THE LIBRARY OF THE OF LOS UNIVERSITY CALIFORNIA ANGELES 0' t c Silver and Gold AND THEIR RELATION TO TUE PROBLEM OF RESUMPTION BY S. DANA glORTON Ohv (T vTTaTJkayiia TTjg XP^'^^^S '''^ vb^iiafia yeyove Kara cwdrjKfiv. koI 6ia tovto tov- vofia ejet vofiidfia, on o'v (pvaei, aA7.a vofKj eari, Kal e(j>' I'/filv jieTaliaAelv Koi ■Koirjcai axpwrov. — Aristotle. " Electa materia est cujus publica et perpctua a'Stimatio ilifficultatibus permutationuni eequal- itate quantitatia 8\ibveuirot.'' — Julius Paulus. " The iiitrinsiek A'ahie of Silver " [or of Golil], " consiaered as Money, is that Estimate which common Consent has placed upon it." — John Locke. " Keine Ursaehe aber [eine Veriinderung im Jliinzfuss vorzunehnien], kann dringender als dieseseyn: Wanri ncnilich andere Jsatioiieu in ilireni Miin/.fusse eiue solche Veriinderung ge- troflen liaben welclie dor Wolilfahrt ilirer Nachbarn nachtlieilig fallen, und deren Driickung Oder Untergang befdrdoru kann." — Jouann Philip Gkaumann. NEW EDITION REVISED AND ENLARGED CINCINNATI EOBEET CLAEKE & CO 1877 COPYRIGHTED BY S. DANA HOKTON. 1876. Stereotyped by Ogden, Campbell & Co., Cincinnati. ACn 10 76 aHf/VERSfTT OF SOUTHERN CALIFORNIA L.'SRAIW- DEDICATION". In the Debate iu the House of Representatives, on the Legal Tender Act, at "Washington, on February 5, 1862, Hon. V. B. HoRTON, of Ohio, said, among others, the fol- lowing words : If this bill passes, as I hope and pray it will not, this will be a point from which we shall date a new financial system in the United States Being a member of the Committee of Ways and Means, I have been engaged in working according to the best of my ability, saying nothing, .... but I wish to utter my voice of warning against being driven by a supposed and asserted im- perious necessity into this measui'c. It is conceded to be against all the teachings of experience ; against all our sentiments of right, and, against all our opin- iii ISO'iSSS ions about jDolitical wisdom It has been asserted upon this floor, with the utmost apj)arent sincerity, that this is a meas- ure, not of choice, but of necessity But, Mr. Chairman, that assertion is only I'eiterated, not jDroved. Where is the proof that it is a matter of necessity ? [It has] not been made apparent so far as 1 have been able to discover. I have failed to hear any argument that it is necessary. I know perfectly well that the Secretary of the Treasury thinks that it is necessary, and Ihave the utmost confidence in his ability and zeal. I think he is mistaken. At any rate, whether he is mistaken or not, he has not furnished us with proof of the correctness of his opinion There is no necessity for us to blight the fair fame of the Grovernment, to impair the public morals, to set afloat the Ship of State, in a fog, on a sea of bubbles, where no human skill can dii-ect or control it, and where ruin is as in- evitable as cause is sure to precede efl'ect The country never was so wealthy as to-day — never was iv so little due to foreign countries as to-day — it never before had as much property, and never was so free from embarrassments. The only drawback is, that the Treasury wants Money to an immense amount Can we best accomplish our purpose by a Legal Tender Treasurj'-note Bill, or can wo best do it by going to the capi- talist of the country and saying: "We are a powerful nation, an honest nation, a wealthy nation engaged in an effort to i)ut down a gigantic rebellion. All that is valuable to us, depends upon our success. The country is powerful ; the people are full of patriotism; we are providing a sure fund to defray the ordi- nary expenses of the Government, to pay the interest of the pub- lic debt, and a fund with which ultimately to redeem the prin- cipal. What we desire to borrow is to be expended in the sup- pression of this- infamous rebellion. We have not only the means, but we have the will, to meet all our engagements promptly." .... Has any gentleman here any doubt of the ability of this country to furnish means to carry on this war ? . . . . What will be the effect (of this measure)? .... I do not believe there is any new thing in the laws of finance. Con- fusion and uncertainty will extend in relation to the value of all exchangeable articles. You have no standard, for the Stan- dard of depreciated Paper Currency changes from day to day, and hour to hour, and all the legislation of Congress can not make Paper Currency anything but what it is Inflation of Prices will be the result, and when Inflation of Prices begins, exports decrease and imports increase. Agricultural interests will be injured to an incalculable extent, and the next great result will be upon us, which will be tne export of G-old to pay debts abroad for excessive importations superinduced bj' the Inflation of Prices here. Every man who has foreign relations, in any shape, will send his Coin out of the country. Why? Because he will flee, as from an infected district, a country where there is no security for property In the end, the Government will be vastly the loser The plan suggested in the bill of the member for Vermont, will, if followed up by judicious and energetic measures, .... accomplish the purposes of the Government, These notes have all the characteristics for circulation which [those] of Mr. Spaul- ding's bill will have, save the Legal Tender clause. You have all that is valuable in the credit of the United States in this form, .... and it keeps the Specie Standard Among the people, what will be the effect (of this measure) ? The first shock will be that the moral sense of the country will be outraged, .... It is not safe for a legislative body to teach the peoj)lo laxity of morals. Our Government, within the last four or five years, has clandestinely taught lessons of cor- ruption, widely enough and well enough understood to corrupt public morals, as far, at least, as the extreme point ot safety. And when, in solemn legislative act, we say that Avrong shall be right, the virus of dishonesty will extend to limits you can not very well calculate. I, for one, will have no part or lot in a legislative act of that sort It disgraces the Government under which we live; it ie worse than forty defeats upon the battle-field; it can not be wiped out by any future heroism ; it is saying to the world, we are bankrupt — we are not only weak, but we are not honest. To him, who, in saying these words, invited the unthinking condemnation of his party and of his constituents, this contribution to debate upon the tardy cure of ills which he, foreseeing, vainly strove to avert from his country, is dedicated, as a token of affection for a father, and of veneration for a man. CONTENTS. CHAPTEE I. Introductory 13 CHAPTEE II. The Stock on Hand, and Annual Supply op the Precious Metals 19 Popular impressions in reference to supply of Money — Present and future— Opinion of Soetbeer ns to rule of statistics of Money — Estimates of Chevalier and Soctbeer of total production up to 1848 — Estimates of Tooke - Newmarch, Seyd, Xeller, Chevalier — Annual product at different periods — Annual product since the Gold Discoveries — Annual con- sumption — Metallic circulation in Western, World — Amount exported-to Asia — Estimate of total stock now in the hands of map — Annual loss. CHAPTEE III. The Arguments for the various Standards briefly stated 29 The argument for the Gold Standard — Answer for Silver — Bi-metallic Money, or Double Legal Tender — Answer for the Single Standard— Reply for Bi-raetallio Money — Garnier's System, or Bi-metallic Bloney with variable ratio — Other suggestions. CHAPTEE IV. The Standard of Desiderata and Standards of Yalue.. 36. Money as a commodity — Assignment of Functions of Money to various commodities — Bents payable in kind — Option with tlio payer— Measures of the value of Jloney — Stan- ' dard of Desiderata — Lowe's Kefcronce Table of Value— Its publication in Germany and the United States — flitter Von Jakob's translation and explanatory essays — Importance of Lowe's theory — Objections suggested by Lowe — Objections of Von .Jakob — M. Manne- quin's argument for Gold monometalism— Revision of contracts — The scaling of debts — Equity of demand for steadiness of value of Jloney- Real Money a commodity— False Money a debt — M. Mannequin's Court of Revision — Standard of Desiderata— Multiple Legal Tender and the argument from metrology. (ix) CONTENTS. CHAPTEE Y. The Situation in the United States , 44 Statement of the Public Debt— State, Muincipal, aud Railroad Bonds — Amount of Paper Cur- rency — Amount of Specie in the Country— Prices in 1859, 1860. CHAPTEE VI. Moral Questions involved in the Monetary Policy — 1. The Bonds of the Government, and the Greenbacks regarded as a Debt 50 What was Lawful Money of the Pnitod States in the years 18G2-G5 — The Paper Money as a means of payment of the Bonds — The Act of 1809 — Payment in Coin, and the agita- tion in favor of the Gold Standard — Payment in Silver before 1873 — The nature of a Money Contract — Commodity vs. Purchasing Power — Delivery of the specific commodity necessary — Reservation implied in Sovereignty of State — Alteration of Monetary Sys- tems — Notice to contracting parties— Fluctuations of Purchasing P.-.wer of Gold and Sil- ver — Historical position of Silver — Coinage Acts of 1873-4 — Estoppel by removal of Legal Tender character — Restoration of the status quo ante — Reduction in value of Bonds work- ing an estoppel — Modes of restoration of Silver — Acts to strengthen Public Credit — A Measure of Payment and Means of Payment distinguished — Payment of Greenbacks as a debt — Depreciation of Silver. 2. The Lawful Successor of the Greenback 62 Duty of Government to provide a good Metallic Currency — Danger of maintaining Gold Standard — Dangers of restoring Silver — Probable and possible action of European Pow- ers — Analysis of Money — Its Functions, material and non-material — Money as the basis of a conception of value — Instrument of Valuation vs. Measure of Value — Func- tion of Money as a Means of Payment — As a Means of Direct Purchase — As a Means of Transporting Value — As a Means of Pr-serving Value — Distinction of Functions which regard the peculiar interest of proprietor of Money, and those which do not — The ideal Medium of Exchange — Portability, and its practical importance — lutlueiice of Instru- ments of Credit — Value of Money, and average of Prices — Variability of Prices — Prob- lems arising in calculation of averages — Alterations of supply of Metallic Money — What is a normal increase of stock on hand — Effect of rise or fall on Mouey in its different Functions — Effect of steadiness of average value — Dangers of alterations of value pro- ceeding from alterations of supply — Effects of rise and fall compared— Opinions of J. K. McCulloch, RoBcher, and Chevalier. CHAPTEE YII. The Example of England — 1. Eestriction and Ecsumption of Cash Paynaent 74 Be-organiz!iti^ CT Of^ Merchandise-moxet, Paper-moxey, axd Credit ]57 f'D. The Fall of Silver vs. The Rise of Gold — Price axd Pur- chasing Power of Demonetized Metal and .of Legal Tender... 159 E. Valorimetre, Evaluateur, and Instrument of Valttation 161 F. FcNGiBiLiTY, Freedom of Trade, and Demonetization 163 G. Aristotle, Locke, and Newton on Money 168 H. Extremes of Opinion concerning the Influence of Law upon the Value of Commodities used as Money — The Laissez-faire Theory and iwan possoschkow 169 ]. A late Utterance of Professor Soetbeer, axd Queries suggested by it 174 .T. Senator Joxes on an Ixternational Standard Con-ventiox 178 K. The Present State of Debate 179 L. The Silver Bill in Congress 183 M. a Partial List of Works treating of the Questions discussed IN this Essay 188 N. Errata 195 INTRODUCTORY. 13 CHAPTER I. INTRODUCTORY. " No reason can l)o more urgent in inducing a nation to alter its Money Standard, than the fact that other nations have introduced changes in their Monetary Systems which threaten injury or de- struction to the prosperity of their neighbors." So wrote, in the year 17G1, a Privy Councillor for Finance of Frederick the Groat of Prussia. In tiiose days, Silver being, according to this authority, an im- portant product of German mines, "the interests of Germany de- manded that she should further with the greatest zeal the raising of the price of Silver."* To-day, upon grounds partly political and partly economical, an opposite policy has prevailed in Berlin. Sectionalism and the Silver Standard were identified with the Germany of the past, while, for the new order of things, the Gold Standai'd presented itself ready to act as a powerful agent in the consolidation of the new Empire. f Successful as a political measure, as an economical measure, ex- cept as a unification of the German Systems, the Coinage Reform has not been a success ; the Silver Thaler bids fair to remain in circulation for years, and Germany has herself borne a share in those economic consequences of a change in Monetary Systems which weigh uj^on the world in a manner so aptl}" illustrating the acumen of the Prussian Councillor. On every side of the planet, in every language, men are discuss- -Herrn Johanii Philip Grauniann's Koniglich-Preussischen-Geheimen Fi- nanz-Eaths und General-Directors derer Kdniglichen MUnzen, etc. Gesamm- lete Eriefe von dem Gelde, von dem Wechsel und dessen Cours, von der Pro- portion zwischen Gold und Silber, etc. Berlin, Voss, 1762, pp. 37, 38. t " More closely than one would believe, is the maintenance of the Silver Standard bound up with our former condition as a League of States, and the introduction of the Gold Standard, which would be endangered even were the diflferent States to have the right of coining Silver change, is far more closely allied than one would suppose, with Emperor and Empire. (Kaiser und Keich.) Knies Das Geld, p. 242. 14 SILVER AXD GOLD. ing the dangers to their prosperity which may arise from changea in the Monetary Systems of other countries, and are debating what may be the wisest policy for themselves. While Gold Dollars are coining in Japan, the varying Gold price of Silver which agitates Xew York and Paris, excite a like interest in Melbourne and Bombay, and a National Bank President writes a book upon " The Money Question " in the atmosphere of the Spice Islands.* Philosophic historians have long been wont to point out the civ- ilizing influence of commercial intercourse, but it has been re- served for these latter days, with one touch of nature, by self- interest, to "make the whole world kin," and by the solidarity of the Money-market sharply to enforce upon the populations of the entire planet the necessity of union and mutual support. The course of instruction has been a severe one ; a myriad of lives have been blasted through the fluctuations of values and paralysis of industry of the past few years; in producing which Monetary Legislation has been so imjDortant a factor ; but for the enduring generations, of course, the gain will be great, if only the lesson be comprehended. Unfortunately for mankind, the out-look in this regard is not en- couraging. The guiding self-interest of the nations shows but little sign of new enlightenment, and fully to take this lesson to heart is to admit that a ruling majority, in leading nations, may, on a large scale, be mistaken both in its economical theories and in its ascertainment of facts. The general disposition to demonetize Silver, manifested by the civilized nations, was itself a declaration of war with the interests of the so-called semi-civilized nations, and indiflFei'encc to the moral claims of Asia, on the part of Christendom, is inauspicious. Within the circle of the Western Nations, the adoption of Gold by German}', emulating, after many years, the example of England, has, in a manner, compelled other nations, if only in self-defense, to join the movement. And yet, even had the anticipations of an increased annual pro- duct of Gold been realized (as they have not been), the change, tending, as it must, to increase the value of Gold, as well as to di- minish the value of Silver, meant that millions who had sown should not reaj), and that many shouhl reap av ho had not sown ; while, in the main, it meant, in tlie Western World, profit to ered- * Van dcr Berg. To Muntquestic, Butavia, 1876. INTRODUCTORY. 15 itors at tlio expense of debtors ; profit to Eui'opo at the expense of the United States; profit to si^ceie-paying, at the expense of non- specic-paying nations. In causing a fluctuation of values, it discouraged enterprise; in promising, in the degree to which Gold-monometallism should be established, a rise in the value of Money, it checked productive in- dustry. Such, at least, were the views of the minority of thinkers who were overruled. For it was not without clear warning and prophesy of evil that this movement was entered upon ;* and the present hope for united action in a common interest rests less upon faith in equity than upon the chance that the self-interest of the various nations may be awakened to a sense of personal danger. The times do not, therefore, seem to be favorable to that union and mutual support which self-interest, if it were sufficiently en- lightened, would counsel to all members of the brotherhood of na- tions. M. Feer-Herzog, the distinguished representative of the Swiss Republic in the Latin Monetary Union, in addressing a monetary commission in Paris, said "there are thus two milliards of silver (in Germany and Austria) which demand that they be converted into Gold : because the States which j)osse8s them are resolved to adopt the Gold standard. " This danger will reproduce itself in the case of other States which may exchange their Silver for Gold. " As this tendency is general in Europe a steeple-chase [sic] will before long be inaugurated. " The State which demonetizes first will do so with but little loss, while the State which shall have hesitated and waited will undergo the losses resulting from the demonetizations which have preceded its own, and so will pay for all the rest." He adds : " The German authors have perfectly understood and explained the advantage which will accrue to their country from acting speedily, while the States of the Union still bold to the Double Standard."! This was said in the spring of 1870, while Napoleon was still Emperor at Paris. » See Wolowski. L'or et L' Argent, 18G3. Seyd, Bullion, etc., 18G8. t Feer-Herzog La France et ses allies monetaires, etc., Paris, 1870, p. 71. See also Knies Das Geld, p. 242. 