of 4 4 (California Jte&irm Cttrtmcg if E. MOHSOS GEORGE, I-IfiSt.Cl PBIOE | ONE RTJPBH. SPfltCKELS THE SILVER AND INDIAN CURRENCY QUESTIONS TREATED IN A PRACTICAL MANNER BY E. MONSON GEORGE, M.lNST.C.E. EFFINGHAM WILSON & CO., ROYAL EXCHANGE. MDCCCXCIV. CONTENTS. PAGE Introduction I CHAPTER I. Result on England and India caused by closing the Indian Mints to free coinage ... ,.. ... ... ... 9 CHAPTER II. Possible results on England and India if the Mints had not been closed ... ... ... ... 18 CHAPTER III. With the Mints closed, should the Secretary of State for India fix a minimum rate for Council Bills ? ... ... 26 CHAPTER IV. The export and import trade of India, and their effect on the Currency Question ... ... ... ... ... 31 CHAPTER V. The introduction of a Gold Standard into the currency of India ... ... ... ... ... ... ... 38 CHAPTER VI. The Silver Problem 42 CHAPTER VII. Should the Indian Mints be re-opened to free coinage ? ... 58 115515 INTRODUCTION. IN the following pages it has been endeavoured to call attention to the great evil to the universe, and India and Great Britain in particular, caused by the depreciation in the gold value of silver, or what is the same thing, the appreciation in the silver value of gold. The author has tried his best to put the matter in as clear and simple a manner as possible, and in few words, so that all who read them can at once understand and grasp the question. CHAPTER I. deals with the question of closing the Indian mints to the free coinage of silver, and points out the effect of this action on the trade of India and England. CHAPTER II. shows what might have been the re- sult on the finances of India if the mints had not been closed, and describes how the fall in the gold value of silver affects the price of produce in England. INTRODUCTION. CHAPTER III. explains what would be the result as regards the sale of Secretary of States drafts in London if a minimum rate was fixed above the cur- rent rate of exchange. On this question there have been widely divergent views, especially in India. CHAPTER IV. points out the relation between the export and import trade of India and the currency question, and the consequent danger to trade by closing the Indian mints. CHAPTER V. discusses the subject of an introduc- tion of a gold standard into India. This matter has been the subject of much argument for many years both in England and India. It has been thought by many who have not carefully studied the question that, provided the natives of India did not absorb the gold introduced for purposes of hoarding, no other special difficulty in the introduction of a gold standard could arise. This fallacy has been exposed in this chapter. CHAPTER VI. deals with the silver problem gene- rally. It shows how the question has in a great measure arisen through the action of England herself. It shows further the terrible depression in trade the INTRODUCTION. depreciation in the gold value of silver has caused in Europe and its danger to illicit coinage. It discusses the proposal of the introduction of " International Bimetallism," and finally points out a more easy method of settling the question. CHAPTER VII. points out the difficulties of the situation with the Indian mints closed, and gives reasons for not re-opening the mints until some settle- ment has been come to with other nations as to the protection of the precious metals used for currency purposes. The Author hopes that this little book may prove acceptable to the general public, and help to elucidate a question that is much occupying attention at the present time. THE SILVER AND INDIAN CURRENCY QUESTIONS m CHAPTER I. RESULT ON ENGLAND AND INDIA CAUSED BY CLOSING THE INDIAN MINTS TO FREE COINAGE. FOR many years there have been advocates in India for closing the Indian mints to the free coinage of rupees. As early as 1876 the Government of India were approached on this question, and it was then thought best not to do anything to support the gold value of the rupee. Since the year 1876 the exchange value of the rupee has fallen from i8Jd., the lowest point touched in that year, to i^d. in io THE SILVER AND the early part of 1893, the price of silver at that time being 37d. an ounce. There ap- peared every reason to expect a further con- siderable fall in the price of silver owing principally to the probable repeal of the Sherman Act in the United States of America. It therefore seemed absolutely necessary to take some action to protect the silver cur- rency of India. After many months' delay, and after receiving the report of the Herschell Commission, the Government of India, with the concurrence of the Secretary of State for India, finally decided to close the Indian mints to the free coinage of silver. A law to this effect was passed in June, 1893, and ex- change, which at that time was about I4fd., at once rebounded to i6d. The Government of India at the same time also offered to re- ceive sovereigns into the Treasuries at the rate INDIAN CURRENCY QUESTIONS. ii of 15 rupees to a sovereign, this rate being equivalent to an exchange of i6d. There were many in India who looked upon the currency question as regards India as practically settled ; the Council Bills