver subsidiary functions of 
 small change. 
 
 In 1835 the Indian Government gave up gold for its 
 standard, and adopted silver mono-metallism. 
 
 What was the result of the conflicting legislation? 
 The triumph of the strongest. The strongest was 
 
 N 
 
178 Appendix K. 
 
 France. Always a creditor of other countries, France 
 became the great emporium of the monetary metals. 
 Her bi-metallic law attracted to her at one time gold to 
 be exchanged for silver; at another, silver to be ex- 
 changed for gold. That exchange was always effected 
 on the legal footing of 15|, with a slight premium to 
 the profit of those asked to effect it that is to say, to 
 
 the profit of the French 
 
 The United States, like other countries, constantly 
 underwent the ascendancy of the French law. Debtors 
 rather than creditors of Europe, they had to pay rather 
 than receive. What metal did they prefer to export '? 
 The one which they had no longer an interest to coin 
 at home ; gold until 1834, silver afterwards. Under 
 the bi-metallic system at 15, instituted in 1792, the 
 Americans had a right indeed to take gold to their 
 mint, but it was to their interest not to take it. Gold 
 being only worth 15 of silver under the American law, 
 and being worth 15 under the French law, they gained 
 3 per cent, by converting their gold into francs rather 
 than dollars. Gold dollars, therefore, did not circulate, 
 but only silver dollars. Just the reverse happened 
 under the bi-metallic system of 16, inaugurated in 
 1834. The Americans had a right indeed to get their 
 silver minted at home, and a right to employ it for 
 payments in specie, but it was to their interest not to 
 exercise those rights. Silver being worth the fifteen 
 and a half part of its weight in gold under the French 
 law, and being worth only one-sixteenth under the 
 American law, the Americans gained 3 per cent, by 
 converting their silver into francs rather than dollars. 
 All the silver therefore was exported, and not a single 
 white dollar circulated in America after 1834 (until 
 the " Bland " Act came into force). 
 
APPENDIX L. 
 AMEBICAN " BLAND " ACT. 
 
 Keferring to this enactment in a work entitled 
 "The Economic Crisis,"* Mr. Morten Frewen 
 writes : 
 
 "In 1873, the United States currency being still 
 dominated by the immense paper issues' greenbacks ' 
 the relic of the late war, gold and silver had left the 
 country, or at least were never seen. Germany, the 
 previous year, had struck down silver, and the same 
 thing was not to be effected in the United States. The 
 manner in which this demonetisation was brought 
 about is very curious reading. Congress had agreed 
 to a mere abstract proposal that, for the sake of public 
 convenience, the various Mint laws should be codified. 
 The silver dollar had, up to that time, been always and 
 everywhere legal tender, and was expressed as such in 
 all the old Mint statutes. Was it by accident or design 
 that the new Code omitted all mention of the silver 
 dollar as one of the coins which the Secretary of the 
 Treasury might allow to be coined? The old laws, 
 thus mutilated in codifying, were passed heedlessly 
 through Congress, and it was not till President Grant's 
 signature had been given that the nation awoke to the 
 fact that the ' dollar of the fathers ' had, all unknown 
 to it, been legislated out of existence. Whether the 
 important omission was fraudulent or was really acci- 
 dental will no doubt be made clear at some later day. 
 Senator Beck, of Kentucky, has declared repeatedly 
 
 * Kegan Paul, Trench, & Co., London. 
 
180 Appendix L. 
 
 that Grant detected the fraud when too late, and 
 admitted that he had been tricked into giving his 
 
 signature The nation was immediately 
 
 awakened to the dangers which threatened it. ... 
 Silver had been demonetised by stealth. The ' dollar 
 of the fathers ' had been removed from its niche. It 
 should at once be brought back again. Mr. Bland 
 himself at that time was, and to-day is, an advocate of 
 unlimited free coinage of silver ; that silver should, in 
 the United States, be placed on precisely the same 
 footing as gold. But such a measure then, as now, 
 was regarded by many of the silver party as too heroic. 
 Mr. Bland's bill was accordingly modified by the 
 amendment of Mr. Allison, and the 'Allison-Bland 
 Bill,' as the measure was formerly called, passed both 
 Chambers." 
 
 The chief provisions of this measure (passed 
 in 1878) were as follows : 
 
 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 necessary amount of silver for this 
 purpose being purchased by the Government at the 
 market price. 
 
 2. Dollars so coined are to be of the weight of 412^ 
 grains of standard silver " as provided by the Act 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 ten 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. 
 
APPENDIX M. 
 SHERMAN SILVER ACT, U.S.A. 
 
 Signed by the President of the United States of 
 America on 14th July, 1890, and repealed as regards 
 its purchasing clauses in November, 1893. 
 
 Be it enacted by the Senate and House of Representa- 
 tives of the United States of America, in Congress as- 
 sembled, That the Secretary of the Treasury is hereby 
 directed to purchase, from time to time, silver bullion 
 to the aggregate amount of four million five hundred 
 thousand ounces, or so much thereof as may be offered 
 in each month, at the market price thereof, not exceed- 
 ing one dollar for three hundred and seventy-one and 
 twenty-five hundredths grains of pure silver, and to 
 issue in payment for such purchases of silver bullion 
 Treasury notes of the United States to be prepared by 
 the Secretary of the Treasury, in such form and of 
 such denominations, not less than one dollar nor more 
 than 'one thousand dollars, as he may prescribe, and a 
 sum sufficient to carry into effect the provisions of this 
 Act is hereby appropriated out of any money in the 
 Treasury not otherwise appropriated. 
 
 SEC. 2. That the Treasury notes issued in accord- 
 ance with the provisions of this Act shall be redeem- 
 able, on demand, in coin, at the Treasury of the United 
 States, or at the office of any assistant treasurer of the 
 United States, and when so redeemed may be re-issued ; 
 but no greater or less amount of such notes shall be 
 outstanding at any time than the cost of the silver 
 bullion and the standard silver dollars coined there- 
 
182 Appendix M. 
 
 from, then held in the Treasury purchased by such 
 notes j and such Treasury notes shall be a legal tender 
 in payment of all debts, public and private, except 
 where otherwise expressly stipulated in the contract, 
 and shall be receivable for customs, taxes, and all 
 public dues, and when so received may be re-issued ; 
 and such notes, when held by any national banking 
 association, may be counted as a part of its lawful 
 reserve. That, upon demand of the holder of any of 
 the Treasury notes herein provided for, the Secretary 
 of the Treasury shall, under such regulations as he 
 may prescribe, redeem such notes in gold or silver coin, 
 at his discretion ; it being the established policy of the 
 United States to maintain the two metals on a parity 
 with each other upon the present legal ratio, or such 
 ratio as may be provided by law. 
 
 SEC. 3- That the Secretary of the Treasury shall, 
 each month, coin two million ounces of the silver 
 bullion purchased under the provisions of this act into 
 standard silver dollars, until the first day of July, 
 eighteen hundred and ninety-one, and after that time, 
 he shall coin, of the silver bullion purchased under the 
 provisions of this act, as much as may be necessary to 
 provide for the redemption of the Treasury notes 
 herein provided for ; and any gain or seigniorage 
 arising from such coinage shall be accounted for and 
 paid into the Treasury. 
 
 SEC. 4. That the silver bullion purchased under the 
 provisions of this Act shall be subject to the require- 
 ments of existing law and the regulations of the Mint 
 service governing the methods of determining the 
 amount of pure silver contained, and the amount of 
 charges or deductions, if any, to be made 
 
 SEC. 5. That so much of the Act of February 
 
Sherman Silver Act. 183 
 
 twenty-eighth, eighteen hundred and seventy-eight, 
 entitled "An Act to authorize the coinage of the 
 standard silver dollar, and to restore its legal-tender 
 character," as requires the monthly purchase and coin- 
 age of the same into silver dollars, of not less than two 
 million dollars, nor more than four million dollars 
 worth of silver bullion, is hereby repealed. 
 