16 SILVER ADD GOLD. A few years later French Gold had enabled united Germany to inaugurate this steeple-chase ; while still later, France, with her allies, refusing to become the passive instrument of Germany's self interest, has, economically speaking, to carry out M. Feer-Herzog's figure, by deferring specie payment, and limiting in the Latin Union the coinage of Silver, put Germany into the ditch, mei-ely, jis a Frenchman has said, "to defend herself from the Prussian maneuvre." The northwestern countries of Europe followed Germany, and the adoption of the Gold Standard by the United States was marked b}' the coinage for export of a Trade Dollar, whose changed rela- tion to the Gold dollar, seemed to point the way to a depreciation of silver. This general demonetization, which, although to a great degree merely nominal, yet closed to Silver the markets of the Western "World, was not slow in causing an eddy in the Gold price of Silver, to which force was added by an increase of annual product and a check of export to India, and which has seemed to open up a bot- tomless abyss, and to the fancies of many makes the entire sea of Silver Prices unnavigable. England, moved by the distress of her great dependency, as well as by the danger to herself of a rise in Gold, now begins to appre- ciate a situation which is the natural result of the application of her great example, and hoi)es that something will be done for Silver. This, in fact, may be taken as a homely statement of the preva- lent feeling in the brotherhood of nations; each hopes that some other will do something for the common good ; or, as was said by a leading authority, as long ago as Januar}'. 1875, " either that one of the great Gold-using nations will abandon the Gold Standard, or that the supply from the mines may be increased."* The latter remark suggests an opportunity for fame unique in history. The unanimous applause of the Avorld awaits the discov- erer of new Gold mines. In the meantime that wave of convincing argument in favor of Gold-monometallism which had swept over the Western World, and the force of which was largely due to the asserted permanence of the value of Gold, bids fair to be overwhelmed b}^ simple facts which point to a rise in its value — a signal and irrefragable proof of its non-exemption from the common fate of mutability. * London Economist, January IG, 1875. INTEODUCTORY. 17 The situation of the American Union at this juncture, standing, as she does, at the threshold, not merely of Eesumption of Specie Payment, but of a contest, scientific as well as political, between the manifold forces of the Assignat,* the Bank Note, and the Specie Certificate, imposes upon American thinkers a burden of j)eculiar responsibility. Paper Money Inflation in its more repulsive forms has been scotched, but not killed, by the blows which the honesty and com- mon sense of the people have dealt, and others of the hydra-heads are ready to rise. Indeed, what has been achieved is merely a preparation for a new order of questions, which, for their proper handling, require a Bpecial study and acumen which, in the contest against an over- issue of Promissory Notes, as Legal Tender, was, strictly speaking, not necessary. If I mistake not, the former champions of sound currency have not as yet, in public discussion, shown themselves equal to this new occasion. f In the public press, for example, what, for convenience, may be characterized as a " Cockney School," resting on its laurels of past loyaltj^ to sound currency, has made itself conspicuous on the side of Gold-monometallism, by an exceptional absence of knowledge and ratiocination combined with violence of feeling.;]; In proclaiming themselves, however, as the elect custodians of the public credit, the representatives of this curious phase of opinion *I use the word Assignat instead of Greenback to avoid confusion. The existing Greenback has a distinct individuality; being a product of the Civil "War, and limited in amount. A new issue must differ from this in character so entirely that it deserves a new name. 1 1 refer, of course, to public discussion outside of the Debates in Congress. As to the latter, see a brief notice, page 49. I should also add, the editorial columns of the daily Cincinnati Commercial have hrought acuteness and learning to bear upon the Silver Question, and I should make a like acknowledgment in reference to the Bankers^ Magazine, of New York. The above characterization of the State of Debate in the text was written in the summer of 1876. Since then, I am glad to admit, the scene has changed (see Appendix 179) ;but I have left the passage as first printed. if There is a tone in some expressions of this school which really seems only compatible with a sort of parvenu sensitiveness, as if there were an air of "good society" about the yellow metal, which promised advancement to the advocacy of the exclusive use of it as Money, and as if there were something dorou;atorv in "having anything to do with" Silver. 18 SILVER AXD GOLD. have, although in a manner which raavs their influence, reinforced the most Avholesome element in the discussion. On the other hand, much crudeness has likewise been put forth in advocacy of the unconditional restoration of the Old Silver Dollar, as the " Dollar of the Fathers." Like many popular cries, this, however excellent in its sphere, threatens to distract attention fi"om points of the situation of far more import to the interests of the people than the fixing of the nunjber of grains of Silver in a Coin ; and men are led into danger of forgetting that legislation is for the present and for the future, and not for the past. In the meantime, that shining array of misdirected talent Avhich has obstructed the Eestoration of a Specie Basis is gathering its forces and changing sides around this new order of questions, and threatens to naturalize a Mexican anarch}- in our Finances. In this state of the controversy it has occurred to the writer to hope that the following result of studies undertaken in the inter- vals of pi'ofessional business for the purpose of obtaining a clear view of the situation, might not be without use as a contribution to debate. Postscript. — To the Gentle Eeader, if such there be for a subject and work like this, I desire to say that I approached this question, as far as I can remember, without prepossessions* and that I have aimed to be a servant of truth. I liave endeavored to look at the questions, not narrowly, but in their wider relations to the future, and to comprehend the arguments on the various sides. Although thus recording my views, I have not shut my mind to new light upon the subject. I am sensible of many imperfections in this Essay, and shall be indebted for jiroof of whatever of error there may be in what I have written. PoMEROY, Ohio, September, 187G. NOTK. — It is proper, in justice to tlio viirious auth'ir.s wliom I have quoted in the course of this essay, that I .sliould call the reader's iittcntioii to the fact that the italics, or rather, the "spacings' in these quotations, are my own. *4Seo Appendix A. STOCK AND ANNUAL SUPPLY. 19 CHAPTER II. THE STOCK ON HAND AND ANNUAL SUPPLY OF THK PRECIOUS METALS. Popular impressions in reference to supply of Money — Present and future— Opinion of Soetbeer us to rule of statistics of Money — Estimates of Chevalier and Soetbeer of total production up to 1848 — Estimates of Tooke - Newmarch, Seyd, Xeller, Chevalier — Annual product at different periods — Annual product since the Gold Discoveries — Annual con- sumption — Metallic circulation in Western World — Amount exported to Asia — Estimate of total stock now in the hands of man — Annual loss. To many minds, it -WGiild seem that a sort of '-divinity doth hedge" the Kingly Metals from the profane curiosity of man — some mysterious quality, to which testify their indestructibility, their seeming, providential discovery and distribution, and the eagerness with which in all ages of the world men have sought for them, whatever their price. It is probably owing to a belief of this kind — perhaps only half-consciously entertained — that, from many men who are thoroughly familiar with the difficulty which individuals feel in getting Money, the idea that the whole world may suffer in this same way does not find ready assent. The excuse for the swaj' of the one idea and the rejection of the other, is briefly expressed in the saying omne ignotum pro mag- nifico. It is simply because they do not know what the amount on hand is, and can not forecast what the annual product will be in the fu- ture, that they refuse to consider that the supply may fail. But, of course, the Legislator is no more "above statistics" than, in the story, the Emperor Sigismund, in his blundering speech, was, in reality, "above grammar;" and it needs no serious argu- ment to prove that estimates of the stock of the Precious Metals have the merit which estimates usually have. "Every one who busies himself, for any time, and with earnest- ness, about questions connected wikh Money, will come to the con- clusion, first, that statistical estimates of the ])roduction and amount in circulation of the Precious Metals, albeit, in spite of all the labor and care expended on them, they remain incomplete, yet are positively indispensable for every discussion upon the fluctuations of Prices ; and, secondly, that amounts given as conclusions from 20 SILVER AND GOLD. general reasonings on this subject, can only be considered as bold attempts at an approximate estimate." -•= Such is the opinion of Soetbeer, one of the foremost authorities apon such questions, whose exertions for the reformation of G-er- man currency, begun thirty years ago, were crowned with succesi^ in the unification of German coinage. True, for aught we can tell, Africa may annul all calculations by playing in the future the part which Siberia, California, and Australia have filled in the central portion of this century ; and, in the meantime, in Spain and in (ruiana. the hopes of gold- seekers are said to have risen to fever-heat. Be that as it may, the annual product has hitherto been but a small percentage of the stock on hand ; the present and the past remain controlling elements of that practical decision which can, at best, look but a few years forward ; and it is plain no reckoning without one's host can be more inexcusable than, in deciding upon the employment of this or that material for Money, to omit to take counsel of the Statistics of Supply. For the total production up to the year 1848, Soetbeer quotes from Chevalier, an estimate of which the following is a reduction in dollars, taking the' mark-banco at 36.100 of the silver dollar, and 37.100 of the gold dollar : GOLD. SILVER. TOTAL GOLD AND SILVER. $1998740000 103600000 22200000 503200000 69200000 .S')2G1040000 381G0O00O 63360000 $7259780000 Europe exclusive of Russia 485200000 85560000 503200000 Stock on Hand in Middle Ages.... 144000000 203200000 $2686940000 $5850000000 $8536940000 Opinions vary widely, as Soetbeer remarks, upon what propor- tion of this grand total was still in circulation in 1848 among the "Western Nations. The amount can, however, he says, hardly be estimated at more than 2920 million dollars. Of the remainder, more than half, ho * Beitriigo utid Matcriulien zur Beurtheilung von Geld und Bank Fragon, p. lll,iiot(j. Hamburg, 1S55. See Appendix I. STOCK AND ANNUAL SUPPLY. 21 estimates, has been exported to Asia, while less than half remains to be accounted for by loss through wear and tear and consumption in the arts. In Tooke-Newmareh's History of Prices, Mr. Newmareh esti- mates the total amount of Gold and Silver in the Western World, in all forms, as follows : [In Million Dollars.] Gold Silver Total Gold and Silve 1848. 2716 3880 6596 This estimate is decidedly larger than that of Soetbeer, who would appear to allow only about 5 billion to the total stock of Europe, Africa, and America. It also exceeds that of Chevalier and Xeller. Ernest Seyd gives, for 18G8, £700 millions of Gold, £550 millions of Silver, as the total amount of Money in use in the world. Michel Chevalier (in the second edition of La Monnaie, 186G, p. 574), gives, as au estimate of the total amount of Gold and Sil- ver in the Western World (au pouvoir de la civilisation occidentale), in 18GC : Silver $3049035000 Gold 4492700000 Total $7,541735000 Friedrich Xeller, one of the leading German writers upon the subject, gives the following estimate for the same year -.-^ [Five Figures omitted.] STOCK IN -WESTERN NATIONS. IN CIRCULATION. USED OTHERWISE Gold S37442 28424 $25476 12903 S11966 15521 Total §65866 ?38379 $27487 'F. Xeller, Die Frage der Internationalen Miinzeini^ung. Stuttgart, 1869. 22 SILVER AXD GOLD. Soetbeer gives (in the work above cited) the followinG; estimates foi* total annual production of the Precious Metals. His estimates are here stated in dollars, estimating the mark-banco at 36^ cents : About the year 1500 $ 730000 " '• 1550 2920000 " " IGOO 10950000 " " 1650 17155000 " " 1700 22265000 " " 1750 35710000 " " 1800 55480000 " " 1850 129575000 With reference to the annual product of the mines, since the era of the Gold Discoveries, while the divergence of authority is not very great, yet agreement has not jet been attainable. The following table is the fruit of a discussion carried on in the columns of the London Dail}^ News, in which Mr. Hendriks, Avell and favorably known in connection with the Gold question, took l^art. Both parties finally agreed uj)on this table.* ^M. A. N. Bernadakis, of Athens, in his work, "De la Quantitedes Metaux Preoieux et du chiffre des Monnaies," etc. (Paris, 1875), gives the following estimate for total production of Gold and Silver: Weight in kilograms. Value in million francs. Stock, in 1492 Anier. production, 1492 to 1848 Other countries, 1492 to 1848 ... Total product, 1848 to 1874 Total Gold. Wt. 725,900 2,600 2,910,977 10,026 2.486,000 8,552 7,678,368 26,414 13,801,245 47,492 Silver. Wt. 11,261,261 122.050,724 20,402,000 51,273,000 Val. 2,500 27,122 4,.529 11,383 45,534 1 204,986,985 Total val. at 1 to 15J. 5,000 37,148 13,081 37,797 93,026 For wear, and tear, and loss, M. Bernadakis is disinclined to make any large deduction. In the Documents relatifs a la question monetaire, published (Ajlio, Bruxelles, 1874), as a Report to the Belgian House from the Minister of Finance, M. Ma- lou, a table is given (page 165), taken from the Report of the Swedish Monetary- Commission of 1869, in which the annual d3struction in the Western World for 1867 is placed at 17,800 kilograms of Gold, and 415,100 kilograms of Silver. This isc(]ual to a destruction, in the Western World alone, of an amount equal to 8 per cent of the total annual product of Gold for 1867, and 25 per cent, of the total annual product of Silver. STOCK AND ANNUAL SUPPLY. 23 ESTIMATES OF TOTAL ANNUAL PRODUCT, 1852-1875, IN MILLIONS OF DOLLAKS (371.25 GRAINS OF PURE SILVER AND 23.20 GRAINS PURE OOLT)).* 1852 ]8.3;] 1854 1855 1856 1857 1858 1850 18G0 18G1 18G2 18G3 18G4 1865 18G6 18G7 1868 1861) 1870 1871 1872 1873 1874 1875 174J 38 149.V 38 122.V 38 130J 38 142. V 38 128.5r 38 120} 38 120} 38 115 38 110 40 1031 42 103^ 46 109 47 116 48} 116| 47| 112 50 > IIG 461 UCrl 44.', 112.V 47 103 56.1 98 60 1 100 65^ 8H 67 94 571 150 145f 149J 156 164t 164 162 J 162^ 161^ 159^ 159| 1583- 165^ 154| 151| *The estimates of the London Economist give less, those of Soetbeer greater amounts tiian the '-compromise table" above given. The Eeport of the Committee of the House of Commons on the Fall of the Gold Price of Silver gives the following table (Appendix, 21, i), which seems to have been prepared by the Bureau of Statistics : TUK world's PRODUCTION OF GOLD AND SILVER BY YEARS AND EPOCUS SINCE 1848. Years and Epochs. Gold. Silver. G0LD& Silver. Million Dollars. Million Dollars. Million Dollars. 1849 26-4 58-3 86-4 43-9 43-3 42-G 70-3 1850 101-6 1851 1290 Total 171-1 57-03 129-8 43-26 300-9 Annual Average 100-3 24 SILVER AND GOLD. 1852 18u3 1854 1855 1853 Total Annual Average 1857 1858 1859 1860 1861 Total Annual Average 1862 1863 1864 1865 1866 Total Annual. Average 1867 1868 1869 1870 1871 Total .Annual Average 1872 1873 1874 1875 1876 Total Annual Average , Total from 1849 to 1875 Annual Average 110-6 41-9 152-5 130-7 41-6 172-3 1468 42 1 188-9 1467 43-2 189-9 139-4 44-4 183-8 674-2 213-2 887-4 134-84 42-64 177-48 133-1 46-0 179-1 115-2 480 163-2 104-1 50-2 154-3 103-0 52-6 155-6 102-6 55-3 167-9 558-0 252 1 810-1 111-6 50-42 162-02 102-4 58-3 160-7 101 6 63-8 165-4 101-1 67-4 168-5 98-9 68-9 167-8 982 691 167-3 502.2 327-5 829-7 100-44 65-5 165-94 98-1 69-2 167-3 98 9 69-3 168-2 99-0 09-3 168-3 98-6 69 4 168 3 97-2 72-1 169 491-8 349-3 841-1 98-36 69-86 168-22 94-8 73-4 108-2 92 74-7 167-0 89 76 2 1661 87.4 77-7 165 1 ../.. 364-4 302-0 066-4 91-1 76-5 166-6 2,761-7 1,573-9 4,335-6 102-29 68 29 160-53 STOCK AND ANNUAL SUPPLY. 25 Of the annual consumption of the Precious Metals, suflSce it to say here, that (.he destruction, as far as human uses are concerned, is variously estimated at -^^^ (Tooke-Newmarch),or -^^^ (J. E. Mc- Culloch) for each year of the total stock on hand. Xeller yives estimates both at ^ per cent, and ^ per cent., but leans to the latter. Upon the total product of the world, from 1492 to 18-18, which Xcllcr fixes at about 8470 million dollars (in- cluding 200 million for the European stock in 1492), a yearly loss of |- per cent, would give a total loss of about 1477 millions; while a yeai'ly loss of ^ per cent, gives a total of 2427 millions. The report of the Swedish Parliamentary Commission is said to have adopted ^ per cent, as its basis of calculation. As to the second form of " consumption " of the Precious Met- als, namely, their employment in the arts, the estimates of Xeller (following McCulloch, Roswag, and Du Puynode) reach a sum of about 39 million dollars per annum for Europe and America. For circulation in the western world Xeller gives the following table : [In Million Prunes.] GOLD AND SILVER. 