sold in London the same week as the announcement of the closing of the Indian mints was pub- lished, at about i6d., as compared to a much lower rate in previous weeks. On the other hand silver, which at the time of the closing of the mints was about 37d., rapidly fell to 3od. an ounce. A very short time was, however, necessary to show that the closing of the Indian mints had by no means cured the evil from which India had been suffering for twenty years. The Council Bills, which it was thought generally in India would now only be sold in London at i6d., were still allotted at rates 12 THE SILVER AND below this figure. Owing partly to an outcry in India, an effort was made to adhere to a minimum of is. sd. in allotting Council Bills. In consequence of this action, the bills could not be sold, and for many weeks no allotments were made. The Secretary of State for India, in order to meet India's gold obligations in England, was therefore com- pelled to raise several millions sterling in the London market. In the meantime rupees were accumulating in the reserve Treasuries of India, and on the 22nd March, 1894, they amounted to 26 crores. Early in 1894 ^ e Government of India de- cided on a new departure. Exchange had up to that date kept pretty steady for some time at isd., but the Council Bills had only been taken up in small quantities. The Secretary of State for India therefore INDIAN CURRENCY QUESTIONS. 13 determined to sell the Council Bills at the market rate, and not to adhere to any fixed minimum. In consequence of this action large quantities of Bills were sold, but exchange fell to laid. Having now given a short account of the action of the Indian Government in closing the Indian mints, the effect of this action on England and India will be considered. It will be shown in Chapter II. how and why the produce of a country with a silver currency always remains the same in value, notwithstanding any variation in the gold price of silver. The same chapter will also show why the price of produce in a country with a gold standard falls and rises with the gold price of silver. The Indian Government, by closing the Indian mints, and refusing to allow merchants THE SILVER AND and others to send bar silver to the mints for conversion into rupees, have forced up the gold value of the rupee from io d., its natural price with silver at 27d. an ounce, to about I4d., the rate of exchange in March, 1894. In other silver currency countries, such as China, Mexico, also the Argentine Republic (the last may be included as a silver country, as that nation can only procure gold at a very high premium) the currency is not in any way protected. It follows, therefore, that any of these countries would receive with wheat at 5 =2 s-s 26s. a quarter, nearly 29 rupees (see margin) or its equivalent in the currency of the country, whereas India with its protected currency would receive a little over 22 rupees =22-2 (see margin). India is therefore handicapped to the extent of 6 rupees per quarter of wheat. If silver fell to isd. an ounce, and >s^ INDIAN CURRENCY QUESTIONS. 15 the rate of exchange with India still remained at I4d., India would still receive only 22 rupees, whereas other silver countries would be receiving 52 rupees for a quarter of : wheat. In other words, as long as the Indian mints are closed, India is crippled in her wheat trade and unless she can produce it at a cheaper rate than other silver countries, she is practically shut out of the European market ; the same remark applies to tea and other commodities. It follows, therefore, that by keeping the Indian mints closed the prices of wheat and tea in the European markets are enhanced ; if the mints were re-opened and silver re- mained at 27d., the price of wheat would fall to even a lower price than 26s. a quarter, as the Indian wheat trade would be thereby encou- 16 THE SILVER AND raged, and more Indian wheat would come to to the English market. In the same way the price of Manchester cloth and coal is kept up, as will be seen by referring to Table A in Chapter II. the higher the gold value of the rupee, the more will India be able to give in gold for these articles. If the mints had therefore remained open, the Indian export trade would have been- more flourishing, but the import trade would have contracted. As far as trade between India and Europe is concerned, the action of the Government of India in closing the mints has had the effect of increasing the Indian import trade, and damaging the export trade to the same extent, the value of the two together being about the same as before the closing of the mints. The real gain to India and England by INDIAN CURRENCY QUESTIONS. 17 closing the mints is that the danger of India not being able to meet its gold obligations is to some extent by this action averted, and India is consequently placed in a much sounder financial position. 