 SEC. 6. That, upon the passage of this Act, the 
 balances standing with the Treasurer of the United 
 States to the respective credits of national banks for 
 deposits made to redeem the circulating notes of such 
 banks, and all deposits thereafter received for like 
 purpose, shall be covered into the Treasury as a miscel- 
 laneous receipt, and the Treasury of the United States 
 shall redeem from the general cash in the Treasury the 
 circulating notes of said banks which may come into 
 his possession, subject to redemption ; and, upon the 
 certificate of the Comptroller of the Currency that 
 such notes have been received by him, and that they 
 have been destroyed, and that no new notes will be 
 issued in their place, reimbursement of their amount 
 shall be made to the Treasurer, under such regulations 
 as the Secretary of the Treasury may prescribe, from 
 an appropriation hereby created, to be known as 
 National bank-notes : Redemption account : but the 
 provisions of this Act shall not apply to the deposits 
 received under section three of the Act of June 
 t \veritieth, eighteen hundred and seventy-four, requiring 
 every National Bank to keep in lawful money with the 
 Treasurer of the United States a sum equal to five 
 per centum of its circulation, to be held and used for 
 the redemption of its circulating notes ; and the 
 balance remaining of the deposits so covered shall, at 
 the close of each month, be reported on the monthly 
 
184 Appendix M. 
 
 public debt statement as debt of the United States 
 bearing no interest. 
 
 SEC. 7. That this Act shall take effect thirty days 
 from and after its passage. 
 
 Extracts from remarks made in the American 
 Senate during the passage of the Bill by Senator 
 Aldrich, of Ehode Island. I give these extracts to 
 show the views and aims of those who form what 
 is regarded as the moderate silver party in 
 America : 
 
 " For us, then, the true question is in what way our 
 leadership in this movement can be maintained and 
 made most effective. 
 
 " There are, it seems to me, three alternatives open 
 to us within the limits of safety : First, we can place 
 before European countries an ultimatum, making the 
 further purchases of bullion by us dependent upon their 
 favourable action in the aid of silver : second, we can 
 maintain the status quo ; or, third, we can adopt a safe 
 measure which will largely increase our purchases and 
 the use of silver. 
 
 " Many reasons have existed in the past in favour of 
 the first proposition. It has been strenuously objected 
 to as dangerous by the extreme friends of silver ; but 
 I believe that if the United States had adopted it 
 years ago, the whole question would have been settled 
 before this. The agitation which would have resulted 
 from the mere prospect of a more radical fall in the 
 price of silver would have stirred European public 
 opinion into action long ago. . . . But this cannot 
 now be considered a practical measure. 
 
Sherman Silver Act. 185 
 
 " The second alternative, judging from our experience, 
 does not give promise of satisfactory results, and we 
 are left to consider the probable effect of the third. 
 
 " The recent rise in the price of silver caused by the 
 mere anticipation of action by Congress in this direction, 
 has stirred the whole world to see its interest in silver 
 in a new light, and it has largely stimulated that 
 agitation which alone can secure Governmental action. 
 
 " I for one am willing that the experiment shall be 
 tried. I say experiment, advisedly, for it is an experi- 
 ment whether the Senators, who may give it their 
 support, think so or not. This Congress cannot pass 
 an Act which will give finality to this great question. 
 It must be tentative and experimental : a measure 
 liable to repeal or modification in a wider sense than is 
 usual in such Acts. The final object of our policy is to 
 establish a legal equality between gold and silver. 
 Gold is universal international money to-day, silver is 
 not ; it will not be international money should this 
 Bill be passed. It remains for the Legislatures, which 
 have given gold the privilege, by virtue of which it 
 holds its rank as universal money, to give a similar 
 privilege to silver. Until this is done, there can be no 
 equality as money between the two metals. This is 
 the fact of all facts, and it is useless for senators to 
 endeavour to persuade themselves or to persuade others 
 to the contrary. This fact defines, in advance, the 
 limitation upon the policy of Congress. It is well that 
 we should fully understand that the expectant attitude 
 of the past must be maintained. The Bill reported 
 from the Finance Committee was prepared with a view 
 of keeping within these limitations." 
 
APPENDIX N. 
 ENGLISH MONETARY LEGISLATION. 
 
 The Statute of 1816, establishing the gold stand- 
 ard, recites or refers to the various previous Acts 
 which were thereby repealed, naming first the 
 Statute of Charles II (1666) establishing the free 
 and gratuitous coinage of gold and silver. 
 
 This law provided : 
 
 That whatsoever person or persons, native or foreigner, 
 alien or stranger, shall from and after the twentieth 
 day of December, one thousand six hundred and sixty- 
 six, bring any foreign coin, plate, or bullion, of gold or 
 silver, in mass, molten, or alloyed, or any sort of manu- 
 facture, of gold or silver into His Majesty's mint or 
 mints within the Kingdom of England, to be there 
 melted down and coined into the current coins of this 
 kingdom, shall have the same there assayed, melted 
 down, and coined with all convenient speed, without 
 any defalcation, diminution, or charge for the assaying, 
 coinage, or waste in coinage so as that for every 
 pound troy of crown or standard gold that shall be 
 brought in and delivered by him or them to be assayed, 
 melted down, and coined as aforesaid, there shall be 
 delivered out to him or them, respectively, a pound 
 troy of the current coins of this kingdom, of crown or 
 standard gold ; and for every pound troy of sterling or 
 standard silver that shall be brought in and delivered 
 by him or them to be assayed, melted down, and coined 
 
English Monetary Legislation. 187 
 
 as aforesaid, there shall be delivered out to him or 
 them, respectively, a pound troy of the current coins of 
 this kingdom of sterling or standard silver, and so pro- 
 portionably for a greater or lesser weight 
 
 This law gave the King certain taxes to cover the 
 cost of the gratuitous mintage which it established. 
 The Statute of 1816 also refers specially to the 
 law of the seventh and eighth years of the reign 
 of William III, " intituled for the remedying the 
 ill state of the coin of the kingdom; " to an Act 
 of the year 1774 prohibiting the importation of 
 light silver coin, and restraining " the tender 
 thereof beyond a certain sum " (except by weight) ; 
 and to the Act of 1798 suspending the coinage of 
 silver. 
 - The second clause of the Act of 1774 runs thus : 
 
 " And be it further enacted by the authority afore- 
 said, that no tender in the payment of money made 
 in the silver coin of the realm, of any sum exceeding 
 the sum of twenty-five pounds at any one time, shall 
 be reputed in law, or allowed to be a legal tender, 
 within Great Britain or Ireland, for more than accord- 
 ing to its value by weight, after the rate of five shillings 
 and twopence for each ounce of silver ; and no person 
 to whom such tender shall be made shall be, in any 
 way, bound thereby, or obliged to receive the same in 
 payment in any other manner than aforesaid ; and any 
 law, statute, or usage to the contrary notwithstanding." 
 
 It may be well to give here the following from 
 
188 Appendix N. 
 
 Clause XI. of the Statute of 1816 as also bearing 
 on the question : 
 
 " And whereas at various times heretofore the coins 
 of this realm, of gold and silver, have been equally a 
 legal tender for payments to any amount, and great in- 
 convenience has arisen from both those precious metals 
 being concurrently the standard measure of value and 
 equivalent for property, etc." 
 
 In the year 1717 Sir Isaac Newton, then Master 
 of the Mint, presented a report to the Lords Com- 
 missioners of His Majesty's Treasury, from which 
 the following is extracted : 
 
 " In obedience to your lordships' order of reference 
 of August 12th, that I should lay before your lordships 
 a state of the gold and silver coins of this kingdom, in 
 weight and fineness, and the value of gold in proportion 
 to silver, with my observations and opinions ; and 
 what method may be best for preventing the melting 
 down of the silver coin. I humbly represent, that a 
 pound weight troy of gold, 11 ounces fine and 1 ounce 
 allay, is cut into 44 guineas ; and a pound weight 
 of silver, 11 ounces 2 pennyweights fine and 18 penny- 
 weights allay, is cut into 62 shillings ; and, according 
 to this rate, a pound weight of fine gold is worth 15 
 pounds weight 6 ounces 17 pennyweights and 5 grains 
 of fine silver, reckoning a guinea at l Is. 6d. in silver 
 money ; but silver, in bullion, exportable, is usually 
 worth 2d. or 3d. per ounce more than in coin ; and if, 
 at a medium, such bullion of Standard allay be valued 
 at 5s. 4^d. per ounce, a pound weight of fine gold will 
 be worth but 14 pounds weight 11 ounces 12 penny- 
 
English Monetary Legislation. 189 
 
 weights 9 grains of fine silver in bullion ; and, at this 
 rate, a guinea is worth but so much silver as would 
 make 20 shillings and eightpence. When ships are 
 lading for the East Indies, the demand for silver for 
 exportation raises the price to 5s. 6d. or 5s. 8d. per 
 ounce, or above ; but I consider not those extraordi- 
 nary cases 
 