1803 10000 '«^ >'»»»{ Sitv, '8^^ 2o:oo{'|»„o|»it. It will be ob.servcd that these estimates restrict themselves in the main to the stock on hand in Europe, Africa, and America, and throw but partial light upon the reservoirs of Asia, except as indi- cated by the portion of the total product since 1500, known or be- lieved to have been exported thither. Among the estimates of the total amount of Gold in the hands of man, is one quoted by Ernest Seyd (in his work Bullion and the Foreign Exchanges, 1868) ; according to which this aniount was, in 18G8, in value, £1200 millions or 5820 million dollars. This amount, as this author remarks. Avould weigh 10500 tons (of 2000 lbs.), and would fill out a cubic block about 26 feet each way. The total amount of Silver has been the subject of estimates which vary more widely, perhaps, than any others, extending, ac- cording to Seyd, from 500 to 2000 million sterling. The unknown factors of the problem, are, of course, to be sought in Asia, whose ancient civilizations, while they must have destroyed, 26 SILVER AXD GOLD. yet certainly have accumulated quantities of metal of which it is impracticable to attain trustworthy accounts. That Gold is also held in larife quantities seems probable, but it appears cei'tain that the total stock of Gold in Asia is but a fraction in value of the tiilver there held. Of the total product of the world, from 1492 to 1848, Xeller esti- mates 28 per cent, as exported to Asia, and since then this percent- age has been from time to time exceeded. To the demand for Indian cotton during our civil war, is mainly to be attributed an increased e:s.portation to India, which, from 1860 to 1866, absorbed considerably more than the entire Silver product of those years. It is farther stated, upon apparently good authority, that, from 1867 to 1874, more than one-half of the yearly product of Silver was absorbed by India. Quenstcdt, a German author, gives the total stock of Silver in the world, in 1868, at about 7340 million dollars. "-i^ The following may serve as an estimate of the total stock in the hands of man in 1876. I ask the reader's attention at the start, however, to the fact that it is confessedly a crude approximation, of no value of its own, apart from that which is given by the authorities upon which it is based. The assumption of 500 millions of Gold and 1000 millions of Silver, as the stock in Asia and the Islands, in 1492, is one iov which I can give no data. A recurrence to the opinion of Soetbeer, cited in the beginning of this chapter, will, I hope, justify this bold attempt at an approx- imate estimate. To be secure in reasoning upon such a basis, it is of course de- sirable that one should understand, as nearly as may be, where the weak points arc in his estimate, and so when inquiry asks for results dependent on facts thus weaklj' evidenced one should make his conclusions correspond with the indeterminate character of his premises. ♦M. Quenstedt. Die neuen Deutschen Miinzen. Berlin, 1872. STOCK AND ANNUAL SUPPLY. 27 Estimate of the Precious Mictals now ix the Hands of Man. Total stock in Europe, civilized Africa, and America, in 1848. Total stock in Asia, in 1492, es- timated at Total new product absorbed by Asia (Xeiler), 14U2 to 1848.... Total for Asia, up to 1848 . Total loss, 1492 to 1848, mated at 20 per cent esti- Total in Asia, 1848., Total product, 1848 to 1876 Deduct total loss, 1848 to 187G, estimated at Total increase 1848 to 1870., 500 1000 2375 3875 775 3100 3102 250 1268 250 GOLD. SILVER. 2000 600 2852 4000 2500 1038 5452 7538 6000 5100 3890 12990 If, then, this be the total amount of the Pi-eciou8 Metals in the hands of man, the estimate of ^ per cent, would give about 32^ million, and the estimate of ^ per cent, would give about 05 mil- lion, as the annual loss. If, then, we accept Xeller's estimate that 2547^ million dollars worth of Gold wore, in 1866, in use for purposes of exchange in the Western World, it would seem not remote from fact to assume that in the ten years that have since elapsed this stock has been augmented to 3000 million, by additions of new Gold, import from Asia, and melting down of manufactured articles. With an annual product of 95 millions, deducting from 13^ to 27 millions, as required to make good the annual loss, we should find from 68 to 81^ millions, free for uses other than, replacing loss, and read)' to be divided between the arts and the Mint. Deducting, in like manner, from an annual product of Silver of 65 millions, an annual loss of about 19 to 38 millions, we find fi-om 27 to 46 millions of the annual product of Silver to be divided in like manner. It should, however, be remembered that "consumption" in 28 SILVER AXD GOLD. coinage and the arts, and " annual loss," to a considerable extent, cover the same ground. The "loss" includes the wear and tear of coins, plate, etc., to repair which recoinage and renewal ot stock of plate, etc., is necessary. Of the total amount of Metals used as Money, the following esti- mate was made for 1870 bj' Mr. Ernest Seyd : Gold Coin Silver Coin Token In Millions. and Bullion. and Bullion. Coinage. Europe £520 205 80 Asia 10 250 40 America and the Islands 170 50 25 Total 700 505 145 It may serve the reader's convenience if, with another bold attempt at an approximate estimate, we should sum up the results we have gained : * In 1876. In Millions. Gold. Silver. Total stock in the hands of man : $5,500 $7,500 Total used as Money by man 3,600 3,200 Annual Dcstiniction and Loss 20 80 Annual Product 95 75 Net Annual Gain 75 45 Annual consumption in Arts in addition to repairing loss of existing Coin, Plate, etc. 15 15 Net Annual Supply to be devoted to use as Money 60 80 We also arrive at the following important truths : 1. The present annual addition of new Ciold is about If per cent, of the total stock of (lold Money ; while that of new Silver is about 1 per cent, of the Silver Money. 2. The possibility of reinforcing metallic Money from metallic stock existing in other forms is, however, by far the greater in the case of Silver, there being twice as much Silver as Gold in hoards, plate, jewelr}', shrines, etc. 3. The fluctuations of total annual ])roduct in either of the two metals together are far less than the fluctuations of annual produc- tion of either metal taken singly. 4. Demonetization of Silver as full Legal Tender, if accomplished in the countries, in which it has already nominally taken place (by stoppage of coinage withdrawal of Legal Tender, etc.), leaving an average stock of Token coinage, would lessen the existing stock of metallic Money in the woi'ld by about $1,100 millions (Feer-Herzog admits this), 18 per cent, of the total sum of existing metallic Le- gal Tender, and 25 per cent, of the Legal Tender metal of the Christian nations. *■ In giving these estimates, howevei", I again caution the reader that (except as to Annual Product) they can be only crude approximations to the truth. ARGUMENTS FOR THE STANDARDS. 29 CHAPTER III- THE ARGUMENTS FOR THE VARIOUS STANDARDS BRIEFLY STATED. The argument for the Gold Standard — Answer for Silver — Bi-metallic Money, or Double Legal Tender — Answer for the Single Standard — Reply for Bi-metallic Money — Garuier's System, or Bi-metallic Money with variable ratio — Other suggestions. Tn the current discussions of the day the adoption of Silver as the single material for Standard Money is treated as out of tho question, and the '-Battle of the Standards " resolves itself into a contest of " Gold-monometallism " against the Double Legal Tender System. My object being to present in brief outline the argument as it stands, 1 shall omit consideration of the Single Silver Stand- ard.* THE GOLD STANDARD. Money is a Measure of Value, and there can be but one Standard Measure of Value, just as there is but one Standard Measure of Length, Weight, or Space. The superior value of Gold, compared with the same bulk or weight of Silver, gives to Gold an even more than corresj^onding advantage in fitness for use as money : 1. It is more portable, giving great values with a minimum of weight, and hence is best adapted for facilitating international ex- changes, as well as to be carried on the person. 2. It costs less to coin Gold, and Gold is in general less destruct- ible tiian Silver. Again, its intrinsic qualities and its history guarantee to Gold a permanence in value greater than that of Silver. This is shown by the fact that while the value of both metals has fallen greatly in the centuries that have elapsed since the dis- covery of America, yet Silver has fallen more than Gold. In Ger- many, for example, it was 1 to 10.50 in 1500 ; 1 to 16.25 in 1813. The superiority of Gold to Silver in its general use in the arts, secures to it a permanent demand which guards against its depre- ciation ; it would oust Silver from use as it is, if it were not for its high price. ■•■■■ Chevalier's La !^^onnaic remains, as far as 1 am aware, the best exposition of the merits of the Silver Standard. 30 SILVER AXD GOLD. The cost of production of Gold remains permanent, while that of Silver is progressively diminished by the invention of new pi-o- cesses. The time will come when the only limit to the production of Silver will be found in its extreme cheapness. Gold can not fall without dragging Silver with it. Silver, en the contraiy, may fall without seriousl}' affecting Gold. ANSWER FOR SILVER. Gold can not be coined in values minute enough to be of use as change. There is no Gold Coin that can take the place in Social Economy which the five-franc piece, the jjiaster, or dollar have occupied. Freight charges for transportation of Gold and Silver are cal- culated on the value and not on the weight. For deposit, the difference in bulk and weight is of little mo- ment. The history of the Precious Metals shows wide variations, which can not logically be charged to the innate variability of one factor alone. Among the Greeks, about 400 b. c, the relations stood 1 to 10 ; in Eome, in the time of Caesar, 1 to 18i| ; a few years ago, in Japan, it was 1 to 4. In this century changes of price have been chiefly due to the causes affecting Gold alone, viz., war demand and the Gold Dis- coveries; or are due to D.emonetization of Silver, which si^gnifies also an abnormal demand for Gold, and, properly speaking, is ex- eluded from the argument on variability. To quote the effect of Demonetization to show the " variability of Silver " is to repeat the child's puzzle of the man who, being ac- cused of having killed a sheep, showed that the sheep Avas dead, and so asked, how could he have killed it?" The question at issue in reference to Silver or Gold is — "suppos- ing that neither be demonetized for the benefit of the other, which metal will be likely to vary most in Purchasing Power?" The cost of production of Gold is largely a matter of luck in finding nuggets, or placers which are fields of small nuggets, and a series of discoveries may, therefore, at any time completely un- settle its value. Its admitted excellences as Money subject Gold to more sudden and general fluctuations of demand than are likely to affect Silver. ARGUMENTS FOR THE STANDARDS. 31 History supplies many instances of a 8i)ecific " war demand" for Gold as prefei'able to Silver. The Gold Standard necessitates a subsidiary coinage of Silver tokens, and under this system the wages of labor arc paid in de- based Money, the profits of capital in real Money. BI-METALLIC MONEY OR DOUBLE LEGAL TENDER WITH FIXED RATIO. (The expression " Double Standard " and its substitutes the Al- ternative, Compound, or Optional Standard are purposely omitted as leading to confusion of thought.) This system, in supplying full weight Coins of every needed de- nomination, combines the substantial advantages of both the Single Gold and the Single Silver Standard, and thus meets all the possible requirements of exchanges of the world. Either metal being, to a considerable degree, available as a substi- tute for the other, the local fluctuations of supply and demand of either simply arouse the other to restore equilibrium, and hence this system secures a stability of value of Money, which is other- wise unattainable. ANSWER. It is essentially a '-Double Standard." It isan absurdity outside of the pale of economic science ; it re- sults simply in an alternation of " Standards." The measure called Money can not be based upon two unequal units. The Double Standard organizes disorder. It exposes business to the fluctuations of two metals instead of one. The debtor always pays in the cheaper metal, hence the creditor always loses. The " Double Standard " is instituted for the benefit of Bullion Brokers, Money Changers, Bankers ("Bonanza Jobbers" also in this country), who reap the profit of the fluctuations of the price of the two metals. Pretending to give two Standard Measures of Value at the same time, itin reality confuses two distinct measures, and shortly leads to a simple alternation of " Standards ;" now Silver, now Gold, ac cording as Gold rises or Silver rises above the relation established between the two by law. The Double Legal Tender with proportion fixed b}- law and pay ment in either metal optional with the payor, is merely the transi- 32 SILVER AND GOLD. tion stage from a crude and amorphous state of commerce to civil- ized dealing with an International Money. The true solution of the question of International JMoney is the adoption by all nations of one Standard of Value, and that Stan- dard can only be Gold. The adoption of the Gold Standard reduces the friction of ex- changes to the minimum, and introduces certainty and stability into the business of the world. Gold has long been in practice the chief standard of the civ- ilized nations, and its universal adoption by them is only a ques- tion of time. REPLY. The History of Modern Commerce proves beneficent results from the use of Double Leiral Tender, which exclude the idea of there being any " absurdity" in it. He who thinks it is outside the pale of economic science requires only a careful study of this History in order to learn what econ- omic science really is. The argument from metrology, as is shown by economists from Say to Eoscher, has no place in the sciences of value. The French system of weights and measures is based on the constancy of nature; on the belief that the circumfei'ence of the earth remains the same ; that gravitation remains constant. Yalue being a mere relation between commodities, which is de- termined by the ever variable desires of man, is incapable of pro- ducing a Unit which can attain a constancy like that of nature and strip off its innate variability. The adjustment of Gold and Silver under the Double Legal Tender system in such a way as to correct the fluctuations of either metal, is the best available approach to the desired steadiness of value of Money. As for the asserted loss of creditors and gain of debtors ; if both metals rise unequally in value, as compared with other commodi- ties, the creditor can not lose, nor docs the debtor gain. If both metals iall unequally in value, the so-called loss of the creditor is only a loss of anticipated profit ; while to the debtor, to pay in the dearer metal, would be positive loss. But even in case of a direct fall of one, Avhile the Purchasing Power of the other remains constant, it is erroneous to say that the creditor loses, for the contract is supposed to be an option, and so understood by both parties. ARGUMENTS FOR THE STANDARDS. 33 The profit of iiioney-cliangers inures to the country whose metal is exported, nud is but a small tax — and that, too, paid at homo — for stability in the value of Money. The alleged "alternation of standards" does not often take place. Silver and Gold remain Legal Tender, and are used as such ; and where this alternation does take place, it is due to De- monetization in other nations ; and if all nations supported the Double Legal Tender at one and the same ratio, it could not take place at all. Both the doctrine of chances and the history of the production of the Precious Metals show that fluctuations in amount of the total annual product of both metals are a much smaller percentage upon the total stock, than the percentage which is given by fluctuations of either metal compared with the total stock of that metal, even if we reinforce the stock of one by an additional tenth for subsidi- ary Coins. BI-METALLIC MONEY WITH VARIABLE RATIO. This name is given to a system which may be briefly described as follows : Starting with some known unit, a certain weight of Silver or of Gold (for example, in the case of France, 5 grammes of Sil- ver 9.10 fine), coins are to be struck in decimal multiples and sub- multiples in Silver and Gold, the coins to be inscribed with their weight; no permanent proportion between the metals to be fixed by law, but a government commission to fix the legal relation from time to time : at the relation thus fixed for payments during the term prescribed, Gold and Silver Coin to be unlimited Legal Tender. This plan, suggested by Chevalier (La Monnaie, p. 184-6), and lately advocated in a discussion in Paris by Mm. Courtois and Jo- seph Garnier, has not, as far as I am aware, been subjected to the test of experience, although all nations seem to have made what may be called partial trials of it, by changing the relation of the metals, usually by increasing or lessening the weight of Gold Coin.* It differs from the Double Standard in making periodical revis-. ions of the relation of the metals a controlling feature ; and, by establishing a Monetarj^ Unit, it excludes the danger of alternate * Since the foregoing was put into type the writer has received the number of the Journal des Econoinistes, Paris, for October, 1876. in which M. Garnier gives a matured scheme for the establishment of this system in France, accom- panied by an exhaustive discussion of the questions involved. The scheme is to be submitted to the French Assembly. ' 34 SILVER AXD GOLD. jilterations of the "weight of coins, which has been asserted to be tlic defect of the Double Standard. If, under this sj-stcm, a certain Coin or weight in either metal, as the dollar or the sovereign, be made b}^ popular consent the gen- erally accepted Unit, the resulting system would, in an important feature, resemble the Single Standard. It may be said in favor of this plan, that it dissipates the mys- tery which surrounds Money. The Coin inscribed with its weight and with, as M. Garnier proposes, the geographical outline of the country for which it is coined, is, to the eye of the ignorant and the idealist as well a certain weight of a certain Metal, stamped for circulation in a certain country. There is no possibility of any one taking ten grammes of Gold as being the same thing as 155 grammes of Silver, any more than as being a thousand grammes of Tin, and, moreover a Token weight can not be palmed off as real weight. There is no*making believe that 9 ounces are equal to 10 ounces. The confusion comes from the names of Coins, and the way they are treated by the law. Complex and diverse notions are bound together in apjDarent unity in the name and use of a Coin, which suggest anything else but the simple logic of M o n e y - b a r t e r , the exchange of a certain certified weight of Metal. The pound sterling for example, has since the Norman conquest meant fifty different things. To an American to-daj', a Dollar means a variety of foi-eign Coins beside those belonging to his own countiy. Of the latter, are the old Silver Dollar, the Dollar consisting of 2 half-Dollars of impure Silver (the Silver Dollar that may be coined in the future), the Gold Dollar of 24.75 grains, the Gold Dollar of 23.2 grains, the Trade Dollar, the paper Legal Tender and Bank-notes.— Such a use of the word Dollar as this implies, is a snare to induce men into hope- less confusion of thought about Money. All this is avoided by using certain weights of Metal in exchange, and simply calling them weights of Metal. Contracts payable in Dollars, ought to be held unlawful as gaming contracts. The following objections suggest themselves: It would require many years to recoin the entire stock on hand of any nati(jii. Habit necessitates the use of Coins which have a definile name and hi.storic individuality. ARGUMENTS FOR THE STANDARDS. 