18 THE SILVER AND CHAPTER II. POSSIBLE RESULTS ON ENGLAND AND INDIA IF THE MINTS HAD NOT BEEN CLOSED. THE price of silver which before the year 1873 was about 6od. an ounce troy has in the early part of 1894 fallen to 2yd. With silver at 6od. the rupee would be worth about two shillings ; with silver at 2yd., and the mints not closed, the value of the rupee would be^^^iofd. With the mints closed the value of the rupee is at present (March, 1894) about I4d. The price of wheat in the year 1873 was 58s. a quarter ; with silver at 27d., its price should be 2J ^-=26^sh.y assuming that the price of wheat is governed by the price of silver, j INDIAN CURRENCY QUESTIONS. 19 There is no difficulty in showing that this must be so, as the countries producing wheat are largely countries without a gold standard, and require to be paid in the currency of the country, which is either silver or depreciated paper money. The amount that such coun- tries have been accustomed to receive for a quarter of wheat they will still expect to re- ceive, notwithstanding any rise or fall in the gold value of silver. In other words, the price of wheat in a producing country with a silver currency is in no way affected by the rise or fall in the gold price of silver. Other agricultural produce is affected by the price of wheat, and will therefore rise and fall as wheat rises and falls in price. Many other commodities produced exclu- sively or principally in countries without a B 2 THE SILVER AND gold standard such as tea, opium, indigo, hides, jute, rice, and oil seeds will, like wheat, rise and fall with the gold price of silver. Or what is the same thing, as gold appre- ciates as it becomes scarcer, more silver, wheat, tea, opium, indigo, hides, jute, rice, and oil seeds exchanges for a sovereign. To show this clearly it will be assumed that silver is God. an ounce, or, what is the same thing, the rupee is worth about 24d. The price of a pound of tea in India' will be assumed at i rupee, and that of a quarter of wheat at 20 rupees, these being exports from India. Imports into India from England, such as Manchester cloth and coal, will be assumed as selling in India at 100 rupees per bale and 5 rupees per ton respectively. If silver fell to 45d. an ounce, the producer in India would still require only i rupee for a INDIAN CURRENCY QUESTIONS. 21 pound of tea and 20 rupees for a quarter of wheat ; he would also still be unwilling to pay more than 100 rupees for a bale of cloth, or 5 rupees for a ton of coal. It would be still so if the gold price of silver fell to 30 or 15 pence an ounce. The rupee in India would still purchase just as much produce of the country as before the fall in the gold price of silver. The cost of local labour will in no way have altered, and the earnings of every European and native will be precisely as it was before the fall in the gold value of silver. The following Table A shows the price in rupees and corresponding price in gold which India could pay for cloth and coal, or would expect to receive for wheat and tea as the gold value of the rupee varied from 60 to 15 pence an ounce. 22 THE SILVER AND TABLE A Price of Silver. Value of Rupee. Price of Wheat per Quarter. Price of Tea per Pound. Price of one Bale of Cloth. Price of one Ton of Coal. Pence. Pence. India. 3: ' M - Eng- land. India. Eng- land. India. Eng- land. Rs. Shs. ; Rs. Shs. Rs. Rs. Shs. 60 24 2O 40 I 2 IOO 10 5 10 45 18 20 30 I I| IOO 7i 5 71 30 12 2O 2O I I IOO 5 5 5 15 6 2O IO I . i loo 2\ 5 2| In all cases the cost of freight, duty, and other incidental charges are purposely omitted. It follows, therefore, that with silver at 27d. an ounce, the rupee at io|d., and wheat at 26s. a quarter, England would be offering India, the same as other silver currency countries or countries without a gold stan- dard, viz., nearly 29 rupees a quarter of wheat, India would not be shut out of the wheat trade with Europe, as is the case at present, INDIAN CURRENCY QUESTIONS. 23 with the Indian mints closed. The 26 shillings offered for a quarter of wheat would represent nearly 29 rupees, instead of a little over 22. The same remark applies to all other Indian produce which that country produces in com- petition with other countries without a gold standard. For the same reason India would gain in her local productions, and English trade cor- respondingly suffer if the mints were re-opened. English cloth and coal merchants would then only receive lofd. for one rupee's worth of cloth or coal, in place of I4d., the present rate of exchange with the mints closed. If England could not supply at this price local manufactures and mines in India would be encouraged, and there would be a correspond- ing reduction in trade between England and India. 24 THE SILVER AND On the other hand India would lose in pay- ing her gold obligations to England with the mints open. With the rupee at I4d., and these obligations taken at 18,000,000 sterling annually, the number of rupees absorbed from the revenue of India to meet this debt would be about 3,085 lacs. But 4,000 lacs of rupees would be required with the mints open, and the rupee at io|d., the equivalent to silver at 27d. In this item alone India would therefore lose 4,000 3,085 = 915 lacs by the opening of the mints. If, moreover, silver fell to isd. an ounce, this loss would be still further raised to 4,115 lacs of rupees. India therefore loses in her export trade by the mints being closed, and the additional import trade caused thereby also affects her manufactures and mines ; she, on the other INDIAN CURRENCY QUESTIONS. 