 " It is the demand for exportation" which hath raised 
 the price of exportable silver about 2d. or 3d. in the 
 ounce above that of silver in coin, and hath thereby 
 created a temptation to export, or melt down, the 
 silver coin, rather than give 2d. or 3d. more for foreign 
 silver ; and the demand for exportation arises from the 
 higher price of silver in other places than in England 
 in proportion to gold, that is, from the higher price of 
 gold in England than in the other places, in proportion 
 to silver ; and, therefore, may be diminished by lower- 
 ing the value of gold in proportion to silver. If gold 
 in England, or silver in East India, could be brought 
 down so low as to bear the same proportion to one 
 another in both places, there would be here no greater 
 demand for silver, than for gold to be exported to 
 India ; and if gold were lowered only so as to have the 
 same proportion to the silver money in England, which 
 it hath to silver in the rest of Europe, there would be 
 no temptation to export silver rather than gold to any 
 other part of Europe. And to compass this last, there 
 seems nothing more requisite than to take off about 
 lOd. or 12d. from the guinea ; so that gold may bear 
 the same proportion to the silver money in England, 
 which it ought to do by the course of trade and ex- 
 change in Europe ; but if only 6d. were taken off at 
 present, it would diminish the temptation to export, or 
 melt down, the silver coin ; and, by the effects, would 
 show hereafter, better than can appear at present, what 
 
190 Appendix N. 
 
 further reduction would be most convenient for the 
 public." 
 
 Parliament contented itself with the half mea- 
 sure of fixing the guinea at 21 shillings (the ratio 
 of 15'21). Silver, still underrated in England, 
 finding still its best market abroad, remained 
 there; and thus England came to possess little 
 money other than gold. 
 
 The following is an extract from the proclama- 
 tion dated 22nd December, 1717, which the King 
 issued at the request of Parliament, giving effect 
 to its resolution : 
 
 Now, for and toward remedying the said evil, we 
 have thought fit, with the advice of our Privy Council, 
 to issue this, our Royal proclamation, hereby strictly 
 prohibiting all and every person and persons whatso- 
 ever, to utter or receive any of the pieces of gold coin 
 of this kingdom, commonly called guineas (which in 
 our mint were coined only at twenty shillings each, but 
 have been by our subjects paid and received at the rate 
 of one and twenty shillings and sixpence each) at any 
 greater or higher rate or value than one and twenty 
 shillings for each guinea, and so proportionably for the 
 pieces of gold called half -guineas. .... 
 
 The foregoing extracts are taken from Historical 
 Material for, and Contributions to, the Study of 
 Monetary Policy, by Hon. S. Dana Horton, inclu- 
 ded with the report presented to the American 
 Government on the Monetary Conference of 1878. 
 
English Monetary Legislation. 191 
 
 From the same source the following remarks are 
 also taken : 
 
 THE EARLY LAW OF LEGAL TENDER. 
 Until a period comparatively recent, it has been 
 reckoned inter jura magistratis to determine the 
 currency and value of coins ; and hence the earlier law 
 of legal tender is to be sought, not in the statute books, 
 but in Royal proclamations, Mint "indentures and 
 regulations." 
 
 The reader has, perhaps, observed that the statute of 
 18 Car. II. c. 5, accepts the currency of "gold and 
 silver coins of this kingdom " as a fact. So, likewise, 
 the statute of William III., which is, by the way, one 
 of the principal laws which directed the famous recoin- 
 age of the silver coins with which the readers of 
 Macaulay's History of England are familiar. 
 
 This statute directs, in section ii., that the officers of 
 the Mint receive, by indenture, the ingots of melted 
 silver coin 
 
 " To be there immediately refined or otherwise reduced to 
 sterling, and to be coined by the mill and press into the 
 current money of this realm, to hold such weight and 
 fineness as are prescribed by the present indenture with 
 His Majesty's master and worker for making of silver 
 monies at the Tower of London ; and with such allow- 
 ance, called the remedy, as is given to the said master by 
 the said indenture, which weight and fineness are hereby 
 declared to be, and shall remain to be the standard of, 
 and for, the lawful silver coin of this kingdom" 
 
 The " standard of and for the lawful silver coin of 
 this kingdom " is, of course, that fixed by the regula- 
 tion of the Mint, in the 43 of Elizabeth (1601), namely, 
 as stated by Newton, 62 shillings to the pound weight 
 
192 Appendix N. 
 
 of silver, 11 ounces 2 pennyweights fine, and 18 penny- 
 weights alloy. 
 
 The Standard for the gold coin, according to a regu- 
 lation of the time of King Charles II., was 44 guineas 
 to the pound weight of gold, 11 ounces fine, and 1 
 ounce alloy. The number of silver shillings the guinea 
 was worth was fixed by proclamation. In a certain 
 sense, therefore, silver remained the monetary unit until 
 1816. 
 
APPENDIX 0. 
 THE BULLION KEPORT OF 1810. 
 
 Mr. Horton, in the volume already alluded to, 
 makes a valuable examination of the Bullion 
 Eeport of 1810, on which the legislation of 1816 
 was founded. He shows that in seeking the 
 primary object which the committee had in view, 
 namely, the convertibility of the paper currency 
 which had been suspended from 1797, it omitted 
 
 To consider with equal thoroughness the general ques- 
 tions of monetary policy involved in the maintenance 
 or choice of a metallic pound sterling whose place 
 was being usurped 
 
 Although given to the world only in 1805, in his 
 treatise on the Coins of the Realm, the gold mono- 
 metallist theory of Lord Liverpool had long been 
 perfected ; and in 1798, when first the guinea rose to 
 be worth more than 15 times its weight in silver in 
 England, and when for the first time for two-thirds 
 of a century private persons were bringing silver to 
 the Mint, this theory in extreme form was placed upon 
 the statute book. 
 
 It would be too much to ask of Lord Liverpool that 
 he should have appreciated fully the extent to which 
 his theory was revolutionary. Looking back upon it 
 from the vantage ground of later experience, it is easy 
 to see that, unlike the silver standard of Locke, this 
 gold standard, although it might be possible in one 
 nation England's own experience in the eighteenth 
 
 o 
 
194 Appendix 0. 
 
 century supported this view yet it could not be 
 extended to many nations 
 
 As a policy susceptible of general adoption, the 
 scheme of Lord Liverpool is obviously unworthy of 
 comparison with that of these elder mono-metallists 
 with which he seeks to connect it. In fact, the effort 
 to justify the gold standard by recourse to the silver 
 standard is, if I may use so strong a figure, analogous 
 to an attempt to prove that because a pyramid will 
 rest securely upon its base, it will therefore stand 
 safely upon its apex. Of course Lord Liverpool did 
 not propose the gold standard as a scheme which could 
 be applied elsewhere than in England ; but at the 
 same time he was apparently unaware that this was 
 a defect that entered into the body of his scheme ; he 
 was apparently unconscious of the golden rule of the 
 solidarity of interest of the nations in the money of 
 the world, as he was mistaken in supposing his theory 
 to be like that of the Locke. 
 
 Strange to say, modern monetary opinion has allowed 
 itself, to a considerable degree, to reflect this erroneous 
 view, and it has been quite generally believed that in 
 the gold standard England has borrowed the substance 
 instead of the shadow of the doctrine of Locke. The 
 late attempt to extend the dominion of Lord Liver- 
 pool's theory over the continent of Europe reveals it 
 in its true light. 
 
 In such a situation, therefore, as obtained in 1810, 
 when the great authority in England, whose word was 
 monetary law, had thus spoken upon the monetary 
 situation, and in a time of national commotion and of 
 national effort, it is not strange that a special com- 
 mittee of the legislative body, even with a Homer and 
 a Huskisson at their head, should have passed lightly 
 over some of the important problems of money. . . 
 
The Bullion Eeport of 1810. 195 
 
 Actual convertibility, lost for a time, was still looked 
 for in the immediate future, and in the meantime the 
 paper was to be kept at par. The standard was not to 
 be lost. 
 