35 It is impossible to obtain appropriate names out of existing sys- tems of measurement of weight. To submit to a Public Board the regulation of the Legal Kela- tion between the two Metals, is to create a dangerous ^power which must become a source of contention in the financial world, and of uncertainty in contracts, and so imj)air the public sense of the obli- gation of them. It is a condition of the effect of a law making Gold and Silver Legal Tender, that the real subject of Money contract should be within certain bounds indeterminate. When B. agrees to de- liver 100 bushels of fine wheat, he has the option of selecting his hundred bushels from all the purchasable wheat in the world, and so with Money contracts. Hence the need of names of Coins, and the perpetual necessity of establishing a legal relation between the two Metals, so that un- der that name cither Metal may be used. If the Double Legal Tender is really to be used, the law must import that he who con- tracts to pay ten grammes of Silver, or 155 grammes of Gold, can when the time comes, pay the Silver debt with Gold, or the Gold debt with Silver. Hence when the}^ contract for a weight, while men talk of ten they mean 155, or Avhatever the market relation is, and hence the confusion may be more confounded than before. The Double Legal Tender under this system would even more than now expose business to fluctuations of the mai'ket prices, and there is, thei*efore, all the more need that all nations (outside of the one supposed to adopt this standard), should join in adopting Bi- metallic Money at one ratio. But if all other nations are to join, why should not that one join the others? It may not be amiss to suggest other possibilities. For example, composite coinage — each coin to contain both Gold and Silver. Or again, it might be suggested that Gold and Silver dollars, coined at a fixed ratio, shall be Legal Tender each for one-half re- spectively of the amount of any debt at its face, with liberty to the debtor to pay the remaining half by giving an amount in the less valuable Coin equal in value to the proper amount of the more val- uable Coin — the rate of the premium to be fixed in accordance with the market price by a Public Board, 36 SILVER AND GOLD. CHAPTER IV. A STANDARD OF DESIDERATA AND STANDARDS OP VALUE. Money as a commodity — Assignment of Functions of Money to various commodities — Rents payable in kind — Option with tl)e payer — Measures of the value of Money — Stan- dard of Desiderata — Lowe's Reference Table of Value — Its publication in Germany and the United States — Ritter Von Jakob's translation and explanatory essays — Importance of Lowe's theory — Otijections suggested by Lowe — Objections of Von Jakob — M. Manne- quin's argument for Gold mononietalism — Revision of contracts — The scaling of debts — Equity of demand for steadiness of value of Money — Real Money a commodity— False Monej- a debt — M. Mannequin's Court of Revision — Standard of Desiderata — Multiple Legal Tender and the argument from metrology. It is an axiom that " Commodities measure the value of Money in the same manner as money measures the value of commodities." * It is, withal, an essential part of the definition of real Money that it must be a commodity, and as such, of coui'se, being, like all other commodities, subject to fluctuations of supply and demand, it is liable to fluctuations in value. All the accredited varieties of Legal Tender — cattle, shells, skins, salt, iron, Silver, Grold, platinum, etc. — are alike subject to this fate. The thought lies, therefore, near the surface, that if men chose they might call other commodities to assist the particular com- modity which they chiefly use as Money in the performance of one or other of its Functions. f Those in which permanence in value is the central idea are of course in special need of such support, and have not fai-led to re- ceive it. Eents payable in kind are a familiar application of this idea, and arc sometimes payable in either of two commodities, at the option of one or the other party to the contract. Thus, for example, a rent payable in corn, or its equivalent, at the market price, creates, quoad hoc, a "Double Standard" of corn and whatever happens to bo Lawful Money. It is obvious tliat the option between the two forms of payment * Ricardo. High Price of J^ullion. London, 1811. tSee Chapter VI. 2. STANDAKD OF DESIDERATA. 37 is convenient, while the fluctuations in the viihic of corn may, by bahincing the fluctuations in the value of Money, have secured a rent more permanent in value than a fixed sum of Money "would have given. So a rent payable in terms of the average annual ccnisump- tion of provisions by a man, or its equivalent in Money, would, while still utilizing i\loney in all its legitimate functions, secure both parties against fluctuations of the value of Money, and there- fore against fluctuations of tlie value of all other commodities ex- cept those provisions included in the average. In the average an- nual consumption of provisions by an adult, if it could be obtained, we should have at least fixed a definite portion of utility, whose steady relation to population is to a certain degree a guarantee of its permanence in average value in exchange with other com- modities. By enlai'ging the sphere of consumption upon which to base this average, and taking in the consumption of certain classes of pop- ulation or of an entire nation, wo still more nearly attain a meas- ure of the value of Money, and a guarantee against the evil eflects of its fluctuation. By selecting from the total consumption of a nation the greater number of certain commodities, the demand for which is general and constant, and fixing their relative importance in the calcula- tion of tlie result, with a view to the total consumption of them, an arbitrary but approximately accurate " Standard of Desiderata " could be formed, the exchangeable value of which in Money would give a still more secure and permanent Standai'd of Value. The idea of such a standard, foreshadowed in the writings of En- glish students of Agriculture and Prices of the last century, appears to have first obtained full expression in a Eeference Table of Val- ues published by Joseph Lowe, a Scotch merchant, long resident on the continent, in his work on the " Present Condition of Eng- land." (London, 1822.) The estimation in which the work was held may be judged by the fact that it was republished in ]S^ew York in 1824, and in Leipzig, in German, in 1823. , It is a melanchol^y reflection, that fifty years after the publication of this work in England, in CTcrnumy, and in the LTnitod States, educated men, nay economists, may still be found whose knowl- edge of the nature of Money is barred by the doctrine, that being 38 SILVER AND GOLD. itself '-the Standard," its own value is not a px'ofitable subject of inquiry.* * Signal examples of the prevalence of this undeveloped stage of theory are given in late utterances in various journals in the United States on this subject. For instance, I find a late letter from a gentleman well and fa- vorably known to the readers of the " Xew York Evening Post " as a fertile and acute writer upon economical questions (Mr. J. S. Moore, who has written also under the signature of " The Parsee Merchant"), in which certain questions proposed by the Silver Commission of Congress are treated in the following manner (See Weekly Post of Oct. 27, 1876) : " Question 2. — What percentage or portion of such change do you attribute to a fail in Silver, and what portion to a rise in Gold ? "Answer. — Now this question is the great hobby of my good friend Senator Jones Sahib. But really there is no Bonanza in it at all. The plain answer is, Gold is the Standard, and is fixed ; it has risen in relation to Silver simply because Silver has fiiUen. But I will be more explicit in respect to this ques- tion by answering the next, which is : " Question 8. — By what process of reasoning or deduction do you arrive at the conclusion given? "Answer. — My process is very simple. Gold is the yard-measure, while commodities are the stufls to be measured. Now, if I measure to-day a piece of cloth, and find that it contains fifty yards, and remeasure it to-morrow, and find that it contains only forty-nine and a half yards, and both day's measure- ments are right, surely it is the cloth that has shrunk one-half a yard, and not the yard-measure that has increased in length one per centum." The gentleman is evidently right when he says his process is very simple. (See Appendix D.) Unfortunate!}', such treatment, although not so intended, seems calculated to strengthen the misunderstanding on this subject so curiously prevalent among bankers and business men. It is a curious fact that a clean-cut explanation of the nature of Money as a standard has been on nearly every "gentleman's library" for generations. Puf- endorf observes that " in the case of a change of price of one and the same thinjj, a distinction must be carefully drawn as to whether, properly speaking, the value of the thing itself or the value of money has changed. For the first happens when the relative abundance of money remains constant (pcrsiatenie cadem pecunicc copia), and the commodity in question becomes rarer or more abund- ant; the latter event occurs when the supply of the commodity remains con- stant {persistente soiiio rejourn provetiiu), while the general supply of money is increased or diminished." (De jure Naturaa et Gentium, Ed. 1744, vol. V. cap. I, De Pretio, sec. 16.) Pufendorf further cites Gothofredus' De Mufatioiie et augmento mo7ieice au- rer, which title seems to indicate that not merely one century, hut several cen- turies, before the New York Gold lloom was founded, the mutability of Gold had attracted .special attention. In fact, in the barbarous days of Athens one Aristotle ob.servcd that '• even money is liable to the same objections as other commodities, for it is not always of equal value; but, nevertheless it is more likely to remain firm." But in 1876, apparently. Wall street can look at IJroad street and say, " We have changed all that !' STANDARD OF DESIDERATA. 39 This is all the more singular in the case of Germany, Irom the fact that the book was introduced to the learned public by a gentleman of distinguished position, both in science and in offi- cial rank. One would suppose that a translation, witii ('X[)lanatory essays, by Chevalier von Jacob, Professor in Hallo and former member of the Imperial Legislative Commission of Eussia (1810-181G), would make a permanent impression : the more so, as bis style is notable for clearne.>-s and energy.* Lowe himself enumerates among the objections which might be urged against his scheme : 1. That combinations to influence Prices might be made with a view of affecting the calculation of the Table of Keference : 2. An injurious influence of 'the use of the Table on the price of land : ;i The fact that wages, fees, etc., arc not included. And he gives arguments to neutralize the force of these objec- tions. Von Jacob suggests as practical difficulties that he who uses Money in trade would, under the domain of this new Standard, euflt'er in the following manner: If general ])rices tall 10 per cent., and sugar remains stationary, a sugar-dealer who receives 800 instead of $100 in income (supposed to be interest on j^ublic debtj, loses as far as his sugar business is concerned ; and again, in gen- eral, that he who does not happen to use the articles whieh go to make what I have called the Standard of Desiderata in the propor- tion in which they enter into the Table, is to this extent a loser. llence Von Jacob remarks that while a permanent Measure can « Von Jacob was the author of a Manual, or Principles of Political Economy. Introduction to the study of the Sciences of Government, Theory and Practice of Financial Science, on Russia's Paper Money, etc. He was attracted, he states, "to Lowe's work by the ground taken, not only as to the injustice, but to the injurious effects of, and the lack of neces- sity for, the Suspension of Specie Payments in England." "Until the appearance of Lowe's work," he says, '-almost all statesmen and writers in England who have expressed themselves publicly, have declared that this measure, if not in general desirable, was yet necessary and unavoida- ble, to guard against the total destruction of the State." "I have been bold enough," says Yon Jacob, "to oppose tbis view in my paper on Russia's Paper iloncy and elsewhere." In his translation of Lowe, Yon Jacob contributes an essay of 54 pages on the Suspension of Specie Payments, in which the question is exhaustively dis- cussed. 40 SILVER AND GOLD. be found for individuals, it does not appear to him possible to find such a Standard for the needs of all, or even for those of families of similar occupations and means. The objections are suggestive, although their cogency can be judged only in connection witli the fact that Lowe's scheme, such as it is, if it can be put in practice, comes into competition only with existing Standards, whose utter variability and inadequacy are admitted. The London Economist, in discussing Professor Jevons' chapter on the Tabular Standard of Value,* solves the puzzle of the effect of its adoption upon foreign ti'ade and banking business, by declar- ing it incompatible with either. But even if this were to be ad- mitted it is plain of course that, whether it be practicable or not to introduce into practice the use of such a Standard, the theory of it should be familiar to all who are supposed to understand Money. It is in fact the key to the entire Theory of Money. The squaring of the circle, with which J. B. Say compared the problem of a constant Measure of Values, has never 3'et been achieved ; but still it is well that mathematicians should under- stand the reason why it has not been achieved, and it is of prac- tical importance that approximations should be made to the de- sired, but unattainable, result. In the statement of the argument for the Gold Standard, we have quoted in several instances from a work of M. Th. Manne- quin ;f although without giving him credit for the citations, the plan of that chapter excluding this idea. M. Mannequin is one of the most ardent and incisive advocates of Unity of Standard. It is but just to so enthusiastic an advocate of Gold Mono- metalism, and is peculiarly interesting in this connection, to adduce from his work the following words (p. 56): "We must," he says, "accustom ourselves to the tliought that Money is subject to sensible variations of value, and we ought to consider beforeliand the means of avoiding as far as possible the pei'turbations which these variations may cause in the dish-ibution of wealth. Such means can, in my opinion, only be found in the right stipulated beforehand ad hoc, or secured by a special law, to *See Jevons' Money iiiid tho !Mccliaiii.srn of Kxi'hungo, Chup. XXV., A Tabular Standard of ^'alu(;. t Mannequin, La Monnaie ct Le Double Etalon. Paris. 1874. STANDARD OK DESIDERATA. 41 rcviHo those contracts, whatever the}' may be, the length of duration or binding nature of which* exi)OHe one of tlie contracting parties to the inconveniences of variations of Money. With good faith, with tlie assistance at hand of an equity court, such revision Avoiild not be difficult." M. Mannequin's idea of a general Eevision of Contracts suggests, at first glance, the plans for scaling of debts, which occupy so prom- inent a place in the History of Money. The claim for such a revision of private contracts, as M. Manne- quin would provide for b}' law, was, for example, put forward in the petition of C. B. Tiiompson, presented to the British Parliament in 1823 by Lord Stanhope and Lord Folkstone. The demand for re- lief was based on the ground, that Legislation having produced the rise in the value of Money, it was but just that the Legislature should provide a remedy for the distress itself had caused. Indeed one might add that the British Ecsumption Act of 1819, which ordained pajmient of the debt at a small discount, in case the deb' or chose to demand payment within certain times, was in a manner a legislative recognition of the duty of government to guard the citizen against fluctuations of price. The various Acts of the American Colonies in the spirit of repu- diation, and again those of Russia, in 1812, 1843, and 1862; the propositions of scaling the debt, or debasing the Coin, made in En- gland at the period of Eesumption, and not by any means unknown in the discussions of the past ten years in this countr}', have in one sispect the same moral justification in Icind, though not in degree, which M. Mannequin would call upon for his Eevision of Con- tracts. In either case, the fulfillment of the letter of the contract, or payment of the debt in full, would have disorganized Prices; would have caused a general perturbation in the distribution of wealth, and hence would have ruined s(mie, and benefited others, without fault or raerit of their own. But there is a radical difference between the ideas of Mr. Lowe and M. Mannequin and these schemes for scaling a Paper-Money Debt. Equity is of course a secure foundation for the demand for legislation tending to secure stability of Prices : and, other things ■•■It should be observed that although M. Mannequins expressions seem to point to a difl'crent idea, yet in fact all time contracts would have claims for revision ; for where debts are measured in thousands, a fluctuation of a frac- tion of one per cent, is a matter of importance, certainly to the loser. 