25 hand, reaps a considerable advantage by the smaller portion of her revenue which is re- quired to make the gold payments in England. She is also now partially protected in her currency from the effect of any further fall in the gold price of silver, and which might be so serious as to make India unable to meet her gold obligations. 26 THE SILVER AND CHAPTER III. WITH THE MINTS CLOSED, SHOULD THE SECRE- TARY OF STATE FOR INDIA FIX A MINIMUM RATE FOR COUNCIL BILLS ? To arrive at a solution of this question it is necessary to consider what makes the rate of exchange. Before the closing of the mints the price of silver undoubtedly made the rate of exchange. As long as banks and merchants had the option of buying silver for conversion into rupees, or Secretary of State drafts, the two systems of remittances competed together, and the rate of exchange depended almost entirely upon the price of silver. With the Indian mints closed to the public the matter of exchange is placed on an INDIAN CURRENCY QUESTIONS. 27 entirely different footing. The banks, mer- chants, and the general public have now only one way of making remittances to India, and that is through the purchase of Secretary of State's drafts. The general public requiring to remit small sums buy the drafts they require from the exchange banks, but these drafts are mostly subdivided Secretary of State's drafts to meet individual requirements. It follows therefore that, with the mints closed, the rate of exchange is entirely governed by the demand for remittance be- tween Europe and India. If the Secretary of State fixed a minimum rate for his Council Bills above the market rate, which in its turn depends upon the demand for bills by which remittances can be made, no tenders would be received for the bills, as naturally banks and others could not 28 THE SILVER AND afford to pay more for the bills than the rate at which they could subsequently sell them to merchants and others. Like all articles for sale, the price must depend upon the supply and demand. In the case of Council Bills the supply is always there, and this will continue to be the case as long as India must remit annually about 18,000,000 to England. The price at which Council Bills can there- fore be sold must depend upon the demand for bills, by which remittances can be made to India, and the same demand makes the rate of exchange. If the demand for bills falls off, probably owing to there being a less quantity of Indian exports coming forward, the exchange banks who have a stock of bills on hand, lower the rate of exchange, in order thereby to increase INDIAN CURRENCY QUESTIONS. 29 the demand for bills, this in its turn tends to increase the exports from India, as merchants in England, although they may not see their way to pay say I4d. for produce of the value of one rupee, might be able to do business at I3|d. or a fall of about two per cent. In the same way the exchange value of the rupee rises and falls in India, but its price is regulated by the London price. If the rate falls in London, the exchange banks in India also lower the rate. This in its turn has a tendency to reduce imports into India, or, what is the same thing, to decrease the ex- ports from England, as although a merchant in England might work at a sufficient profit if he could get I4d. for goods of the value of one rupee, he might hesitate to do business if he was only guaranteed isfd. for the same goods. Through the first action of the exchange 30 THE SILVER AND banks the exports from India are encouraged, and through the second the exports from England are discouraged. This combined action creates a greater difference between the value of the Indian export and import trade, makes a greater demand for Council Bills, and accomplishes what the exchange banks desire. It can therefore at once be seen that the rate of exchange cannot be fixed in an arbi- trary manner, but the rate must depend upon circumstances over which the Secretary of State for India has no control. INDIAN CURRENCY QUESTIONS. 31 CHAPTER IV. THE EXPORT AND IMPORT TRADE OF INDIA, AND THEIR EFFECT ON THE CURRENCY QUESTION. INDIA has to remit each year to England about 18,000,000 sterling; this payment must be made in gold, as England is a country with a gold standard. This payment is necessary partly for stores purchased in England, and pensions due to retired officials of the Govern- ment of India, but also for interest on loans or money borrowed in England which has been spent in covering India with a network of railways and canals and other public works of advantage to the country. At the present rate of exchange (March, 1894), I 4 ( ^- to a ru P ee > the Government of 32 THE SILVER AND _ ,. .,.. . 18,000,000x20x12 _ > r _ India will require - ^ = Rs. 308,564,285, or say 3,085 lacs of rupees. The revenues of India are entirely raised in rupees, the cur- rency of the country. With silver at its present price, 27d. an ounce, the rupee, if not protected by the closing of the mints, would be worth ^^r^iofd., and in that case the Government would require 4,000 lacs of rupees to raise 18,000,000 in gold. If the exchange value of the rupee fell to 6d., 7,200 lacs of the Indian revenues would be required to raise the same sum in gold. On the other hand, if silver regained its old price of God. an ounce, only i, 800 lacs of rupees would be absorbed of the revenues of India to make its payment of 18,000,000 to England. If the export and import trade of India were of equal value, the Government of India would have to ship to England annually either 1,800 INDIAN CURRENCY QUESTIONS. 