 And what was the standard? A consideration of 
 the statutes (referred to) will show that for a century 
 all obligations enforceable by law in England had been 
 payable either in gold or in silver coin, if of full 
 weight, at the option of the payer ; and hence, if we 
 use the word "standard" in the sense which best 
 represents the facts, gold and silver remained de facto 
 and dejure the "standard" till 1816. Lord Liverpool, 
 however, uses the word " standard " as simply mean- 
 ing " the principal measure of property " that is to 
 say, the chief coin in use. This diction was apparently 
 followed by the Bullion Committee, and gold was held 
 to be the English "standard." This confusion of 
 terms would, of course, have been harmless if no 
 confusion of ideas had followed. Indeed there is a 
 certain moral respectability in the idea that England 
 was bound to stand by her " standard " in the narrower 
 sense, to maintain that which had been her principal 
 coin as still the principal measure of property. Strict 
 honour, ideal justice, would in any case have been 
 better served by the maintenance of the true double 
 standard under which, strictly construed, all English 
 obligations for a century had been incurred ; and the 
 law of 1798 was in a certain measure (just as the 
 orders of restriction of cash payment of 1797 had been) 
 an impairment of the obligation of contracts. But 
 still, if through some not far-seeing, not clear-thinking, 
 but generous feeling of loyalty, England was attached 
 to the guinea, and on account of habits contracted in 
 the reign of the Georges felt constrained to renounce 
 the " standard of Elizabeth," it is not necessary to 
 
196 Appendix 0. 
 
 attack this fidelity of gold in order to decide the 
 question here raised about silver. As a matter of fact, 
 England did not cleave to gold. " Her standard floated 
 bravely on the breeze, but it was unattached to terra 
 firma. The Union Jack had become a kite. England 
 was using paper money." While Lord Liverpool and 
 the authors of the Bullion Report were restricting the 
 meaning of the word " standard " in such a way as to 
 exclude silver, the gold coins, formerly chiefly in use, 
 had in ample measure left England, and bank paper 
 had become the " principal measure of property." 
 The question, therefore, whether England was not 
 bound to maintain gold as her principal measure of 
 property in preference to permitting silver to emulate 
 gold in that function, is practically excluded from the 
 discussion. The only question actually at issue under 
 this head is whether it was not better to have Eng- 
 land's paper at par with silver as well as gold than to 
 have it below par both in silver and gold 
 
 There is a natural disposition on the part of those 
 familiar with the controversy waged in England in the 
 great cause of Specie v. Paper to assume that the know- 
 ledge and acumen enlisted in support of specie in that 
 cause had been equally applied to the great ejectment 
 case of Gold v. Silver, which was so summarily decided 
 in favour of the party whose possession seemed para- 
 mount. 
 
 Such, however, is not the fact. There is indeed no 
 proof that the case was ever fully argued on its merits, 
 either in the Privy Council in 1798, before the Bullion 
 Committee in 1810, or before Parliament in 1816. . . 
 
 It is interesting to know that the great men who so 
 sagely guided the policy of their country in establish- 
 ing in permanence the convertibility of England's paper 
 money had really never, in their own minds, clearly 
 
T/ie Bullion Report of 1810. 197 
 
 formulated the question of convertibility into silver or 
 convertibility into silver and gold, as compared with 
 convertibility into gold alone. 
 
 Now, it is not surprising that this omission to pass 
 judgment upon the merits of the question should have 
 been the symptom or result of an entire lapse of know- 
 ledge of the relative position of the two metals, the 
 nature of the demand for them, the causation of their 
 value. 
 
 If it were assumed that the two metals were to all 
 intents and purposes one, so that they formed, in fact, 
 one great body of metal, white and yellow, of which 
 each nation drew its quota in whichever colour or 
 mixture of colours it preferred, and that, in the main, 
 either metal was a complete substitute for the other, it 
 would be very easy and perfectly natural to pass by 
 unobserved the problems heretofore examined. 
 
 The facts to which I have alluded, connected with 
 the novelty of England's situation and of Lord Liver- 
 pool's theory, themselves suggest that an unconscious 
 assumption of this kind would have been perfectly 
 natural, but the following observations show that the 
 lapse of knowledge went so far as to involve uncon- 
 sciousness of the actual status of silver in English law. 
 
 As is apparent from the preceding extracts from the 
 English statutes, silver coin was legal tender in 1810 
 for any sum whatsoever, although for a payment over 
 ,25 the payee could demand coin enough to make up 
 the legal weight of silver pounds sterling. He would 
 have had to do the same thing in Amsterdam. . . . 
 
 This limitation of legal tender by tale had, however, 
 lasted only from 1774 to 1783, and as there had been 
 no improvement, only a deterioration of the condition 
 of the coins between 1774 and 1783, it is probable that 
 the limitation was not a matter of much practical 
 
198 Appendix 0. 
 
 importance, because the amount of silver in circulation 
 was actually less than trade required. This expiration 
 of the statute in 1783 is, by the way, not merely a 
 matter to be ascertained from the statute books, but is 
 mentioned by Lord Liverpool on page 129 of his 
 treatise. Subsequently, and after the restriction of 
 cash payments had taken place, when England was 
 entering upon an experience of a paper standard, 
 worth in many cases far less than ever were silver 
 coins, this law was revived in connection with the 
 prohibition of silver coinage. 
 
 What proportion of these facts were known to the 
 authors of the Bullion Report ? They say, that ever 
 since 1774 silver coin had not been legal tender above 25. 
 
 How was it possible that the facts could have been 
 ignored by such men 1 The following obvious explan- 
 ation occurs to me : There were no full- weight silver 
 coins in England in 1798, when silver was coming to 
 the Mint, in spite of what the Bullion Report, ignoring 
 that England had gold because gold was cheaper than 
 silver, calls merely " the usage and commercial habits 
 of the people." In 1798 the manufacture of full- weight 
 silver coins had been prohibited. 
 
 The authors of the report, had, therefore, never seen 
 silver coins with which, under the law, one could pay a 
 debt above 25 without losing a percentage on the 
 excess so paid ; for, by^tale, 20 shillings of George II., 
 worn to four-fifths of their original weight, were a 
 pound sterling ; but when they were paid by weight, 
 one must put 25 of them into the balance in order 
 with them to equal the weight of that silver pound 
 sterling which remained the monetary unit of Great 
 Britain. But had they been freshly coined, or of 'full 
 weight, 20s. would have made a pound sterling for a 
 payment of 25,000 as well as for 25. 
 
The Bullion Report of 1810. 199 
 
 Not having had actual experience of this fact the 
 authors of the report ignored it, and spoke of silver 
 without being aware that silver was legally, and, but 
 for this prohibition of coinage which they do not 
 mention, might have been, in practice, as completely 
 money in England as it was in the Netherlands. 
 
 The historical aspect of the question, of which 
 these extracts give us a glimpse, are of great 
 interest, and I would advise the reader to examine 
 them more fully in the sources from which I have 
 drawn, or in others which may present themselves. 
 M. Emile de Laveleye, in the address to which I 
 have already referred, says : 
 
 There are to-day two schools in political economy, 
 the " historical " or " realistic," which employs by pre- 
 ference the inductive method, and the "orthodox" or 
 "rational" school, which chiefly makes use of de- 
 duction. The inductive school examines facts estab- 
 lished by history and by statistics, and endeavours to 
 draw from them the rules which should be applied to 
 the direction of economic interests. The deductive 
 school studies the nature of man, and infers absolute 
 universal laws, which it calls "natural" laws. The 
 first says that political economy is a science greedy of 
 facts ; the second affirms that its principles are so 
 manifest that they can dispense with the control of 
 facts. The one, lost in the thousand complications of 
 industrial and commercial life, does not always attain 
 a sufficient clearness in its ideas ; the other, on the 
 contrary, from the height of its abstract axioms, pro- 
 mulgates dogmas to which, too often, experience must 
 give the lie. 
 
200 Appendix 0. 
 
 Our English economists have, no doubt, treated 
 this question of standard too much in the latter 
 way, and have been led astray in doing so, and it 
 will only be by giving both methods of inquiry their 
 due place that the truth regarding it will be clearly 
 established. 
 
APPENDIX P. 
 
 EXTRACTS FROM MR. ERNEST SEYD'S PREDICTIONS. 
 
 In my introduction I have referred to M. Wol- 
 woski and Mr. Ernest Seyd, and it may be well to 
 give here the following extracts. In his work 
 entitled "The Decline of Property/' published 
 in 1879,* Mr. Seyd wrote: 
 
 In a book first issued in 1868t the writer first stated 
 the outline of the views here represented. The late 
 Senator Wolwoski, of France, who may truly be called 
 the father of bi-metallism, translated portions of the 
 same in his work on the subject. In another publi- 
 cation issued in 1869J these views were more specially 
 affirmed. In 1876, when the fall in the price of silver 
 created some alarm, the author read a paper, and in 
 1878 he again followed up the subject before the Society 
 of Arts.|| In all these publications it was distinctly 
 stated that the demonetisation of silver was the original 
 cause of the decline of trade. In 1871 the writer ven- 
 tured to say : 
 
 " It is a great mistake to suppose that the adoption 
 
 * Published by Edward Stanford, 55, Charing Cross. 
 
 t" Bullion and Foreign Exchanges." 700 pp. Effingham 
 Wilson & Co. 
 