42 SILVER AND GOLD. being equal, the status quo of Prices at the time the Act is passed has rightful claims for recognition, as the level whose maintenance in the future is desirable. But " other things are not equal'' when prices in false Money urc compared with prices in real Money. This Equity, always appli- cable to real Money, applies only to Paper Money in its character as a cii'culating medium. But Paper Money is more than a mere circulating medium — it is a debt. And debts must be paid in full. Bankruptcy or Repudiation ai-e the other alternatives. Debts must be paid, even if Prices be thereby disorganized. The Equity of preserving the existing Instrument of Valuation and Means of Payment must be sacri- ficed to avert the iniquity of Repudiation. Acute advocates of Paper Money have much to say in favor of the theory that a Grreenback passes current, not because it is a promise to pay a dollar, but because the receiver knows that the people he purchases from will take it in payment. The fallacy will be apparent on comparison with the reasons why Metallic Money passes current, or with such a statement as the following: "I respect Dr. A as a Doctor, but not as a man — I conclude therefore that if the man A were abolished, the Dr. A would remain." In the case of a fall in the value of Money, this Revision of Con- tracts proposed by M. Mannequin would prevent that " impairing of the obligation of contracts" which is one of the almost inevitable consequences of forced currency of promissory notes. But what principle is to determine this readjustment? By what rule is this Court of Equit}-. to which M. Mannequin would have the parties a])peal, to be guided in this scaling of debts? Evi- dently Equit}', or that equality which is the central idea of Equity, demands that the Average of General Prices shall be the guide. J^ow, it is evident that if we suppose a wise discrimination in the importance accoi-ded to the diflPerent articles whose Prices are to be reckoned in making up this average, the Court will be led to the very Standard of Desiderata of which we have been speaking- The Tabular Standard of Value and this Revision of Contracts are therefore different forms ot the same idea. It should be clearly understood, of course, that the scheme im- plies that while one or both of the Precious Metals are retained as the Means of Purchase and as the nominal Instrument of Valua- tion, and while definite amounts of them i-cmain the general Units STANDARD OF DESIDERATA. 43 of Account, and while their position as a Means of Payment is not disturbed at all, yet that cardinal Function of being the last resort in measuring Values is eliminated from other F^inctions of JVIone}'', and the real responsii)ilit3- of this Function is transferred from the single commodity. Gold or Silver, or the two commodi- ties together, to an artificially compounded multiple body of com- modities. In this view the ultimate Measure of Values of the future will then be not so and so much fine Gold, or fine Silver, but convenient fi-actions of a conglomeration of definite amounts of a multiplicity of commodities. * But huw docs this "Multiple Legal Tender theory" comj)ort with the dogma of the Unitj^ of Standard? Of course if such ii Standard as that above described were enforced b_y law, Gold and Silver might be left to find their level, and there might then be neither Single nor Double Standard. It would seem therefore that M. Mannequin, in admitting the Revision of Contracts, has severed the root of his argument for the Single Standard; for his argument is drawn from "the nature of metricrd things," and presents Money as the analogue for wealth of the 3'arlaee of ^tnlon, so devoutly proclaimed by Chevalier. (See his Letter to Alfred Latham, Esq., a Director of the Bank of England, 18G7, in Wolowski's L'Or et L'Aruent.) I have learned also that M. Joseph Gamier has suggested valori- irnHre as an appropriate substitute. I need hardly add, that such countenance as this has marvelously brightened and relieved the loneliness of heresy. The question, "What's in a name?" will naturally, of course, suggest itself, and surprise may come that such matters are deemed of importance; but hardly to the mind of one who knows how men's lives have been laid waste by fiillacies that have their dens in household words. See Appendix E. 44 SILVER AND GOLD. CHAPTER V. THE SITUATION IN THE UNITED STATES. Statement of the Public Debt — State, Muincip:il, and Railroad Bonds — Amount of Paper Cur- rency — Amount of Specie in the Country — Prices in ISiO, 18G0. STATEMENT OF THE PUBLIC DEBT FOR SEPTEMBER, 1876. Debt bearing interest in Coin — Bonds at 6 per cent Amount Oui- siandi)ig. Interesi. $984,999,650 712,320,450 Bonds at 5 per cent Total dolit bearing interest in Coin $1,697,320,100 14,000,000 2,738,530 368,501,472 34,520,000 29,.^58,415 2;t,777,900 $26,812,436 105,000 187,086 Debt bearing interest in Lawful Money Debt on which interest has ceased since maturity Debt bearing no interest — Old demand and Legal Tender Notes Certificates of Deposit Fractional Currency Certilicates of Gold deposited Total debt bearing no interest 462,717,788 Unclaimed interest 21 704 Total debt to date 2,166,776,418 27,12(),"'27 2 ''OS m.)'> 645 Amount in the Treasury — Coin $64,591,124 Currency 12,524,945 Special Deposit for liedemptioii of Certificates of Deposit 34,520,000 Total $111,636,069 The nominal amount of outstanding State Securities is about P85,000,000 ; of City Securities, $543,000,000 ; of Ilailroad and Canal Bonds, about $2,170,000,000. Of tlie National Bank Notes there were outstanding, October 1, 187G, 8322,253,554. There were at the same date $21,860,943 of Greenbacks on de- posit with the Treasurer I'or the j^urposo of retiring Bank-notes. The statement for October 1, 1876, gives, deducting the latccf item, $668,887,351 astlie available circulation at that dateof Grocn- biicks and Bank-notes. Besides these, the Gold Certificates may serve as circulation, ami SITUATION IN THE UNITED STATES. 45 iimount to $29,977,900; Fractional Currency, $29,758,415 : giving thus a total of Bank- and Public Credit serving as Money, $728,- 421,660. Of the amounts of Specie in the country, widely varying esti- mates are made. Dr. Lindcrman, the Master of the Mint, in his report for 1876 estimates the total amount of Specie in the country at $145 mil- lions, including 15 millions of subsidiary Silver. Others estimate the amount as much greater, Mr. Young, chief of the Bureau of Statistics, giving $280 millions (^ Silver), a •writer in the Banker's Magazine (May, 1875), from $215 to $265 millions. These estimates are of course controlled by varying opinions as to the amount of Specie hoarded — the latter gentlemen giving 150 millions as a maximum estimate. It must, however, be remembered that the Americans are not a hoarding people ; that the stock on hand, when Specie went out of circulation, was not very large, and more than this, that small Notes of one, two, five, and ten dollars were everywhere current, and that the business of the agricultural population was chiefly done with notes, and that there was little or no Silver of full weight in existence, except a limited quantity of foreign Silver, including that brought by emigrants, and the Spanish and Mexi- can Dollars once current. What amount of half and quarter Eagles are likely to remain in old stockings after eleven years of speculation and of peace ? Again, it must be remembered that as an element of importance in the question of Resumption, the average amount of Specie that will come out of these hoards into circulation is chiefly to bo considered. The writer before cited estimates that $85 millions, out of $100 to $150 millions, will become available. On the grounds above suggested, if one were called upon to haz- ard an estimate, it would seem that to say $10 millions would be neai'er the truth. No details appear to have been given by Dr. Lindei-mun in his Report ; but the items may be approximately stated, as follows : Treasury of the United States $(15,000,000 Metallic Currency, Pacific States 10,000,000 Subsidiary Silver issued ]5,000,000 Specie in Banks 30.000,000 Hoards Bullion in hand, etc L'0,000,000 46 SILVER AlVD GOLD. Of the above, about S30 millions are actively present in the cur- rency by the Certificates of Deposit based upon them; while it should be remembered that Specie current in the Pacific States will be but to a slight degree available to take the place of Paper. Of the condition of Prices, no carefully prepared Statistics have come to my knowledge. The following table of average wholesale Prices in New York Cit}^ before the Rebellion may, on comparison with the averages of Prices in the same mai'ket, in 1875-6, serve to indicate the state of afi'airs to those who can form a judgment on the latter subject. I have, however, no knowledge of the principle followed in the computation of these averages, nor to what extent the intrinsic qualities of the various articles mentioned would correspond with what would go under the same name now. I append this table merely as a suggestion in case a reader should desire to make a " bold attempt at an approximate estimate " of the comparative value of Money in 1859-60 and in 1875-6. It would be an inestimable service to the future of Applied Economy if some American thinker could bring the methods of Jevons or of Laspeyres to bear upon such questions in this country : [From "Hunt's Mercbants' Magazine,'" February, 1861.] Tears Ending Jantjaky 3, 1860 and 1861. Ashes— Pots, 100 lbs Pearls Breadstuffs— Wheat Flour, State, bbl "Wheat Flour, Best Extra Genesee Rye Flour, Best Extra Genesee Corn -meal, Jersey, bush..... Wheat (average of four kinds, $1.45 to $1.50), bush liye. Northern, bush , Oats, State, bush Corn, Old Western, bush New Southern, hush Cotton — Middling Upland, lb , Jliddling New Orleans, lb Fish— Dry Cod, qtl Fruit — Bun eh Raisins, box , Currants, lb Hay — Shipping, 100 lbs , Hemp — Rough Am er lean, ton , Hops, lb Iron — Scotch Pig English Bars Jxiths, per M 1859. $5 12^ 5 37.V 4 30 7 50 4 00 3 90 1 47 i 92 46^ 90 88 11 lit 1 50 •2 52 6 1 00 145 00 16 24 50 5;:; 00 ■2 00 1860. 00 00 35 50 00 15 1 45 75 37 72 72J 12^ 12| 3 50 1 75 4i 90" 152 50 25 21 00 52 00 1 30 SITUATION IN THE UNITED STATES. 47 Yeaks Ending January 3, 1860 and 1861 — Continued. Lead — Spanish Galena Leather — Honilock Sole, Light, lb.... Oai< Sole, Lit,rht, lb liimc — Common llorkland Liquors — Brandy, Now Cognac Domestic Whisky Molasses — New Orleans. Naval Stores — Crude Turpentine, bb Spirits Turpentine, gal Common Kosin, N. C., bbl Oils— Crude Whale, gal Sperm , Linseed Provisions — Pork, Old Mess, bbl Pork, Old Prime, bbl Beef, City Mess Ilepacked Chicago Beef Hams, Extra Hams, Pickled Shoulders, Pickled Lard Butter, Ohio State Orange County Cheese Pvi.-e, Good, 100 lbs Salt — Liverpool Ground, sack Liverpool, Fine Ashton's Seeds — Clover, lb Sugar — Cuba, Good Tallow Whalebone — Polar Wool — Common Fleece 1859. 1860. 5 65 5 25 5 77J 5 50 30 \^ 30 27 75 75 3 00 3 00 26 19f 53 00 37 00 3 433- 2 75 44^ 35 1 65 1 25 52 51 I 40 1 40 57 50 16 37.V 16 00 11 75 10 50 9 00 6 00 9 50 9 00 14 50 14 00 n 8 Gh H lO.V 10| 16 14 20 18 24 22 11 10 4 20 1 60 1 15 75 1 95 1 60 8^ H n 6i 10.1- n 90 88 40 30 The amount of Specie in the United States at various times has been estimated as follows (Tooke-Newmarch, History of Prices. II., 2, 718) : 1820 SP)5.890,000 1849 142.022,550 1854 246,942,600 Note to Table of Prices. — It must of course be admitted that the obstacles in the way of ascertaining the value of Money in this country are out of all pro- portion greater than in England. The value of ^loney in London may fairly be supposed to represent the value of Money in England, while the rapid growth, inequalities of transportation, vast extent of this country, and absence of a central market, exclude the ave- rages of prices in any one American market from being a proper criterion for the whole country. Note. — The statement of Public Debt and Circulation in this chapter are from the Financial and Commercial Chronicle of New York. 48 SILVER AND GOLD. Mr. Chase is said to have estimated the amount of metallic cir- culation in 1861 at 8270 to 300,000,000. The mean rate per capita for 1861 would therefore give for 1879 about §450 million as the total Specie to be in use. The main features of American Monetary Legislation have al- ready been suggested in other parts of this Essay, while to most Americans the present state of the question in the political field is sufficiently familiar. It may, however, not be amiss to insert a few words of explana- tion on this point. Until October, 1875, when the contest of Inflation against Sound Money was fought out in the elections in Ohio, the future was darkened by the portent of Greenback Inflation. The defeat by the Eepublicans, under the lead of treneral Hayes, of a party which (at least in Ohio) combined to a degree interesting to a stu- dent of history, the features of the Birmingham school of eai'ly days in England, and of the Communists of Puris, seemed to prom- ise to the country freedom in the future from the Inflation heresy. Since the defeat of Governor Allen, the discussion of the Cur- rency Question has been permitted to occupy a higher plane. The attempt of a party in the House of Re^^resentativcs to repeal the Resumption Act proved inefl'ectual. and the Restoration of Silver became one of the questions of the day. Unfortunately for the prospect of a wise solution of the problems before the country, politicians in the House of Representatives, well known to the country as advocates of Inflation, having been de- feated in the attempt to rule and ruin with Paper alone, seized upon Silver (then to the minds of the masses under a cloud) as being the next most " depreciated " and at the same time available instrument of exchange — apparently in the idea that this historic metal would lend itself passively to their schemes. On the other hand, in the Senate the question was broached in less questionable form, and by men of different caliber. Senator Jones, of Nevada, whose sound position on tlie subject of Money had. in 1874, attracted the attention of the country, made the ques- tion of Resumption and the Double Standard the subject of ex- haustive discourse. His speeches on the subject are landniari^s in American Monetary Debate.* *See Resumption and the Double Standard, delivered April '24, 1876: Wash- ington : ^Ie(Jill & Witherow, 1876. I should make more detailed mention of tlii.x work, hut tiuit it came into my hands after my general conolasions had SITUATION IN THE UNITED STATES. 49 The question, as pi'esented to the Senate, was, I believe, confined to the ]}ropositions of retaining the old Silver Dollar as full Legal Tender, and that ui-ged by Senator Sherman and others of limiting its Legal Tender quality to, I think, twenty dollars in one pay- ment. In the meantime, in the presence of the decline of the Gold price of Silver, the policy of coining Tokens foi- change was pur- sued by the Government. The Treasury of the United States even purchased German Sil- ver in London, and the demand for subsidiary coinage in this country was naturally potent in checking the decline in its Price. B}' coining Silver promissoiy notes, and with them redeeming Paper promissory notes, the United States interfered to protect Germany and England from the effects of that infraction of the "law of nature and of nations," of which their demonetization of Silver had made them guilty. To the United States the coinage of Silver Tokens naturally gave " protection " to the Silver interest, and was gladly accepted by the people as an augury of the feasibility and probability of Pesump- tion. As a practical outcome of the debate in Congress, a law was passed appointing a Commission of Members of both Houses (who were to choose three members outside of Congress to assist in their deliber- ations) to take into consideration the entire question of the meth- ods of Resumption, and to report on or before the 15th of Jan- uary, 1877. The members of the Commission appointed on the part of the Senate were Mr. Jones, of Nevada ; Mr. Boutwell, of Massachu- setts; and Mr. Bogy, of Missouri. Those on the part of the House of Representatives were Mr. Gibson, of Louisiana; Mr. Bland, of Missouri; and Mr. Willard, of Michigan. Hon. William S. Groesbeck, of Ohio ; Mr. A. Delmar, of New York ; and Prof Francis Bowen, of Harvard University, were subsequently chosen as expert members of the Commission ; and Mr. George M. Weston, of New York, was made Secretary. been formed, and when I was desirous of assuring the correctness of my posi- tions by such argument and analysis of counter-arguments :is were not likely to be already familiar to American readera. 50 SILVER AND GOLD, CHAPTER VL THE MORAL QUESTIONS INVOLVED IN THE MONETARY POLICY. 1. The Bonds of the Government and the Greenbacks regarded as a Debt. What was Lawful Money of the Unitod States in tlie years 1862-65 — The Paper Money a8 a means of payment of tlie Bonds — The Act of 18G9 — Payment iu Coin, and the agita- tion in favor of the Gold Standard — Payment in Silver before 1873 — The nature of a Money Contract — Commodity vs. Purchasing Power — Delivery of the specific commodity necessary — Keservation implied in Sovereignty of State — Alteration of Monetary Sys- tems — Notice to ccmtnicting parties — Fluctuations of Purchasing P.wpr of Gold and Sil- ver — Historical position of Silver — Coinage Acts of 1873-1 — Estoppel by removal of Legal Tender character-^Kc-storation of the stains quo ante — Reduction in value of Bonds work- ing an estoppel — Modes of restoration of Silver — Acts to strengthen Public Credit — A Measure of Payment and Cleans of Payment distinguished— Payment of Greenbacks as a debt — Depreciation of Silver. 2. The Lawful Successor of the Greenback. Duty of Government to provide a good Metallic Currency— Danger of maintaining Gold Standard — Dangers of restoring Silver — Probable and possible action of European Pow- ers — Analysis of Money — Its Functions, material aud non-material — Money as the basis of a conception of value — Instrument of Valuation vs. Measure of Value — Func- tion of Money as a Means of Payment — As a Means of Direct Purchase— As a Means of Transporting Value — .\s a Means of Preserving Value— Distinction of Functions which regard the jjeculiar interest of proprietor of Money, and those which do not — The idea! Medium of Exchange — Portability, and its practical importance — Influence of Instn- ments of Credit— Value of Money, and average of Prices— Variability of Prices— Prob- lems arising in calculation of averages — Alterations of supply of IMetallic Money— What is a normal increase of stock on hand — Effect of rise or fall on Money in its different Functions— F.ffect of steadiness of average value— Dangers of alterations of value pro- ceeding from alterations of supply — Effects of rise and fall compared— Opinions of J. R. McCuUoch, Koscher, and Chevalier. 1. THE BONDS OP THE GOVERNMENT AND THE GREENBACKS REGARDEL' AS A DEBT. The Bonds and the Greenbacks were promises to pay dollarti. They were originally issued between 18G1 and 1865. What were these "dollars," which by these instruments the Ciov- ernment promised to pay? (I exclude of course from the following considerations those Bonds which were expressly made paj'able in Gold.) Tlie Gold Dollar and the Silver Dollar had, since 1792, formed the Double Legal Tender of the United States. Comparulivcly little Silver had come to the Mint, however, since 1834. In that year tlie Gold Dollar was reduced iVoin 24.7.') to 2:5.2 gi-ains tine Gold, which was equivalent to eslalilishini;- a relation of 1 to 16 MORAL QUESTIONS INVOLVED. 