33 lacs, 3,085 lacs, 4,000 'lacs, or 7,200 lacs of rupees, the exact sum depending upon the rate of exchange, to meet obligations due from India to England. As a matter of fact, the annual value of the exports from India before the closing of the mints exceeded the value of the imports into India by more than 18,000,000. The Go- vernment of India was consequently under no necessity to ship rupees to England for conversion into 18,000,000 sovereigns. The exports from India being more in value than the imports by over 18,000,000 sterling, mer- chants in Europe required facilities to pay for this extra amount of India's produce, and which could not be covered by the imports which India absorbs from Europe. This faci- lity is offered to merchants and banks in Europe in the shape of Council Bills or 31 THE SILVER AXD Secretary of State's drafts. Each Wednesday in the year the Secretary of State for India calls for tenders for these drafts to the amount of 30 to 60 lacs of rupees, and these bills are allotted to the highest tenderers. In the interests of the Government of India it is therefore necessary that the value of the exports from India should continue to exceed the value of the imports annually by at least 18,000,000 sterling, or the banks and merchants in London and elsewhere would not be able to absorb the whole of the annual supply of Council Bills. By protecting and artificially raising its gold value, as has actually been done by closing the Indian mints to the free coinage of rupees, there is some danger of the exports from India decreasing to such an extent as to make the exports only equal the imports, and in this INDIAN CURRENCY QUESTIONS. 35 case no part of the 18,000,000 of Council Bills could be absorbed by the banks and merchants in London and elsewhere. By artificially raising the gold price of the rupee, the gold price of wheat, tea, and other exports are proportionately raised, as explained in Chapter II. In other countries with a silver currency like China and Mexico, the price of these exports would, however, still be based on the market price of silver, and would therefore be able to undersell India by ^jj ? *77*l^ or 22*9 per cent., taking the price of silver at 2yd. an ounce and the rate of exchange with India at I4d. It is therefore quite possible that by closing the mints in India, the exports of produce from India may be handicapped to such an extent as to damage the export trade to the annual value of 18.000,000 sterling. c 2 36 THE SILVER AND In this case there would be no demand in London for Secretary of State's drafts, nor could the difficulty be met by shipping lacs of rupees to London, as the rupees would not be taken up, the value of the imports in India being sufficient to pay for the exports, and therefore banks and merchants would not require rupees. The rupees, if sent by the Government of India to pay their gold obligations, would be of no use, as the rupee is not a current coin in the United Kingdom or anywhere else, except India ; they would therefore have to be melted up and sold at the market price of silver. This would help to still further depress the silver market, and still more handicap India as compared to other countries with a silver currency or countries not protected by a gold standard. INDIAN CURRENCY QUESTIONS. 37 This shows that any country with a silver currency that enters into gold obligations does so at great risk to its own interests, and that gold liabilities should not be incurred until something is done to fix the price of silver in relation to gold, and that until this is the case the interests of trade must suffer. It also shows how trade with India is bound up in the question of currency, and what evil effects might arise through the closing of the Indian mints. 38 THE SILVER AND CHAPTER V. THE INTRODUCTION OF A GOLD STANDARD INTO THE CURRENCY OF INDIA. IT has been explained in Chapter IV. the effect the export and import trade of India has on the currency question. It has been shown there the possible effect on India by closing the mints, and the very great difficulties that might arise owing to the export trade being destroyed to such an extent as to make it diffi- cult for India to meet her gold liabilities. It has been thought by many that the intro- duction of a gold standard into India would help the country out of her difficulties, and many methods have been proposed for intro- ducing gold into India with a view of making a gold unit the standard of the country, and INDIAN CURRENCY QUESTIONS. 