 $ ' ' The Depreciation of Labour and Property which would 
 follow the Demonetisation of Silver." 169 pp. Effingham 
 "Wilson & Co. 
 
 " The FaU in the Price of Silver." 169 pp. H. S. King & Co. 
 
 || " The Wealth of Nations and the Question of Silver." Eden 
 Fisher & Co., London. 
 
202 Appendix P. 
 
 of the gold valuation by other States besides England 
 will be beneficial. It will only lead to the destruction 
 of the monetary equilibrium hitherto existing, and 
 cause a fall in the value of silver, from which Eng- 
 land's trade and the Indian silver valuation will suffer 
 more than all other interests, grevious as the general 
 decline of prosperity all over the world will be. The 
 strong doctrinism existing in England as regards the 
 gold valuation is so blind, that when the time of 
 depression sets in, there will be this special feature ; 
 the economical authorities of the country will refuse to 
 listen to the cause here foreshadowed ; every possible 
 attempt will be made to prove that the decline of 
 commerce is due to all sorts of causes and irrecon- 
 cilable matters. The workman and his strikes will 
 be the first convenient target ; then speculation and 
 overtrading will have their turn. Later on, when 
 foreign nations, unable to pay in silver, have recourse 
 to Protection, when a number of other secondary 
 causes develop themselves, then many would-be wise 
 men will have the opportunity of pointing to specific 
 reasons which in their eyes account for the falling off 
 in every branch of trade. Many other allegations will 
 be made, totally irrelevant to the real issue, but satis- 
 factory to the moralising tendency of financial writers. 
 The great danger of the time will then be, that among 
 all this confusion and strife, England's supremacy in 
 commerce and manufactures may go backwards to an 
 extent which cannot be redressed when the real cause 
 becomes recognised, and the natural remedy is applied." 
 The role of a prophet is not a desirable one, and 
 these remarks are only quoted to show that the views 
 held by bi-metallists have been confirmed by events. 
 But, besides the writer of these pages, there are 
 
Mr. Ernest Seyd's Predictions. 203 
 
 numerous other authorities here and abroad, amongst 
 whom M. Henri Cernuschi (the spirited inventor of 
 the word " bi-metallism ") requires special mention, 
 who agree with the opinions here expressed. 
 
 It is perhaps fitting just to say one word regard- 
 ing M. Cernuschi, who is thus referred to by 
 Mr. Seyd. Although it is the fashion for English 
 mono-metallists to endeavour to cast ridicule on 
 the dramatic style which he sometimes adopts in 
 seeking to impress the views he so earnestly holds, 
 I believe that ere long the great service he has 
 rendered by his brilliant advocacy of bi-metallism 
 will be fully acknowledged; and as my humble 
 tribute, would here say that it was in reading one of 
 his pamphlets my interest in the subject was first 
 aroused, and that suddenly, very much in the way I 
 have described, I came to perceive its true 
 bearings. 
 
APPENDIX Q. 
 EXTRACT FROM SPEECH OF M. EMILE DE LAVELEYE. 
 
 In a speech at the International Monetary Con- 
 ference, held in Paris, 13th October, 1889, Professor 
 Emile de Laveleye said : 
 
 I begin by making an admission. I belong to that 
 school of " lunatics " of whom mention has just been 
 made, and as such I presume I ought to be locked up 
 in the Bedlam of political economists; but I should 
 find myself there in good company, with Messrs. Fox- 
 well, Marshall, Nicholson, Sidgwick, and nearly, I 
 think, all the professors of political economy in Eng- 
 land and in America, without naming those of M. Cer- 
 nuschi's school, and those of other countries. Among 
 these " lunatics " the majority are economists. M. Cer- 
 nuschi was rather hard upon them yesterday afternoon. 
 I am myself a professor of political economy and a 
 partisan of bi-metallism (and, alas, rather an old one) 
 because I consider it in accordance with the less 
 contested principles of our science. Seeing that if I 
 look around me at the professorships of political 
 economy in Europe, the most notable are occupied 
 by bi-metallists. In England, some of the best univer- 
 sity professors, Foxwell, Nicholson, have become 
 bi-metallists. The same thing in America: Mr. Walker, 
 author of one of the best works which has been written 
 on money, is a bi-metallist ; the same thing in Germany, 
 where, though opinions are not unanimous, we have 
 
Appendix Q. 205 
 
 some of the most eminent with us, such as Messrs. Rau, 
 Michaelis, Roscher, Prince Smith, Von Stein, Schaffel, 
 
 Lexis, Adolf Wagner, <fcc These learned 
 
 men have declared that if bi-metallism were adopted 
 by the Great Powers, the relations between the two 
 metals, gold and silver, would remain steady for an 
 indefinite time in a sense advantageous to the com- 
 merce and industry of the whole world. This appears 
 to me to be a declaration as complete as anyone could 
 wish for. If bi-metallism, therefore could be estab- 
 lished by four great nations, it would be an excellent 
 thing. 
 
APPENDIX E, 
 
 EXTRACTS FROM THE FINAL REPORT OF THE 
 
 ROYAL COMMISSION ON GOLD AND 
 
 SILVER, 1888. 
 
 PAKT I. 
 
 (Signed by all the Members of the Commission.) 
 
 SEC. 115. "The remedy which has been put before us 
 most prominently, and as most likely to remedy the evils 
 complained of to the fullest extent possible, is that known 
 as bi-metallism." 
 
 SEC. 186. " It must be borne in mind that, in the case 
 of other commodities (than gold and silver), the effect of 
 changes in the supply and demand is both more marked 
 and more immediate. These commodities are generally 
 produced for the purpose of consumption at an early date, 
 or within a comparatively short period. The supply at any 
 time available for the market, or capable of being placed on 
 it at short notice, is therefore a very important element in 
 the process by which its value is fixed. 
 
 "The precious metals, on the other hand, are but to a 
 slight extent consumed, and the available supply consists 
 of the accumulations of previous years. 
 
 " It follows, therefore, that in their case a diminution or 
 an increase in the new supply is of less importance than in 
 the case of consumable articles, and that an increase or 
 diminution in demand has also a smaller effect. The im- 
 portant consideration, with regard to them, at any one 
 moment, is rather the relation between the total stock then 
 in existence, and the then existing demands upon it." 
 
 SEC. 189. "Looking, then, to the vast changes which 
 occurred prior to 1873 in the relative production of the two 
 
Extracts from Report of Eoyal Commission. 207 
 
 metals without any corresponding disturbance in their 
 market value, it appears to us difficult to resist the conclu- 
 sion that some influence was then at work tending to steady 
 the price of silver, and to keep the ratio which it bore to 
 gold approximately stable." 
 
 SEC. 190. " Prior to 1873, the fluctuations in the price 
 of silver were gradual in their character, and ranged within 
 very narrow limits. The maximum variation in 1872 was 
 fd., and the average not quite -A'd., while in 1886 the maxi- 
 mum was 2rkd., and the average ld. It has not been, and 
 indeed hardly could be, suggested that this difference 
 can be accounted for by changes in the relative production 
 or actual use of the two metals." 
 
 SEC, 191. "The explanation commonly offered of these 
 constant variations in the silver market is that the rise or 
 depression of the price of silver depends upon the briskness 
 or slackness of the demand for the purpose of remittance 
 to silver-using countries, and that the price is largely 
 affected by the amount of the bills sold, from time to time 
 by the Secretary of State for India in Council. 
 
 " But these causes were, as far as can be seen, operating 
 prior to 1873, as well as subsequent to that date, and yet 
 the silver market did not display the sensitiveness to these 
 influences from day to day and month to month, which it 
 now does." 
 
 SEC. 192. " These considerations seem to suggest the 
 existence of some steadying influence in former periods, 
 which has now been removed, and which has left the silver 
 market subject to the free influence of causes, the full 
 effect of which was previously kept in check. The question, 
 therefore, forces itself upon us : Is there any other circum- 
 stance calculated to affect the relation of silver to gold, 
 which distinguishes the latter period from the earlier ? 
 