51 in place of the oriirinal ratio of 1 to 15. But IG ounces of .Silver being worth more in tiie market then than 1 ounce of Crohl, it be- came profitable to export Silver and to im])ort Gold, and the latter naturally assumed the chief place in our currency. The decline in the value of Gold, consequent upon the Gold Dis- coveries subsequently exposing the country to the danger of losing its Silver change, [for the dimes, quarters, etc.. being coined of lull weight, had, though in large part worn, become worth more than Gold at the rate of 1 to 16], a law was passed, in 1853, order- ing the coinage of Silver tokens for change, Avhose paying power was limited to five dollars. The Silver Dollar still existed, however, and still retained its char- acter of unlimited Legal Tender. Beside these, there Avas the Greenback itself, the paper promise of the Government to pay dollars, which the statute had elevated to the dignit}'' of being itself a dollar, by declaring it to be "good and Lawful Money and Legal Tender for all debts, public and pri- vate, except duties on imports and interest on the public debt." At the close of the war there were tlien tlu-ee Legal Tenders, in which, as far as the statute expressl}^ indicated, the principal of the Bonds was payable — Gold, Silver, and Paper. As for the Paper Legal Tender, it was, in spite of the statute out of the question as an honest means of payment of the Bonds. Had the notes of the Government been convertible at their fiice value into Coin, it would have been a mere question of convenience whether the debt was to be paid in Paper Money or no, just as it would be to-day with payment of debts of the English Government by Bank notes. But, unlike English Bank-notes of to-day, the notes of the Government were past due and depreciiited in value, and when a powerful party urged the Government by additional issues to depreciate them still further, it became desirable to allay the distrust of those whose aid was necessary for the re-funding of the Bonds, to stop the mouth of treachery among the politicians, and to bind the country by a solemn public Act to payment of the pub- lic debt in Coin. This was done in 1869. It is important to observe that this Act followed the Interna- tional Monetary Conference at Paris, at which an enthusiastic Gold-monometallist had been active in representing the supposed interests and aspirations of the United States. It followed also the discussion of the Gold Question in Congress, which had drawn this country into that wide circle of debate on 52 SILVER AND GOLD. adopting the Single Gold Standard, which public bodies and think- ers in Europe had alread}' formed. The declaration that the principal of the public debt was to be paid in Coin was, therefore, notice to the world that, in spite of all that had been said, in spite of the promise held out to Americans by certain ill-informed advocates of the Single Gold Standard that its adoption was a " colossal speculation " for America, and although Silver was still at a high premium over Gold, yet the American Union proposed to retain her privilege of paying her debts in Gold or Silver as she should choose. Such, then, was the situation up to the passage of the Coinage Acts of 1873-4. Was there anything in the situation up to this date which forbade the Government to pay in Silver, supposing Gold should rise or Silver fall across the line of the legal relation of the metals as Money, to an extent which should make it desirable to the Gov- ernment to use its option so to do ? The ground for full answer to this question must be lound in the doctrine and in the history of Money. A Money contract, in the strictest sense of Money, is a contract for the delivery of a certain commodity. This is emphatically the expression of the theory of Metallic as •apposed to Paper Money. It is with this argument that Greenback Inflation has been suppressed. The law, nay, justice, as it is recognized, knows no considerations of the Purchasing Power of Money at different times, any more than it does of the amount of gain on one side or loss on the other, which the fulfillment of other contracts supposes, provided, of course, that there is no incapacity of the parties to make a con- tract, and that no fraud or mistake intervenes. There can be no general implied guaranty against loss to one wlio invests in land, or horses, or wheat, and there is no guaranty against loss from an agreement to deliver certain amounts of Gold or Silver. Each party must run his risk. It is safe to affirm this jure gentium, i)y the law common to all nations. This subject ought to be clcarl}^ understood in this country, for it is one upon which a battle of discussion has already raged, and which is also in nianv respects a mere repetition of discus- sions which took place in England after the wars with Napoleon. Paper Money was issued upon inflated prices, and hence the MORAL QUESTIONS INVOLVED. 53 amount of PurclKisiiii;; I'cnvtT was small. Thu Bonds sold for but 11 fraction of their face value in Gold or Silver. Currency and public debt had stood in much the same position in Enghmd. Both in England and in this countiy ambitious dema- gogues strove to find BU])port for their plea that tlie small amount of value received by the Government was a defense to the literal fulfillment of its contract. They failed in England, and have failed here. It is plain that the contract was made b}" a party capable of contracting, and that the discount was in consideration of the risk which the lender assumed, and neither party can take advantage of the condition of prices. The Government can not plead failure of consideration. The contract calls not for an equivalent of the Purchasing Power of the Bonds or Greenbacks when issued, nor even the Purchasing Power which the quantity of Gold or Silver they promised to pay could command at the time they were issued, or was then expected to command at the time of payment; neither of these did the contract call for, and neither of these did the Government aim to pay- It recognized that it was bound at the proper time to deliver to the proper party the commodity named in the contract. It is true and most important in another bearing that (as has been shown in Chapter lY) the ideal of the economist is to have contracts made which shall be expressed in a real Standard Meas- ure of Yalue ; in other words, that men shall contract to jjay Pur- chasing Power, But they do not now so contract, nor did they in this case. For the present, therefore, a money contract is an agreement to deliver a certain amount of Mone}^ apart from all considerations as to whether this party or that J)arty gains or loses. It must, however, bo clearly understood that this obligation is subject to an implied condition, necessitated by the sovereignty of the State which is a party to the contract under discussion. It is included in the idea of sovereign power that the State may alter its Monetary System.* Now the debts of a State are payable usuallj^ in what legislation has made '' Lawful Money :" yet the state can not be bound always to maintain thesame Lawful Money, for the interests of the nation may require that some changes be made in metal or coinage, and the interests of the nation are paramount. * See Chapter X. 54 SILVER AXD GOLD. There can be no question, for example, of the power of the British Parliament to change the system of pounds, shillings, and pence, just as in 1816, before Resumption, it changed the Double Legal Tender of Gold and Silver to the Single Standard of Gold. Its duty to the public creditor is thus limited to providing him in the new, an equivalent of the former Lawful Money.* The Law- ful Money of one time may, therefore, be not only of different value (we shall speak of this hereafter), but of different natui-e from that at another time. Germany, for example, in changing from a Silver Legal Tender to a Gold Legal Tender, has changed not only value, but material, and contracts made under the domain of Silver are payable in Gold.f jSTow, the business world had notice of these truths : of the nature of Money, and of Money contracts, and of the sovereign power of states in this regard. In fact, the last quarter of a century had been crammed with experience of the changes of Monetary Systems and in the relative value of Gold and Silver, and alterations of their Power of Purchasing commodities. In this country a process had still earlier taken place, beginning in 1834, by which depreciated Gold had succeeded to the place of what may have appeared appreciated Silver. We, too, had taken our share in that decline in the Purchasing Power of Gold after 1850, so lucidly analyzed by Professor Cairnes and Professor Jevons.| In this period Silver, too, bad accompanied Gold, but was in its decline obeying Gold as the stronger metal, although it had not kept pace with its fall, and thinkers were anticipating a decline in its value, even beyond that of Gold. Long before our Civil War, Chevalier had preached his crusado against Gold, and urged France to adopt the Single Silver Standard. Holland had abandoned Gold, and England bad calmly seen her ■'■ Of cour.so it is understood I spaak only of real Money. -j-How to do this with the least possible shock to business— how to do com- plete justiire in the matter — was a problem which German tl'.inkcrs have earn- nestly labored with, approacliing it both from the point of view of the jurist and the economist. Tlie main object is, of course, to avoid abrupt alterations of value of Money, and the dilHcultics of obtaining the various Legal Tenders in the right quan- tity, and at the right time. J "Cairnes' Essays in Political Economy;" '' Jevons' Serious Fall in tho Value of Gold ;' and Journal of the Statistical Society, 1865. MORAL QUESTIONS INVOLVED. 55 millions of Gold increasiiiij^ in number while depreciating in value, and, while turning a deaf ear to the agitation for restoring Silver in order to avert this depreciation, the Government had reaped benefit, among other ways, by an annual gain (which amounted in the end to 30 million dollars for some years) on the interest of the national debt.* If we consider what special reasons there were wh}' men should anticijiate that Silver wouM come again into use in this country, we shall find that to the commerce of the world the Silver Dollar had been a familiar coin for centuries. Gold and Silver had been recognized in the Constitution of the United States as alike fit material for Money, and like the Silver Franc of France, which French writers, Chevalier at their head, have been wont to treat as sacred, the Silver Dollar was recognized as the Monetary Unit of the coinage.f It may be fairly said that the law of 1834, as well as the law of 1792, recognized that, in case of any change of the legal propor- tion between Gold and Silver, the Gold Dollar was the one to be enlarged or diminished, while the Silver Dollar remained constant. The Bonds were sold in France, where the Double Legal Tender prevailed ; in Germany, which supported the Silver Standard ; and in England, where a return to Silver had been urged, to pi'otect vested interests against the dreaded extreme depreciation in Gold. The Double Legal Tender remained " the law " as much as it ever had been, and the experience of all countries had shown that ad- vantage was certain to be taken of the option of paying in the cheaper metal. In fact, at that very time France and the United "■■- See Jevons' " A Serious Fall in the Value of Gold," 18G3, p. 58. A Gold " depreciation of 9 per cent., which is (juite the least I can believe to have occurred, must therefore have effected a reduction in capital of ahout £75 mil- lions, and in the annual charge of nearly £2i millions." This was in 1862. Twelve years luter, the subsequent fall, added to that experienced up to 18G2, is variously estimated, at about 15 to 20 per cent. Among others, Profes- sor Fawcctt, (" Manual of Political Economy"), 1874, p. 480, gives the fall as " not less than 25 per cent." He denies that the fundholders have any claim for compensation. ■\ It may be worth mentioning that the statute of Elizabeth, 1500, continued the Pound "sterling" of Silver in the position which it is presumed to have held since the migration of the "Easterling.*" to Britain; and, as far as I have boon able to discover, Silver gave, strictly speaking, as Monetary Unit, in Chevalier's sense, in England, till 181G, a lineal descendant of a primitive ' piind viere Inuites seolj'res.'' 56 SILVER AXD GOLD. States were both using Gold, because Gold was the cheaper. If men never thought they could demand Silver when Gold was the cheaper, why should they expect to receive Gold when Silver is the cheaper? In view of this state of the law and of the facts, it is obvious that in 1873, however low Silver might then have fallen as com- pared with Gold, and however difficult it might have been to obtain Silver Dollars, yet the delivery of a Silver Dollar was admittedly the full, fair, and honest fulfilment of the contract written on the Greenbacks or the Bonds. Whether it would have been magnanimous or politic to pay in this way, is a totally different question. Our object here is, of course, simply to eliminate confusion of ideas as to this particular branch of the question. What is magnanimous and politic in us * can safely rest on its own merits, and does not require to be bolstered up by confusion with Avhat is deraandable by another party as a right. We come now to the question, has the action of the Government in 1873-4, forbidding coinage of full-weight Silver, and taking away the Legal Tender quality from such coins if existing, estopped the Government from paj'ing the Bonds in Silver? If we look at the letter of the contract merely, we shall see clearh' that as the Bond, or Greenback, was merely an agreement to deliver so and so much Gold, or so and so much Silver (stamped, of course, so as to become properly speaking dollars), the letter of the contract may be satisfied by payment in Silver or Gold Dollars, whether that Silver or Gold be Legal Tender or no. Hence, as far as the letter of the contract is concerned, payment might be made in Silver, in spite of its demonetization ; but not according to the spirit of the contract. This prerogative of being Legal Tender, which is conferred, whether upon Gold or Silver (or promises to pay them), by Legis- lation, creates a use and increases the demand for the bearer of the prerogative, and enhances its value, and so is " worth money." It is plainly an integral part of the consideration, and the Govern- ment having, by taking away this prerogative from Silver, dimin- ished the value of Silver, can not take advantage of its own wrong. Can this estoppel be removed ? One may briefl}' answer — 'first, * The readayment of the Greenbacks as a debt is subordinated to the general question, what shall be our monetary system after Resumption. Of course no one familiar with the subject will be confused by the fact that the Silver Dollar has been quoted as worth less ir Gold than the Greenback Dollar. If Silver were re-monetized, even by the coinage of the old Silver Dollar as Legal Tender, it is 62 SILVER AND GOLD. safe to predict that it would rise above the value of the Greenback and approach the value of the Gold Dollar, and that the value of the Greenback would follow this rise in time, while the tendency of the change would be to check the rise or cause a slight full in the Purchasing Power of Gold.* As will be explained hereafter, in the future there may come a serious depreciation of Silver, after its restoration here, but not im- mediately. 2. THE LAWFUL SUCCESSOR OP THE GREENBACK. We come now to consider the duty of the Government of pro- viding a real Money, which shall fulfill the requirements of the business of the nation, and be a secure basis for prosperity in the future. As will appear from a consideration of Chapters YIII and IX, the movement of the Western World toward the substitution of Gold in the place of Silver and of existing Paper Money, threatens, if persisted in, to produce a progressive rise in the value of Gold — a rise which need not spend its force during the prepara- tions for, and consummation of, Kesumption in the United States; but which, being almost entirely independent of action here, bids fair to make itself felt in the Western World for an indefinite pe- riod in the future. On the other hand, the restoration of Silver in the United States to its former character of unlimited Legal Tender, without con- current restoration by other leading nations, will, whether the ratio be 15^ or 18, if not at once, yet eventually, under not improbable circumstances, expose the country to the dangers of a general and rapid depreciation, as wcl 1 as, im- mediately, to abrupt fluctuations of the value of its Money. For example, such action on the part of Congress might, in duo time, lead to a transfer of Silver from Germany to tiie United States, while, in return, the Gold now held in this country would pass to Germany, and thus enable her to complete her " Coinage Reform." But in addition to setting free whatever Gold there may be in * It is proper to admit that, in speaking of re-monetization of Silver, I have avoided discussing the practical difficulties of providing Coin. The ca- pacity of the mints enters of course as a most important element into the problem of the ways and means of Resumption, but could not profitably be discussed here. MORAL QUESTIONS INVOLVED. 63 the Americiin Union to find its place in European currenciet?, the abandonment of Gold (for, if the United States are alone in this movement, the restoration of Silver might well have this meaning), would set at rest the apprehensions which weigh upon the market about the future demand for Gold for the United States. That powerful party which has long agitated the countries of the Latin Union, with the aim of inducing them to abandon Silver, might, through the events thus suggested, gain strength to over- come the opposition to which the present embarrassing situation gives support. In that event, the Silver there held would be thrown upon the market. In checking, by her new employment for Silver and her with- drawal of employment of Gold, the depreciation of the one and the rise of the other, the American Union would thus have promoted the interests of the world in general, but at her own ex- pense; for, if thus left alone in the "Western World to receive the surplus Silver of Europe, while Europe ceased to be a buyer of her share of the annual product, this countr}^ would, as I have indicated, be subjected to great danger of a rapid deyn'eciation, and, in any case, would have to depend on the vicissitudes of Asiatic demand for help in moderating those tendencies to fluctuations in value, for which the elasticity which has accompanied the variety of cur- rencies in Europe has hitherto given so effectual a counterpoise. The influence of England, through her Empire in India, as well as by her general control of Asiatic commerce, might thus be ex- erted to tlie serious detriment of American intei-ests. To such a situation it would be but slight alleviation to know that Gold-monometallism was exposing Europe to dangers of jjer- haps greater magnitude.