39 the rupee a token coin like the shilling in England. The Government of India in June, 1893, when closing the mints to the free coinage of silver, publicly offered to give fifteen rupees for each sovereign brought to the Indian Trea- suries, this being equal to a rate of exchange of i6d. to a rupee. The Indian Govern- ment appears, therefore, to have thought that its action in closing the mints would facilitate the introduction of a gold standard into the currency of India. It can, however, easily be shown that the introduction of gold into India in such quan- tities as to make a gold standard in that country feasible is an utter impossibility as long as the Government of India require to remit annually 18,000,000, or any like sum, to pay its gold obligations. 40 THE SILVER AND If this gold obligation could by any satisfac- tory method be paid off, and the export and import trade of India continue as formerly, banks and merchants in Europe would require to remit to India money in some manner to pay for the excess of exports over imports. Assuming this excess of exports over im- ports to remain as it was, or over 18,000,000 sterling, merchants and banks dealing with Indian produce would require to ship to India annually over 18 million sovereigns or its equivalent in rupees at the exchange of the day. As sovereigns would be more easily obtained in Europe than rupees, which are not easily obtained outside India, sovereigns would therefore probably be remitted in payment. By this means gold would be introduced into India in large quantities, and a gold standard could be introduced without much difficulty. "*/ Vo or" ' 7 '' ) INDIAN CURRENCY QUESTIONS. 41 The only other method by which gold could be introduced into India in such quantities as to make a gold standard feasible would be by increasing the export trade very largely so that the annual quantity of Council Bills available would not suffice as a form of remittance to pay for the excess of exports over imports. It has, however, been shown in Chapter IV. that, by closing the mints to the free coinage of silver, there is danger of even the present annual supply of Council Bills not being ab- sorbed, and that as long as the mints are kept closed any increase in the export trade of India is unlikely. Therefore at present there exists no satisfactory method of introdu- cing a gold standard into the currency of India. 42 THE SILVER AND CHAPTER VI. THE SILVER PROBLEM. THE problem as to how to restore silver to something like its old value seems no nearer solution now than it was fifteen years ago. In 1876 the first serious fall in the price of silver took place ; but between the years 1873 and 1876 silver had a decided drooping ten- dency. It was, however, in 1876 that Anglo-Indians first took serious alarm at the low rate of ex- change, which for a short time fell to about iSi-d. per rupee. It is useless discussing here what were the causes of the fall in the price of silver, as it is now universally acknowledged to have arisen from the following causes : INDIAN CURRENCY QUESTIONS. 43 1. Appreciation of gold. 2. Depreciation of silver. 3. The restricted use of silver for purposes of currency. Knowing, therefore, the causes for the evil, it will be endeavoured to point out a remedy. There is, however, a further difficulty, and that is to show in a satisfactory manner that the fall in the gold price of silver is a decided evil. There are still many who look upon this fall in silver as not an unmixed evil, and some even go so far as to say that England and other countries with a gold standard reap an advan- tage through the low price of silver. It will be therefore the first object of this chapter to show that the present state of things is injurious to England, and then will be shown the remedy that should be applied. 44 THE SILVER AND The most important countries with a silver currency are India, China, and Mexico. To these for all practical purposes may be added the Argentine Republic and the Brazils, as neither of these countries can get gold except at a very high premium. If gold continues to appreciate in value, as seems probable, many other countries will have to be added to this list before long. It may be roughly stated that the whole world is or will be shortly divided into two hostile camps of very similar proportions, one half the w ? orld having a silver currency and the other a gold. If these two halves could live without any intercourse with each other, the present state of things might continue, and possibly the results would in no way be injurious to each other or to their respective populations. England is, however, the greatest commer- INDIAN CURRENCY QUESTIONS. 