 " Now, undoubtedly, the date which forms the dividing 
 
208 Appendix R. 
 
 line between an epoch of approximate fixity in the relative 
 value of gold and silver, and one of marked instability, is 
 the year when the bi-metallic system, which had previously 
 been in force in the Latin Union, ceased to be in full opera- 
 tion ; and we are irresistibly led to the conclusion that the 
 operation of that system, established as it was in countries 
 the population and commerce of which were considerable, 
 exerted a material influence upon the relative value of the 
 two metals. 
 
 "So long as that system was in force we think that, 
 notwithstanding the changes in the production and use of 
 the precious metals, it kept the market price of silver 
 approximately steady at the ratio fixed by law between 
 them, namely, 15 to 1." 
 
 SEC. 193. " Nor does it appear to us a priori unresonable 
 to suppose that the existence in the Latin Union of a bi- 
 metallic system with a ratio of 15 to 1 fixed between the 
 two metals should have been capable of keeping the market 
 price of silver steady at approximately that ratio. 
 
 " The view that it could only affect the market price to 
 the extent to which there was a demand for it for currency 
 purposes in the Latin Union, or to which it was actually 
 taken to the mints of those countries is, we think, fallacious. 
 
 " The fact that the owner of silver could, in the last 
 resort, take it to those mints and have it converted into 
 coin which would purchase commodities at the ratio of 15 
 of silver to one of gold, would, in our opinion, be likely to 
 affect the price of silver in the market generally, whoever 
 the purchaser and for whatever country it was destined. It 
 would enable the seller to stand out for a price approxi- 
 mating to the legal coin, and would tend to keep the 
 market steady at about that point." 
 
 SEC. 194. "It has been urged that during the earlier of 
 the two periods which we have been contrasting, the con- 
 
Extracts from Report of Royal Commission. 209 
 
 ditions which existed from time to time were favourable to 
 the maintenance of the legal ratio ; that the great influx of 
 gold towards the middle of this century found France with 
 a large stock of silver, and that this silver, owing to 
 exceptional circumstances, had a ready outlet to India. 
 
 " But we do not think this affords an adequate solution 
 of the problem without taking into account the existence 
 of the bi-metallic system. It may be true that the circum- 
 stances referred to were conditions which helped to make 
 the bi-metallic system operative. But, as we have observed 
 before, circumstances and conditions of a like nature have 
 been more or less operative both before and since 1873, and 
 yet the effect on the relative value of the two metals has 
 been very different." 
 
 PART II. 
 
 Signed by six members of the Commission ' 
 
 LORD HERSCHELL. 
 
 ( RT. HON. SIR JOHN LUBBOCK, BART., M.P. 
 ] MR. J. W. BIRCH. 
 
 HON. C. W. FREMANTLE, C.B. 
 | SIR T. H. FARRER, BART. 
 
 . HON. LEONARD H. COURTNEY, M.P. 
 
 SEC. 9. "However much opinions may differ as to the 
 extent of the evil arising from the increased difficulty which 
 a fluctuating exchange interposes, we do not think its 
 reality is open to question." 
 
 SEC. 101. '* There cannot be two opinions as to the very 
 serious effect which the continued fall in the gold price of 
 silver has had on the finances of the Government of India." 
 
 SEC. 102. "We are fully impressed with a sense of the 
 difficulties which surround the Indian Government, and of 
 the serious questions to which any proposed additional tax 
 must give rise. It is only the embarrassment which has 
 
 p 
 
210 Appendix E. 
 
 already been caused to the Government of India that has 
 to be borne in mind, but the impossibility of forseeing to 
 what extent those embarrassments may be increased and 
 their difficulty augmented by a further depression in the 
 value of silver." 
 
 SEC. 107. "We think that in any conditions fairly to be 
 contemplated in the future, as far as we can forecast them 
 from the experience of the past, a stable ratio might be 
 maintained if the nations we have alluded to* were to 
 accept and strictly adhere to bi-metallism, at the suggested 
 ratio. We think that if in all these countries gold and 
 silver could be freely coined, and thus become exchange- 
 able against commodities at the fixed ratio, the market 
 value of silver as measured by gold would conform to that 
 ratio, and not vary to any material extent." 
 
 SEC. 119. "Apprehensions have been expressed that if 
 a bi-metallic system were adopted gold would gradually 
 disappear from circulation. If, however, the arrangement 
 included all the principal commercial nations, we do not 
 think there would be any serious danger of such a result. 
 
 " Such a danger, if it existed at all, must be remote. It 
 is said indeed, by some, that if it were to happen, and all 
 nations were to be driven to a system of silver mono- 
 metallism, the result might be regarded without dissatis- 
 faction. 
 
 " We are not prepared to go this length, but at the same 
 time we are fully sensible of the benefits which would accrue 
 from the adoption of a common monetary standard by all 
 the commercial nations of the world, and we are quite alive 
 to the advantage of the adoption by these nations of an 
 uniform bi-metallic Standard as a step in that direction." 
 
 SEC. 138. " Though unable to recommend the adoption 
 
 * The United Kingdom, Germany, the United States, and the 
 Latin Union. 
 
Extracts from Eeport of Royal Commission. 211 
 
 of what is commonly known as bi-metallism, we desire it 
 to be understood that we are quite alive to the imperfections 
 of standards of value, which not only fluctuate, but fluctuate 
 independently of each other ; and we do not shut our eyes 
 to the possibility of future arrangements between nations 
 which may reduce these fluctuations. One uniform stan- 
 dard of value for all commercial countries would, no doubt, 
 like uniformity of coinage or of standards of weight and 
 measure, be a great advantage. But we think that any 
 premature and doubtful step might, in addition to its 
 other dangers and inconveniences, prejudice and retard 
 progress to this end. We think felso that many of the 
 evils and dangers which arise from the present condition 
 of the currencies of different nations have been exaggerated, 
 and that some of the expectations of benefit to be derived 
 from the changes which have been proposed would, if such 
 changes were adopted, be doomed to disappointment. 
 
 " Under these circumstances we have felt that the wiser 
 course is to abstain from recommending any fundamental 
 change in a system of currency under which the commerce 
 of Great Britain has attained its present development." 
 
 PART III. 
 
 Signed by the other six members of the Commission : 
 
 r Rr. HON. SIR LOUIS MALLET, C.B. 
 ET. HON. A. J. BALFOUR, M.P. 
 RT. HON. HENRY CHAPLIN, M.P. 
 SIR D. BARBOUR, K.C.S.I. 
 SIR W. H. HOULDSWORTH, BART., M.P. 
 MR. SAMUEL MONTAGU, M.P. 
 
 SEC. 28. "We think that the above remarks upon the 
 evils affecting both the United Kingdom and India, if 
 taken in connection with the more detailed statement in 
 Part I. of the Report, will sufficiently indicate our view as 
 
212 Appendix B. 
 
 to their nature and gravity ; and that they are largely due 
 to the currency changes which have taken place in the 
 years immediately preceding and following 1873. 
 
 " We think that too much stress cannot be laid upon the 
 novelty of the experiment which has been attempted as the 
 result of the above changes. That experiment consists in 
 the independent and unregulated use of both gold and 
 silver as standards of value by the different nations of the 
 world. 
 
 "We are strongly of opinion that both metals must 
 continue to be used as standard money ; the result of 
 using them separately and independently since 1873 has 
 been most unsatisfactory, and may be positively disastrous 
 in the future. 
 
 " It cannot be questioned that until 1873 gold and silver 
 were always effectively linked by a legal ratio in one or 
 more countries. 
 
 t " It is equally indisputable that the relative value of the 
 two metals has been subject to greater divergence since 1874 
 than during the whole of the 200 years preceding that date, 
 notwithstanding the occurrence of variations in their relative 
 production more intense and more prolonged than those 
 which have been experienced in recent years." 
 
 SEC. 29. "In 1873-74 the connecting link disappeared, 
 and for the first time the system of rating the two metals 
 ceased to form a subject of legislation in any country in the 
 world. 
 
 " The law of supply and demand was for the first time 
 left to operate independently upon the value of each metal ; 
 and simultaneously the ratio which had been maintained, 
 with scarcely any perceptible variation for 200 years, gave 
 place to a marked and rapid divergence in the relative value 
 of gold and silver, which has culminated in a change from 
 15| to 1 to 22 to 1." 
 
Extracts from Report of Eoyal Commission. 213 
 
 PROPOSED REMEDY. 
 
 SEC. 30." It appears to us impossible to attribute the 
 concurrence of these two events to a merely fortuitous 
 coincidence. They must, in our opinion, be regarded as 
 standing to each other in the relation of cause and effect. 
 