* ■■In discussion with a friend some time since, a query was proposed as to what might be the effect of the restoration of the Silver Dollar, under Treaties for Bi-metallic 3Ioney without Fusion of Currencies, with the Latin Union and Austria, upon South American and Asiatic trade, and I was led to conclude that (of course apart from the question of the actual feasibility or other results of the measure) such measures would materially improve thy prospects of our commerce. It was therefore with considerable surprise that in a pamphlet, lately issued in England, I read the following passage, in a letter of Mr. Stephen William- son, a merchant of Liverpool, engaged in the South American trade, on the "Depreciation in the Value of Silver,' addressed to the President of the Liv- erpool Chamber of Commerce, dated Jul}- 20, 1876: "It may have the semblance of disloyalty,"' says Mr. Williamson, "to tender 64 SILVER AND GOLD. In view of these and similar possible alternatives, I propose, without discussing the ways and means of Eesumption, but sup- posing Resumption already to have taken place, to otfer a brief analysis of the Functions of Money, and their relation to a rise and fall of its value. We can best, in this way, disengage the principles which should guide the Legislator in the difficult task of providing a stable basis of metal for the nation's business. J\[oney is then a material commodity, used under the guaranty of stamp or coinage of the state, as an Instrument of Exchange. Its substance being regarded both as valuable in the present and secure of unremitting employment in the future, both for purposes of exchange and for use in the arts, the idea formed by men of the value of certain quantities of it becomes a convenient standard for mental comparison with it of the values of other commodities and of services, whether the persons making the comparison have any expectation that these commodities or services will be exchanged or paid for with actual Money or no.* This computation is thus a process in the mind of an individual to whom the material commodity has supplied a conception : namely, that of a — to him — approximately definite value. Money, therefore, beyond and above its use as a material Instru- ment of Exchange, supplies to man that idea of the value of a dol- advice contrary to the good of my own country. But if the United States were able to buy up (even on loan) the depreciated Silver Currency of the Conti. nental nations — to establish with France a Dual Standard, to make the Silver Dollar an unlimited Legal Tender, as the Silver Five-franc piece is in France, and as the Eupee is in India — she might ere long attract to herself, and away from us, nearly the whole of the South American, Mexican, East Indian, and Chinese demand for calicoes, twist, iron, and cutlery. France might partici- pate largely in the residue. They might establish copper works at New York, Baltimore, and Havre that would be able to compete with Swansea and Liver- pool for those supplies of the raw material which constitute two-thirds of the entire Copper now imported into Europe, and otherwise cause us to have a humbler estimate of our financial and manufacturing greatness. But I am aware that the very risk of such contingencies, carrying with them, as they would, the germs of permanent commercial declension, and, as a consequence, a materia] reduction in the value of all real property, will arouse our slumbering Statesmen and Financiers, and so prevent the national catastrophes which oth- erwise may befall us. The sooner they awake to a real and lively sense ol danger, the better for England and for the World." ■■ In speaking of Money, I mean, of course, real Money, excluding Paper Money, subsidiary Coins, and other forms of credit. MORAL QUESTIONS INVOLVED. Qo lar. or pound, mark, or franc, which becomes, in his comjjariiiii; and coniputinic of vahies, the Unit of Prices, of Account, of Appraise- ment, of Investment, This, therefore, is tlie non-material, the arithmetical, or numer- ical function of monc}' ; as the universal divisor or common de- nominator of values : a function which maybe brieflj' character- ized as that of an Instrument of A^aluation. But value itsell" is, ot course, merely a relation between exchange- able or supposably exchangeable commodities ; it lies entirely at the mercy of man, who makes, or may make, these exchanges, and man is himself at the mercy of events. Time may bring change to the utility and to the value of the materials between which the relation of value is supposed to exist. There can, therefore, be no permanence of accuracy in that com- putation of value Avhich is implied in Prices, Accounts, or other uses of Money, as an Instrument of Valuation. An exchange ac- tually made is not likely to be afterward exactly duplicated. The innate properties of the commodities compared, may remain the same, and the qii;ilitics of the number — ten, for example — are as constant as the universe ; yet the value, or, in other words, the Purchasing Power of ten dollars of Gold or of Silver varies from time to time, and the value of ten tons of iron, ten bushels of wheat, ten acres of land, is even more unstable. Each term of the comparison is thus elastic, and not only has a different length for different persons and places, but to the same person at different times. What determines what the "figures" shall be in Prices, Accounts, Appraisements, Investments? Evi- dently, they depend upon the relation in the mind of the Seller, Ac- countant, Appraiser, Investor between what happens to be, at the time the valuation is made, his individual idea of the value of a dollar and his individual idea of the utility of the commodities or services estimated. The division of labor, the multiplication of needs, and resulting increase of exchanges which characterize civ- ilized life, have indefinitely increased the practice of computations of value, and hence arises an increasing importance of Money as an Instrument of Valuation. Concurrently with this development of the use of Money as an Instrument of Valuation, another and distinct use of the material Mone}' is evolved : namely, its Function as a Means of Paj'ment. The liquidation of obligations, which may arise from a variety o** causes (as, for example, contract, laws or judgments of courts di- Q6 SILVER AND GOLD. reeling payments, etc.), assumes ^a prominent position among the Functions of Money. The past, present, and future are bound to- gether by a network of obligations, and these obligations are habit- ually expressed in terras of Money, and liquidation of them is de- mandable in metal. To the extent of fabulous sums total of Clearing Houses — indeed, of the entire credit transactions of the world — the matcri«iil Mone}*. which has supplied to the mind the various Units in which debt or credit are expressed, is (except where there is a Paper Legal Tender) also demandable in corpore, as a Means of Payment. Its use in this Function attains, therefore, immense proportions, and is subject to great fluctuations. Second in the extent to which it gives employment to the mate- rial Money, though first in historical importance, is that portion of the activity of Money as an Instrument of Exchange which ap- plies to the direct purchase of commodities. It is, in my belief, profitable to segregate this as a distinct Function of Money. But, beside these uses, Money is largely used for the peculiar purpose of preservation of value, and this both in space and time. It is the acce^^ted Instrument for the Transfer of Yalues from one place to another place. Again, as a hoard or Store of Value, or as an Investment (as, for example, where a court orders property con- verted into Money for safe-keeping) it serves to transmit to the fu- ture a value obtained in the past. The uses of the material commodity. Money, therefore, may thus be classified : A. A Means of Payment. B. A Means of Direct Purchase of Commodities. C. A Means of Transporting Value. D. A Means of Preserving Value — while, as the basis of a definite idea of value, it serves as: An Instrument of Valuation. As to A, we observe that payment being a present delivery of certain quantities of Money, determined upon in time past, this use of Money rests upon persons, in so far as they arc debtors ; and the extent to which Money is actually used in this Function depends largely upon the ability of debtors to obtain, at the proper time, the amount of Monej' stipulated for in the past. As to B, it is plain that the Money used in this Function is pri- marily regarded as being in hand, although the idea of obtaining it is not far in the background. MORAL QUESTIONS INVOLVED. 67 In like manner, the Functions C and D look to the action and interest of one who is already a ])ro])rietor of Money. To the fifth Function, on tlic other liand, all men, in various de- grees, contribute their activity in computations of value. It may also be well to remember that inasmuch as in the Func- tions A, B, and C Money must be transported, the smaller the bulk or the less the value is, with an equal weight, the more conven- ient will the Money be. It follows, therefore, that, as regards the general Function of Money as a Medium of Exchange, which includes the three Func- tions just mentioned, if it were true that convenience of handling and carrying were the chief desideratum, then the greater the value of any special sort of Money referred to, the better it would be, provided the difficulty of obtaining pieces of smaller denomi- nations for change could be met. To use the worls of Ricardo, " ten millions would be as effectual for that jiurpose as one hundred millions." The same observation applies to the use of Money for hoarding, inasmuch as the smaller the bulk the greater will be the ease of concealment. It is plain, then, that from the point of view of mere conven- ience (excluding for the time all other considerations), it would bo well to have a metallic currency composed of a small quantity of Gold, the value of which should be indefinitely greater than it is at present; and, perhaps, an equal weight of Silver, the value of which should be so far inferior to that of Gold as to enable it to supply the need of Coins of convenient size and of less value than the smallest Gold Coin which can be conveniently used. Of course, such Money can exist only in Utopia.* It is as im- possible to establish such a system as it would be to build the upper story of a house first, leaving it in the air with nothing to sup- port it. The future must be buiit upon foundations of the past and the present. Now the pa■^t and the present command the field of dis- cussion, by the existing stock of the Precious Metals; b\- the ex- isting Prices in different countries, based partly upon Metallic, but largel}- upon Paper Money, and by the outcome of former Valua- "^' Even if such a currency existed, it would be exposed to the same derange- ment of Purchasing Power, and relative values of Gold and Silver, which now disorganizes the business of the world ; and the same questions must arise which we are now endeavoring to answer. 68 SILVER AND GOLD. tions and Investments in the shape of outstanding obligations pay- able in Mone}". In the presence of these great facts, convenience of handling and transporting seems dwarfed into insignificance. This insignificance is only heightened by the further fact that pa- per Instruments of Credit, while their use tends to make Metallic Money fall in value, and hence to incretise the weight of metal necessary for exchange with a given value, j^et have also, in prac- tice, constantly tended to supply the place of Money in such a way as to reduce to the minimum the actual handling and transporting of mettil. and have, therefore, likewise reduced to the minimum the importance of this mere convenience or portability. Eeturning then to the general questions of Yalue, we observe that from existing Prices in a given time, in a given country, an average of Prices may be constructed which conveniently meas- ures the average value of Money at that time and place. Our main question is then as to the eff'ect of a rise or fall of this value, manifesting itself in the various Functions of Money, and their respective influence upon National Prosperity. But, first, a word of explanation as to Prices : It is of course understood that variability is an innate character- istic of Price ; and albeit the fluctuations of different commodities tend to balance each other in the calculation of an average, yet a certain degree of variation, possibly periodic variation, in the averages of Prices, would seem inevitable. For an average extended over a considerable period of time, a greater degree of steadiness would seem attainable. In the calculations of such averages, a series of perplexing, if not insoluble, problems arise, whose existence, added to the inaccu- racy of statistics, compels an admission that the results can only be approximately correct. Fluctuations of Price are of course producible by a variety of causes, beside that increase or diminution of the supply of metal for Monej', to which our attention is directed in tliis chapter.* Each commodity has its own vicissitudes of demand and supply, and the alterations of cost of production — for examj)le, a very good * Indeed, in the case of a Credit Currency, expansion might coexist with a fall and contraction with a rise of Prices. This subject has been lately dis- cussed with accustomed insight and clearness by a distinguished thinker, Mr. 13. F. Nourse, of Boston, in a jiaper on "Currency and Prices," recently read before the Amer. Social Science Association. MORAL QUESTIONS INVOLVED. 69 or veiy bad harvest, a labor-saving invention, etc. — introduce a dis- turbing, though gcnerall}^ wholesome, clement into the problem. Confidence or apprehension, acting upon Credit Exchanges and Coin Exchanges, as wind may act upon a mass of clouds, enter also as factors into the pi'oblem. But making all allowance for the seemingh' irresponsible laws of Price and for cost of production, deduntis deducendls, it still ivmains true that a marked change in an}' given status quo of supply of metallic Money does, sooner oi- later, albeit by tortuous and hidden paths, tend to affect the average of Prices, making Prices higher as Money increases in amount, lower as it dimin- ishes. To illustrate : it ma}^ be said that alterations of the supply of Money tend to affect prices, as an increase or diminution of the force of gravitation would affect the movements of bodies, animate and inanimate, on the earth. In speaking of a rise or fall in the value of Money, I refer sim- ply to such as are caused by an increase or diminution of the supply of the metals used as Money, beyond or within that annual increase of sup])ly which may be taken as normal, and I exclude all other causes from consideration. But what is the normal demand? The question is a difficult one. As man is constituted, one may say that population ought to increase, and wealth ought to increase, and hence a certain per- centage of increase of Exchanges may be assumed to be " normal." It is plain that opinions are likel}' to v.wy upon these questions, and that the best opinion is a very indeterminate solution of the question. Until I gain further light, I shall be content to define it as that supply which will keep the General Average of Pi-ices constant. In considering the effect then of such changes ii])()ii the action of Money in the various Functions above set forth, we observe that as an Instrument of Valuation it is equally distui'bed by a rise as by a fall. Any change in the value of Money tends to confuse the mind of him who makes the computation of value; and as the thought of the future is constantl}' active in the present computation, the disturbance is complicated by additional uncertainty. Of course men could accommodate themselves to a less or more valuable Unit of Account, of Price, of Appraisement, if they started with tabula rasa — if there were .no old Prices ancl Valuations sensibly to affect their interests in present or futur-'. But man, rO SILVER AND GOLD. for tbe most part, inherits his Units of Value, and if the present and future are to keep good reckoning with the past, the common denominator should remain as constant as possible. On the other hand, the Function of Money as a Conservator of Value in Space and Time — looks simply to the interest of the pro- prietor of Money, and to no other. To hira of course a rise in the value of Money is far preferable to a fall. A rise in value not only preserves, but increases, the original value with which those Functions came into activity. A fall, on the other hand, implies a failure to perform these Functions, of preserving value. As a Means of Direct Purchase of commodities, so for as the in- terests of a proprietor of Money are concerned, it is desirable that Money should rise in value. "We come now to the Function into which these other Functions may be said to discharge themselves, as rivers into a sea — to that of a Means of Payment. We see that the past, present, and future are bound together in this Function. Ui5on this Function is cast the burden of discharging those outs' anding obligations which are the result of former Valuations. In this Function, former Prices, Accounts, Salaries, Wages, Investments, Appraisals, are ever kept present by the necessity of payment based upon them. In general, it is plain that to him who has Money in hand, as far as his interest in that portion of his property is concerned, it is desirable that its value should rise. To him who has not, but desires Money, it is plain that that change is preferable which enables him to obtain more Money than he would otherwise obtain. A fall in the value of Money, arising from an increase in its available amount, will naturally tend on the average to produce this desired result ;* but the creditor to whom the debtor pays his debt will receive Money that is worth less, and the debtor himself will also possess Money that is worth less than before. It perhaps needs not to be said that the desideratum for the inter- * I speak, of course, of the redundance o{ Precious Metals. I am well aware of the demagogugc spirit, which is the legitimate child of the Legal Tender Acts, and which has sought to dishonor the conntiy by appeals to the basest motives of the " debtor class." I know the danger of appearing to give support of Science to that spirit. On the other hand, I have confidence in truth, and in llio honesty and acutc- ness of my countrymen, and I think the safe course ibr the advocates of sound currency is to grasp this nettle firmly. The truth will bear being seen— the greste-t danger is in misrepresenliiiij it. MORAL QUESTIONS INVOLVED. 