45 cial nation in the world, and must have con- tinual intercourse with all parts of the world. In 1846 free trade was introduced, and since that date the commerce of the United Kingdom has attained colossal proportions. The annual value of her trade with the East alone amounts to 250,000,000 sterling. The United Kingdom depends to a great extent upon foreign nations for its supply of food, the sum paid away annually for this pur- pose amounting in 1892 to ^4 per head. The total value of these imports in 1892 being 151,000,000 sterling. Between the years 1873 and 1892 the area under wheat cultivation in Great Britain has fallen from 11*2 to 5*8 per cent., or about one- half the area under wheat in 1873 has since gone out ^of wheat cultivation. Much of the land in Wiltshire, Essex, and "other parts is at 46 THE SILVER AND present unsaleable at any price, and agricul- ture is in such a depressed state that with any further fall in the price of agricultural produce it would seem impossible for agriculture to continue to exist in Great Britain as an industry. This state of things has been partly brought about by the people of Great Britain them- selves. England has assisted with her riches to develop countries with a silver currency. Great Britain has advanced many millions sterling to the Argentine Republic, Brazils, Mexico, India, and China, to assist these countries in constructing railways, harbours, canals, and other public works of utility. By means of English capital these countries are now able to supply England with the foreign food she requires, and at prices with which she herself is at present unable to compete. INDIAN CURRENCY QUESTIONS. 47 Wheat between 1873 and 1894 l ias fallen from 585. to 265. a quarter, barley from 405. to 253., and other agricultural produce in pro- portion. It has been shown in Chapters I. and II. how the gold price of silver affects the price of agricultural produce in Great Britain. It has also been shown in Chapter II. how the fall in the gold price of silver has brought India to the verge of bankruptcy. What applies to India applies even more to other countries with a silver currency. Guatemela has lately stated through her Government her inability to con- tinue to pay her gold obligations owing to the depreciation in the gold price of silver. Mexico is in much the same plight, and unless there is some recovery in the gold price of silver it will be difficult for that country to continue to meet its gold obligations. Other South American 48 THE SILVER AND nations are not able to pay the interest on their foreign debt, partly owing to the appreciation of gold. Some of the European States are bankrupt or on the eve of bankruptcy, owing partly to the low price of produce caused by the fall in the gold value of silver. Most of the European States whose people have to depend upon agricultural produce for their livelihood, even more than the people of Great Britain, are suffering in the same way from the low price of produce. In some States protective duties have been introduced with a view of raising the price of native produce, but although this duty may enhance the price locally of the particular produce upon which it is placed, little if any good can result to that nation, as protective duties injure trade as a whole, as it tends to low T er the imports, and in this case the exports must also suffer. INDIAN CURRENCY QUESTIONS. 49 There is also another aspect of the question which has become serious to the United King- dom and other nations with a gold standard. The actual value of silver in the shillings at the present time is only about ^p 2 = 5fd., the actual value of silver in a five-franc piece is 27 X 500 , . , . - 6 = 225 centimes. This gives an immense inducement to illicit coinage. It is true that in England only forty shillings of silver is legal tender, but this is little pro- tection, as it is extremely easy to pay one's way with silver in England. A few enterprising men, or even a native State in India, or per- haps a small South American Republic, could easily obtain the necessary appliances, and, without much fear of discovery, manufacture shillings, half-crowns, francs, and five - franc pieces by the ton, and thereby making a profit of over 100 per cent. No conscientious scruple D 50 THE SILVER AND need restrict such manufacture, as the coins manufactured would be what they were repre- sented to be viz., silver. Who can say that this practice may not now be in extensive operation ? It is possible the present price of silver, 2yd., . may restrict the outturn to such an extent as to make some recovery possible, but the same was said when silver was at a much higher price. On the other hand, silver might fall to I5d. This cannot be regarded as an impossi- bility. When silver was at 6od. its fall to 27d. would have been ridiculed by all. It has, however, now fallen to this figure. The Broken Hill Mine in Australia sends weekly 250,000 ounces of silver to the market, and can produce it at 22jd. per ounce. Other mines with improved machinery may be able to INDIAN CURRENCY QUESTIONS. 51 produce it at a lower price, and even the Aus- tralian mine might find it possible by greater economy to produce it at a lower figure. Enough has now been said to show the in- jurious effects on the United Kingdom and other countries of the great fall in the gold value of silver, and the author will now point out the remedy that he thinks should be applied. The principal remedy advocated to raise the gold price of silver is international bimetallism. It is thought by many that the different coun- tries interested in the question could settle by international agreement (the same as the Postal Union settle an universal price for letter postage) a fixed ratio at which the Governments concerned would agree to accept silver equally with gold in payment for all taxes, duties, and other revenue purposes. D 2 52 THE SILVER AND Until the year 1873 several of the countries of Europe did accept