 " We cannot, therefore, doubt that if the system which 
 prevailed before 1873 were replaced in its integrity, most of 
 the evils which we have above described would be removed ; 
 and the remedy which we have to suggest is simply the 
 reversion to a system which existed before the changes 
 above referred to were brought about a system, namely, 
 under which both metals were freely coined into legal tender 
 money at a fixed ratio over a sufficiently large area. 
 
 " The effects of that system, though it was nominally in 
 force only within a limited area, were felt in commercial 
 countries, whatever their individual systems of currency 
 might be ; and the relative value of the two metals in all 
 the markets of the world was practically identical with 
 that fixed by the legislation of the countries forming the 
 Latin Union. 
 
 " As regards the possibility of maintaining such a system 
 in the future, we need only refer to the conclusion at which 
 our colleagues have arrived in Sec. 107, Part II. (see above), 
 arid with which we entirely agree." 
 
 SEC. 34. "No settlement of the difficulty is, however, in 
 our opinion, possible without international action. 
 
 " The remedy which we suggest is essentially international 
 in its character, and its details must be settled in concert 
 with the other Powers concerned. 
 
 " It will be sufficient for us to indicate the essential 
 features of the agreement to be arrived at, namely 
 
 (1) Free coinage of both metals into legal tender 
 money; and 
 
214 Appendix B. 
 
 (2) The fixing of a ratio at which the coins of either 
 metal shall be available for the payment of all debts at the 
 option of the debtor." 
 
 (SEC. 35). " The particular ratio to be adopted is not, in 
 our opinion, a necessary preliminary to the opening of 
 negotiations for the establishment of such an agreement, 
 and can, with other matters of detail, be left for further 
 discussion and settlement between the parties interested. 
 
 " We, therefore, submit that the chief commercial nations 
 of the world, such as the United States, Germany, and the 
 States forming the Latin Union, should in the first place 
 be consulted as to their readiness to join with the United 
 Kingdom in a conference, at which India and any of the 
 British Colonies which may desire to attend should be 
 represented, with a view to arrive, if possible, at a common 
 agreement on the basis above indicated." 
 
 SEC. 36. ** We have indicated what appears to us to be 
 the only permanent solution of the difficulties arising from 
 the recent changes in the relative value in the precious 
 metals, and the only solution which will protect this and 
 other countries against the risks of the future." 
 
APPENDIX S. 
 
 Table showing Annual Production of Silver in Troy 
 Ounces, also the Price of Silver and Exchange Quotations 
 from 1873. 
 
 
 Fine Silver. 
 Ounces Troy. 
 
 (000 
 omitted.) 
 
 Price per oz. of 
 Bar Silver. 
 
 in London. 
 
 Exchange per Rupee 
 
 (Council Drafts on 
 Calcutta.) 
 
 Highest. 
 
 Lowest. 
 
 Highest. 
 
 Lowest. 
 
 1873 
 
 63,267 
 
 5/0 
 
 4/9| 
 
 i/io| 
 
 1/9| 
 
 1874 
 
 55,300 
 
 4/1H 
 
 4/94 
 
 1/11* 
 
 l/9f 
 
 1875 
 
 62,262 
 
 4/9 
 
 4/74 
 
 l/10i% 
 
 1/94 
 
 1876 
 
 67,753 
 
 4/10J 
 
 3/10| 
 
 1/lOf 
 
 1/6* 
 
 1877 
 
 62,648 
 
 4/10* 
 
 4/54 
 
 1/10| 
 
 1/8-1% 
 
 1878 
 
 73,476 
 
 4/71 
 
 4/1* 
 
 1/9 
 
 l/6f 
 
 1879 
 
 74,250 
 
 4/5if 
 
 4/0| 
 
 1/8| 
 
 l/6 
 
 1880 
 
 74,791 
 
 4/4| 
 
 4/3f 
 
 l/8f 
 
 1/7| 
 
 1881 
 
 78,890 
 
 4/5 
 
 4/2| 
 
 We 
 
 1/7^ 
 
 1882 
 
 86,470 
 
 4/4| 
 
 4/2 
 
 l/8i% 
 
 1/7A 
 
 1883 
 
 89,177 
 
 4/34 
 
 4/2^ 
 
 1/7H 
 
 1/74 
 
 1884 
 
 81,597 
 
 4/3| 
 
 4/1* 
 
 1/8 
 
 1/611 
 
 1885 
 
 91,652 
 
 4/2 
 
 3/10| 
 
 1/7|* 
 
 1/5M 
 
 1886 
 
 93,276 
 
 3/11 
 
 3/6 
 
 1/6^ 
 
 1/4A 
 
 1887 
 
 96,189 
 
 3/11* 
 
 3/7| 
 
 1/6& 
 
 i/m 
 
 1888 
 
 110,086 
 
 3/8^ 
 
 3/5| 
 
 1/5A 
 
 1/4A 
 
 1889 
 
 126,000 
 
 3/8f 
 
 3/5lf 
 
 i/m 
 
 1/4^ 
 
 1890 
 
 133,195 
 
 4/6| 
 
 3/7| 
 
 1/8M 
 
 l/4ff 
 
 1891 
 
 144,406 
 
 4/Of 
 
 3/74 
 
 1/6& 
 
 l/4f 
 
 1892 
 
 152,041 
 
 3/7| 
 
 3/1* 
 
 1/4H 
 
 1/21 
 
 1893 
 
 
 3/2| 
 
 2/6 
 
 1/3* 
 
 l/2f 
 
216 Appendix S. 
 
 The figures indicating the production of silver 
 in the foregoing table, and also those from 1873 to 
 1889 in table on page 14, giving the value of both 
 gold and silver, are taken from the statistics com- 
 piled by the United States Mint authorities. I 
 have adopted these figures as the only complete 
 data available of the world's production of the 
 precious metals. It is much to be regretted that 
 our own Mint authorities or Board of Trade have 
 not yet attempted to deal with this matter officially. 
 
INDEX. 
 
 Agreement, International, 48, 65. 
 Aldrich, Remarks of Senator, 184. 
 Alternation of the monetary metals, 136. 
 American, Bland Act, 137, 179. 
 
 Sherman Act, 140, 181. 
 
 ,, early, monetary legislation, 177. 
 
 monetary agitation, 139. 
 Anti-silver views, 112. 
 Appreciation of gold, 110. 
 Aristotle, 45. 
 
 Bagehot, Walter, 4, 
 
 Bank of England reserves, 27, 37. 
 
 ,, suspension of specie payments, 135. 
 
 Battle of the standards, M. Emile de Laveleye's, 57. 
 Bimetallic agreement. Willingness of United States and France 
 
 to join in, 18, 137. 
 movement. Central idea of, 107. 
 system of France, 12, 18, 61. 
 Bim tallism, English opposition to, 18, 37. 
 objections to, 32, 42. 
 prior to 1874, 11, 134. 
 , the essence of, 62, 136. 
 
 Bland Act, American, 137, 179, 
 Bombay, exports of cotton yarns and goods, 96, 
 
 ,, mill industries, 122, 124, 
 British farmer, 37, 
 Brussels' conference, 141, 167. 
 Bullion report of 1810, 135, 193. 
 
 California and Australia, gold discoveries in, 23. 
 
 Capital only kept up by perpetual reproduction, 118. 
 
 Charge of Protectionism, 37. 
 
 Cheap money driving out dear money, 35. 
 
 Chevalier M. Michel, 50. 
 
 China and Japan, trade with, 89. 
 
 Closing of Indian mints, 142. 
 
 Coining in Native States of India, 143. 
 
 Commerce, foreign, 59, 75, 85. 
 
 Commodities measure money, 115. 
 
 Competition, foreign, 81, 85. 
 
 Consumers not really benefited by unnatural fall in prices, 121. 
 
 Contraction of trade, 70, 80. 
 
218 Index. 
 
 Cost of production, theory, 45. 
 Credit and time contracts, 53. 
 
 Demonetisation of silver in Europe, 105. 
 
 United States, 137. 
 
 Depression in trade, Royal Commission, on, 138. 
 Dual basis of money, 34, 108. 
 
 East always absorbing silver, 106. 
 Effect of Sherman Act, 140, 143. 
 