either silver or gold at a ratio of 15-^- of silver to i of gold. Up to this date the price of silver kept steady at about 6od. an ounce, and the bimetallists argue that it was owing to this practice on the part of these countries that the price of silver did not fluc- tuate much before 1873. They go further and say that if the remaining countries of Europe had agreed to accept silver payments equally with gold at the same ratio, the silver problem would never have been heard of. However that may be, the bimetallists are undoubtedly right in dating the disastrous fall in the price of silver from the year 1873. It must, however, be borne in mind that the outturn of silver has immensely increased since 1873 as compared to gold, and it would seem that those nations who possessed a gold standard and a token INDIAN CURRENCY QUESTIONS. 53 silver coinage at that time were quite justified in their own interests in adhering to this standard. At that time any departure from the gold standard would have been strongly resisted in England, and bimetallism could therefore not have been introduced. It is, however, useless, discussing further what might have been done in 1873 the pro- blem is what should be done for the good of the world, and Great Britain and India in particular, in the year 1894. International bimetallism, although still pos- sible, could only be introduced with great difficulty, as the consent and agreement of so many nations would be necessary. Some sys- tem of raising the price of silver to which a less number of nations would require to give their consent and adherence seems more feasible. 54 THE SILVER AND The principal silver mines are situated in the United States, Mexico, and Australia. Whatever arrangement is made must there- fore at first be made with these three countries. The outturn from the mines in the United States is over 50,000,000 ounces per annum, and the balance comes principally from Aus- tralia and Mexico. These three nations would be naturally in- terested in any scheme for raising the gold value of silver, as they would then be able to purchase the same amount of gold with a less quantity of silver. It would not, however, be just to nations outside those producing silver to take any special action as regards silver without doing the same as regards gold. Both precious metals should be treated in the same manner and have the same advan- tages. They are both used principally for INDIAN CURRENCY QUESTIONS. 55 currency purposes, and therefore require spe- cial treatment and protection. Although at the present time gold is appreciating in value because of its scarcity, and silver depreciating because of its quantity, the reverse may happen at any time, and therefore what is now done should not deal only with the present state of things, but with what might be the state of things at some future day. The principal gold-producing countries are also silver-producing ; the only other States largely interested in the question, and who would probably also have to be consulted, would be the States of South Africa. Great Britain as one of the nations, and per- haps the nation most interested in the question, should through its Government take up the question in a practical manner. It should invite the nations interested largely in the pro- 56 THE SILVER AND duction of gold and silver to send representa- tives to a conference to be held in London. At this conference Great Britain should be represented in the interest of her colonies in Australia and South Africa, and an effort should be made at this conference to come to an agreement on the following points : 1. Gold and silver to be in future a monopoly of the Government in whose territory the mines are situated, the same as opium is a monopoly of the Government of India. 2. All gold and silver produced and not re- quired for coinage in the country where it is mined to be shipped to London and sold at a rate to be fixed by the confer- ence. 3. The conference to meet periodically, as may be agreed. INDIAN CURRENCY QUESTIONS. 57 There would probably be no difficulty in the conference coming to an effective agreement on these points, and the details of the arrange- ment could be subsequently easily arranged. All the countries represented at the conference would be only too eager to have the question settled in such a manner as to make the great depression in trade caused by the appreciation of gold and depreciation in silver that has occurred in recent years an impossibility in the future. 58 THE SILVER AND CHAPTER VII. SHOULD THE INDIAN MINTS BE RE-OPENED TO FREE COINAGE? IT HAS been shown in previous chapters in what manner the closing of the Indian mints has affected trade, both in India and England. In India the export trade has suffered, and manufactures and mines are placed at a certain disadvantage in competition with England and also China. In England the export trade to India has been encouraged by the action of closing the Indian mints, and the price of wheat and other produce of India is kept up in England at a higher price than would be the case if the mints were re-opened and the rupee dropped to INDIAN CURRENCY QUESTIONS. 59 its natural price of io|d. with silver at 27