 ,, the closure of the French mints, 22. 
 Elizabeth, Queen, mint indentures of, 133. 
 England, foreign commerce of, 1816 20, 60, 
 
 monometallism, a departure from ancient standard of, 108. 
 ,, monometallism established in 1816, 108. 
 English capital being withdrawn from India, 123. 
 India needs, 124. 
 
 withdrawal from foreign enterprises, 76. 
 English law, Early, of legal tender, 191. 
 monetary legislation, 186. 
 opposition to bimetallism, 18. 
 system of gold monometallism, 16, 135. 
 Equilibrium formerly maintained, 19. 
 Essence of bimetallism, The, 62, 136. 
 Estimates, Mr. Ernest Seyd's, 19. 
 Exchange transactions, 28. 
 
 variations in, with silver standard countries, 15, 30 
 Expansion of trade, 85. 
 
 Exports of cotton yarns and goods from England to India, 95. 
 of cotton yarns and goods from India, 96. 
 
 Fall in prices, Consumers not really benefited by unnatural, 121. 
 
 Fiduciary money, 69. 
 
 Finances of Indian government, 125, 142. 
 
 Foreign commerce, 59, 75, 85. 
 
 of England, 1816-20, CO. 
 
 ,, competition, 81, 85. 
 
 protective duties, Effect of, 86. 
 Foxwell, Professor, of Cambridge, 132, 
 France, Bimetallic system of, 12, 18, 51, 61. 
 
 free mintage in, 13. 
 Free trade, 61, 65. 
 
 ,, ,, Silver difficulty hindering, 99. 
 French mints, effect of the closure of the, 21. 
 
 monetary legislation, 145, 160. 
 
 German coinage, state of, before new law of 1871, 16. 
 
 monetary legislation, 157. 
 
 silver money, Sales of, 16, 113. 
 Germany, suspension of sales of silver by, 16. 
 
Index. 
 
 Gold and silver, distribution of, 105. 
 ratio of, 13, 14,141. 
 
 ,, report of Royal Commission on, 138, 206. 
 
 ,, uniformity in relative value of, 11. 
 
 Gold, appreciation of, 110, 115. 
 
 coin, standard for, 133. 
 
 discoveries in California and Australia, 23. 
 
 monometallism, English system of, 16, 135. 
 
 obligations, increased weight of, 25. 
 oschen, Right Hon, G. J., 102, 115, 119, 122, 164. 
 Grain exports from India, stimulus, 98. 
 Grouping of nations under the old systems, 19. 
 Guineas : price fixed by Royal proclamation, 134, 190. 
 variation in silver price, 134. 
 
 HerschelFs, Lord, Committee, 171. 
 History of question since 1874, 137. 
 Horton, S. Dana, Silver Pound, 135. 
 
 Importance of foreign commerce, 81. 
 
 ,, unity in the standard of value, 61. 
 Import duty on silver entering India, 143. 
 India : Bombay mill industries, 124. 
 
 grain exports from. Stimulus from fall in exchange, 98. 
 interests of, 122. 
 jute manufacturing in, 100. 
 needs English capital, 123. 
 quantity of silver in ornaments and coin, 127. 
 Indian government, finances of, 125, 142. 
 suggestions of, 142. 
 
 industries, protection to, 93, 97. 
 mints, closing of, 142. 
 producer, 38. 
 
 Indestructible nature of the precious medals, 46. 
 Influence of monetary law, 46. 
 Interest on National debt reduced, 119. 
 International agreement, 50, 65. 
 
 Jevons, Professor Stanley, 3, 45, 53. 
 Jute manufacturing in India, 100. 
 
 Latin monetary Union, 12, 112, 150. 
 Laveleye, M. Emile de, 57, 204. 
 Law of 1816, 26, 43, 135. 
 
 legal tender, Early English, 191. 
 
 ,, monetary, 44, 46. 
 Lending of money, 68 77. 
 Liverpool, Lord, 59. 
 Locke, John, 63. 
 London market for silver, 31. 
 
220 Index. 
 
 Manufacturing in the East developed by fall in silver, 89. 
 
 Market prices, 116. 
 
 Medium of exchange, 52. 
 
 Monetary conference of 1867 at Paris, 15, 112, 133, 153. 
 
 1878 137, 162. 
 1881 ,, 137, 165. 
 1892 Brussels, 140, 167. 
 confusion resulting from present instability of silver, 110, 
 
 144. 
 
 Latin union, 12, 112, 150. 
 law, 44, 46. 
 
 legislation, American, 139, 144. 
 ,, Early American, 177. 
 
 English, 91. 
 French, 145, 160. 
 ,, German, 21, 157. 
 metals, interdependence of the two, 35, 48. 
 Money : a common measure of value, 52. 
 a medium of exchange, 52. 
 a standard of value, 52. 
 a store of value, 52, 54. 
 cheap, driving out dear, 35. 
 commodities measure, 115. 
 dual basis of, 108. 
 fiduciary, 69. 
 lending of, 68, 77. 
 
 monometallic theories regarding, 42, 130. 
 the value of, 68. 
 Monometallic school, aim of, 111, 113. 
 Monometallism in England a departure from ancient standard, 108 
 
 established in 1816, 108, 186. 
 Mill, John Stuart, 46. 
 Mill property in Oldham, 121. 
 
 Mills and machinery, effect of appreciation of gold on, 72, 121. 
 Mint indentures of Queen Elizabeth, 133, 191. 
 
 National debt, 26, 119. 
 
 ,, loans, 25. 
 Nature of money, 42, 59. 
 
 Nevada and California new silver mines, 22. 
 
 Newton, Sir Isaac, 63, 188. 
 
 Nicholson, Professor, of Edinburgh, 132. 
 
 Objections to Bimetallism, 32, 42. 
 
 Oldham, mill property in, 121. 
 
 Old systems, grouping of nations under the, 19. 
 
 Par value, 29. 
 
 Peel, Sir Robert, 59, 61. 
 
Index. 221 
 
 Perverse The, rupee, 102, 113. 
 Precious metals, indestructible, 45> 46. 
 
 ,, statistics of, 14, 215. 
 Prices, market, 116. 
 Production, cost of, 45. 
 
 ,, of silver, 215. 
 
 Proposed import duty on silver in India, 143. 
 Protectionism, charge of, 37. 
 Protection to Indian industries, 93, 98. 
 
 Ratio of gold and silver, 13, 14, 41. 
 Reserves, Bank of England, 16, 37. 
 Royal Commission on gold and silver, 138, 206. 
 
 ,, the depression in trade, 138. 
 
 Royal proclamation fixing price of guinea, 134, 188. 
 Rupee, Indian, 29, 102, 113. 
 
 Sales of German silver money, 15, 113, 157. 
 Seyd, Ernest, estimates, 19. 
 
 ,, ,, predictions, 201. 
 
 Sherbrooke, Lord, 45, 52, 54, 62. 
 Sherman Act, American, 140, 143, 181. 
 Sidgwick, Professor of, Cambridge, 131. 
 Silver : difficulty hindering free trade, 99. 
 
 East always absorbing, 106. 
 
 London market for, 31. 
 
 manufacturing in the East developed by fall in, 89. 
 
 mines, Nevada and California, 22. 
 
 monetary confusion resulting from present instability of, 
 110, 144. 
 
 Pound, S. Dana Horton, 132. 
 
 production of, 215. 
 
 proposed import duty on, in India, 143. 
 
 quantity of, in ornaments and coin, 127. 
 
 Royal Commission on gold, and 138, 206. 
 
 variations in price of, 15, 147, 215. 
 Sismondi, 66. 
 Smith, Adam, 58, 63. 
 Standard Stability of value in, 53. 
 
 ,, for gold coin, 133, 135, 192. 
 Standard of value, money a, 52. 
 
 ,, ,, importance of unity in, 32, 60, 110, 114. 
 
 Standards, battle of the, by M. Emile de Laveleye, 57. 
 Statistics of precious metals, 14, 215. 
 Statute of 1816, 186. 
 Store of value, money a, 52, 54. 
 Suggestions of Indian government, 141, 173. 
 Supplies, variations in the, of Gold and Silver, 14, 23. 
 Suspension of sales of silver by Germany, 16. 
 
222 Index. 
 
 Tooke and Newmarch, 57. 
 Trade contraction, 70. 
 
 expansion, 70. 
 
 of India with China and Japan, 89, 96. 
 
 Uniformity, former, in relative value of gold and silver, 11. 
 United States : Demonetisation of silver, 137, 179. 
 
 and France, willingness of, to join hi bimetallic 
 
 agreement, 19. 
 
 Value of money, the, 68. 
 
 Variations hi exchanges with silver standard countries, 15, 30. 
 
 price of silver, 15, 147, 215. 
 
 ,, the supplies of Gold and Silver, 14, 23. 
 
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