71 csts of u people is tliat the value of Money should remain on the average permanent. Our hypothesis of rise or fall is referred to a certain level, a nor- mal sup})!}' of the metals to be coined into Monej', and the idea of this normal supply eari'ies with it what is meant by adaptability to the wants of trade, to take up that bj'word of Inflation and use it in its legitimate connection. Where, then, there is this steadiness of value the debtor fulfills his obligations bj" paying, and the creditor is satisfied on receiv- ing tiie amount of Purchasing Power originally stipulated for. The value preserved and the value transported prove the same as at tlie start, and answer the legitimate expectations of the owner. Prices, Appraisals, all Valuations in fact, are granted a longer lease of accuracy, and thus a fertile source of error is removed from the myriad calculations of business. In general, to him who desires, and has not, Money, a constant value and normal supply present a majority of favorable con- ditions. It will furthei' be apparent that the injurious effect of an altera- tion in the value of Money, arising from redundance or scarcit}' of it, will be, other things remaining equal, proportioned to the sud- denness and extent of the change, combined. A gradual alteration is less dangerous than a sudden alteration. Supposing, then, we have to compare the effects upon prosperity of a rise and a fall thus caused, and the extent and suddenness of which are similar, which of the two is preferable, other things of course remaining equal ? The judgment of economists is clear that a fall is preferable to a rise ; or, in other words, that redundance is better than scarcity. M. Dupont-White said that the metal that followed Columbus' discovery paid off the old debts of Kurope. This is a brusque statement, and indeed repelling, when one mentally supplies, "Yes, but with depreciated Silver." And yet the question is not so simple as tliis answer would impl}*. Let us consider, for example, whether debts were not paid which but for this metal never would have been paid at all. Were not bank- ruptcies and repudiations made unnecessarj' b}' this redundance of Mone}', which but for it would have prevented the payment of those debts? Were nut the jjroduetive energies of the Western World '2 SILVEE AND GOLD. stimulated by the redundance of money?* It may also be said that the majority of men being both debtors and creditors, they gained in one capacity what they lost in another. J. li. McCullocli, in his discussion of the effect of the late great in- crease in the world's stock of Gold, sa3-s, in conclusion :f '• Though, like a foil of rain after a long course of dry weather, it may be prejudicial to certain classes, it is beneficial to an incomparably greater number, including all who are actively engaged in indus- trial pursuits, and is, si^eaking generally, of great public or na- tional advantage." Roscher (Grundlagen der National Oeconomie, sec. 141) points out that the Gold Discoveries by preventing a dearth of Money, which witliout them would have probably occurred, saved the nations from a grievous malady. On the other hand, he explains, in the sense expressed by McCulloch and Chevalier, how a fall in the value of Money may stimulate to a notable increase of national produc- tion. Chevalier, in the second edition of La Monnaie (186G), referring the reader to his work on the Probable Fall of Gold, gives a resume of the subject discussed in it, which may here conveniently- serve to suggest the nature and variety of the questions involved (the full discussion of which is forbidden b}' the limits of this essay) as well as the conclusions of the distinguished author. The questions which are there examined he says (La Monnaie, pp. 759, 7G0) are as follows : The outlet offered to the Precious Metals by peoples which at present lack a sufficient proportion ot Precious Metals in their in- struments of exchange. The increased demand for Coin which, may arise from the de- velopment of business and increase of popuhitions. Luxury and the emploj-ment it may give to the Precious Metals. Classification of incomes which will, and incomes which will not, be injuriously aifected in the degree ol jn-osperity which tliey pro- cure. The sufferings and embarrassments which, it appears, must accom- pany the change. '^^ The familiar view as to the injuriou-s effect of vedundance of Precious Metals upon the development of Spain does not exclude this idea. t Encyclopaedia Britaiinica, article, Precious Metals, He denies, however (in 1858), that Gold had fallen in value. MORAL QUESTIONS INVOLVED 73 The 111-ofit which will accrue from this fall in the value of Money to certain categories of persons, and to society. The saving which States may be enabled to make in the pay- ment of their debts and tlie interest on them. "In fine," he says, "the change will profit those who live by present labor; it will injure those who live on the fruits of past labor, be it their own or that of their fathers. " In this respect, it will act in the same direction with the greater part of those evolutions which are accomplished in virtue of the great law of civilization to which ordinarily we assign the noble name of progress."* Explanatory Notk. — In the foregoing classification of the Functions of Money, the peculiar importance of the function of a Means of Pay- ment may not unprofitably be illustrated by a reference to the discussion of the causation of the Value of Money, in Chapter VIII and note. The Money obligations, of which Payment is a fulfillment, are the out- come of the Legal and Lawful Position which the needs of men and of society, as regulated by Private and Public Law, have given to whatever merchandise serves as Money. The failure to comprehend the influence of Law upon the value of Money-merchandize, is curiously illustrated by the almost inveterate cus- tom of writers to sijeak of Money as a ]Medium of Exchange of Commodities, as if this definition exhausted the subject! Civil Society is inconceiva- ble without Money of some sort. Government can not be carried on, Law can not be administered, without Money. The moment they come into being, taxes, appropriations, fines and damages, salaries, etc. — in a word, a multiplicity of obligatory payments — come also into existence, in which the idea of exchange of services, and, still more, that of exchange of com- modities, is so remote as to be unavailable as a principle of classification. Meantime the private citizen is naturally led to the use of some sort of merchandize as a convenient middle thing — medium, tcrtlum compara- tinnis, measure — in his exchanging, which, if it be fit for its purpose, will, in the words of that greatest of Jurists, Paulus, with its general and per- manent value and its divisibility, mold itself to the dis]>arate commodities which men would gladly barter, and thus facilitate exchanges. Now, the Goverinuent can not exist without some kind of Legal Tender and Lawful Money ; and in practice Governments usuallj' make that mer- chandize Legal Tender and Lawful Moneywhich the citizens are in the habit of using chiefly as a Means of Purchase. * A cet egard, il agirait de meme que la plupart des evolutions qui s' accora plissent en vertu de la grande loi de la civilisation, a laquellu communoment, on assigne le grand nom de progres. In the foregoing lines I have given "debts and the interest on them" as an equivalent to the French •' rentes."' 74 SILVER AXD GOLD. CHAPTER YII. THE EXAMPLE OF ENGLAND. 1. Eestriction and Eesumption of Cash Payment. Re-organizatiou of Coinage in 1717 — Blarket relation of the metals in the Eighteenth Century — Ke-coinage of Gold, and Law of 1771 — Limitation of Silver coinage in 1799 — The Five-Shilling Dollar — Estimates of stock of Specie and Notes — Restriction of Cash Payment — The One and Two-Pound Notes — Characteristics of the Restriction Period — Professor Jcvon's Table of Prices — Estimates of Circulation — Preparations for Resump- tion — Coinage Act of ISIG — Resumption Act of 1819— Estimated increase of Specie Stock — AVithdrawal of One and Two-Pound Notes — Policy of the Bank — The non-withdrawol of the small Notes — Repeal of the Act directing withdrawal — Speculation and crash of 1825. 2. Demonetization of Silver in 1816, and its relation to Resumption, Prices from 1815 to 182-1 — Stages of transition from Paper Prices to Gold Prices — Rise of Value of Gold — Normal Reaction from War and Inflation or deficient Supply of Gold — Stock of Specie in Western World, 1810— Annual product, 1810-30 — Existing Supply of Gold — Mode of obtaining it — Misfortune of England's position — Condition of Monetary Theory and Statistics — Denionetizatiou of Silver — Question of Legal Ratio — Existing Supply of Silver — Silver Standard on the Continent, and Demonetization of Gold — Effect of Act of 181G — The Silver Price of Gold — The argument for permanence of the Value of Gold — Effects of the demand for Gold for Resumption upon its Silver Price — The em- ployment of Gold and Silver as Legal Tender at that period — The cessation of the War Demand for Gold — Local Values — Effect of use of full-weight Silver in Resumption — Ap- plication of M. Mannequin's argument for permanence of Value of Gold — Explanatory note — Position of Resumption Act in English controversy between Specia and Paper — Coinage Act popularly identified with Measures of Resumption. 1. RESTRICTION AND RESUMPTION OF CASH PAYMENT. In the reorganization of the English Coinage System, in 1717, in which an amount of Gold about five per cent, less than had been previously fixed upon was now made the lawful equivalent of the pound sterling of Silver, although the change was cx])ressly in- tended to guard against the exportation of Silver, Gold remained slightly over-valued. Twenty shillings of Silver were worth more in the market than jO. of a guinea, which was the chief Gold Coin then in use. The legal rate was 1 to 15.21 the market rate about 1 to 14//^. Although thus over-valued, and hence more and more in demand as the cheapest Lawful Money in the business relations of the chief Commercial Country in the world, Gold stood during a great part of the 18th century (notably between 1736 and 17U-4) at a lower average price than in 1717. EXAMPLE OF ENGLAND. to The discovery and iiiereasin*;^ product of the Brazilian gold- mines is naturally assigned as the cause of this decline. At about the time these mines were most productive, Gold fell for a time in some marUcts in Germany (which then maintained the Silver Standard) to the nnusually low figure of 1 to 13^^^. Subsequent fluctuations thus failing to lower Silver or raise Gold beyond the line of the new legal relation, Gold became the con- trolling element in British currency. Both Silver and Gold were of course Legal Tender for all debts and all amounts. In 1774, the great mass of Coins having been deteriorated by long use, and a large importation of Coins below full weight hav- ing taken place, the question of re-coinage came up in Parliament. To re-coin the entire stock at once was beyond the power of ti)e Mint, and it was resolved to commence the work with the Gold, and in order to regulate for the time the use of the deteriorated Silver Coins, it was ordered that in the case of payments in excess of twenty-five pounds in one ])ayment, the excess should be paid, if in Silver Coin, by weight, and not by the number of Coins. The war with the Colonies followed, leaving a depleted treasury, and in 179;] the threatened storm of war with France broke out, and ihe I'e-coinage of Silver was further postponed. In 1799, a rise in Gold having brought silver to the Mint, a law was passed inhibiting the coinage of Silver, from which fact lii- cardo remarks,* it would aj^pear that " it was the intention of the Legislature to establish Gold as the Standard of cui'rency.' In 1804, dollars were coined at a private Mint by the Bank, of a nominal value of 5s., but worth in Silver only 4s. 6d.f * High Price of Bullion, etc. For text of statute, see Addenda, p. IDti. tin view of the policy subsequently established by the Coinage Act of 1816, which has since con)pelied the majority of British population to depend mainly on such "Silver promissory note.-,' as Mr. Pitt called them, in what they have to do with Money, it is interesting to note, as late as 1804, such observations as the foilowing: "To issue (Bank dollars) at that rate is no less a fraud on the pub- lic than if o n e - n i n t h of the silver in the shilling was taken away and the remaining 1 1 d . coined into the shape of a shilling and issued as such.'' Lord Folkestone on the Counterfeit Dollar Bill, Cobbett Pari. Deb. 1804, p. 894. This coinage of Tokens is of course a legitimate descendant of the policy of debasement formerly so prevalent. 76 SILVER AND GOLD. The Bank-note currency consisted of notes of the Bank of Eng- land and Ireland, and of the Country Banks ; the former issuing nntil 1794, no notes of less denomination than £10, while the latter had been since 1777 resti-ained in their issues by a law forbidding the issue of notes for less than £5. Of other forms of credit circulation the limits of this essay for- bid me to sj^eak. Of the amount of Coin and of notes in use, widely varying esti- mates have been made. Mr. Eose, one of the Secretaries of the Treasury, estimated, in 1708, the Gold Coin then in use at 43 million pounds, but upon grounds which suggest themselves that the estimate is exagger- ated.* Twenty j-^ears later, Mr. Morrison, Master of the Mint, estimated the Gold in use, in 1790, at 20 to 25 millions, while Tooke gives 22-^ millions as the Gold circulation before the Eestriction.f In the debate upon Lord Stanhope's Act in the House of Com- mons, in 1811, Mr. Johnstone gave as an estimate 30 millions of In Locke's time it was called "raising the Value of the Money." His discus- sion of the subject is eminently suggestive. Among other things he says (Works, fo. II., 89): " Since therefore we are not from matter of Fact informed what were the true motives that caused those several changes in the Coin, may we not with Reason suspect that they were owing to that policy of the Mint — to raise the value of silver in the Coin to promote the work of the Mint? The business of Money, as in all times, so even in this our quick-sighted age, hath been thought a mystery. Those employed in the Mint must by their Places be suppos'd to penetrate deepest into it. "This at least they were not mistaken in that they brought work to the Mint and a part of the Money coined to the Crown for seignior- age : in both which there was profit." Bodin says of the same thing: "For men have so well obscured the facts about Money, by means of {BiUonage) debasing the Coin, that the greater part of the people do not see them at all, (the Moneyers do) as Doctors do who talk Latin before women, and use Greek characters, Arabic words, and Latin ab- breviations, fearing that if people understood their receipts they would not have much opinion of them." De la liepublique, Kdition 1577, p. 0G8. *A Brief Examination into the Increase of Revenue, etc., London, 1709, Appendix, p. 4. t Tooke, History of Prices (I. 1, 117). I have to ask the reader's indulgence for the citations from Tooke's History of Prices in this essay : thoy refer not to the original, but to tiie German Translation — an autliorized translation, with valuable addenda: Tooke-Newmarch Geschiclite und Bestimmung derPreise: ti'an-lated by Dr. Aslier. Tne original was inaccessible to me. EXAMPLE OF EXGLAXD, 77 Specie for the period precediiii^ the Bank Restriction, while in the debate of 1810, Mr. Peel quoted Lord Liverpool's opinion, to th(i effect that the amount of Gold in the country, in 1792, was 30 millions. Now, according to the estimate of Jacob, as adopted in Tooke- [Newmarch's History of Prices, the total amount of Gold and Silver Coin in the Western "World (Europe, North Africa, and America), in the year 1700, was 170 millions of pounds sterling. The average annual product of the Precious Metals, from 1770 to 1809, is fixed by the same authority at 8 million pounds, and the sum of Gold and Silver Coin in the Western world, at the latter period (1809), at 380 million pounds sterling.* Allowing a wide range for inaccuracy in these estimates, it may safel}^ be said that from one-tenth to one-fifteenth part of the Spe- cie then existing in the three continents was in use in Great Britain at the period of Suspension of Cash Payments. The quantity of Bank-notes and Country-notes circulating at this period, was estimated by Mr. Johnstone at 11 and 7 million of pounds respectively. The period of Restriction of Cash Payment extended from 1797 to 1821. The original Restriction was the result of an order of the King in Council made upon the representations of the Chancellor of the Exchequer as to an unusual demand for Specie (probably for hoarding), in consequence of exaggerated alarms in different parts of the country. The order directed the Bank not to issue any cash in payment until the sense of Parliament should be taken. Parliament met, and passed the first of a series of Acts " contin- uing for a limited time the Restriction," and the Bank Directors were also protected against legal proceedings. The drain of Specie, caused by the exigencies of war, was of course accompanied by an increased use of Bank-notes, and events presently led to the withdrawal, in 1797, of the restraining barrier imposed by the 5 pound limitation of the law of 1777. This j^er- mission to issue small notes was to extend until the Bank should resume Cash payments. In consequence of this measure, one- and two-pound notes speedily usurped the place of Coin. It would be of course foreign to mj- purpose to attempt even an outline of the economic features of the period of Restriction. *F. Xeller, Die Frage dcr Internationalen MUnzeinigung, p. 40, gives 400 million pounds for 1803. 78 SILVER AXD GOLD. Such an outline would be incomplete without full treatment of Paper Currency, which my subject excludes; and, indeed, as this period offers a battle-ground for still undecided controversies in ■which most of the noteworthy European economists have taken part, it could not be adequately treated without an exposition of the history of the controversy, and of the present state of the argument. Suffice it. then, to say, that this period of uninterrupted wars waged on continental battle-fields was characterized in Great Brit- ain ; by speculation alternating with depression of business and culminating in disastrous crises ; by an unusual proportion of bad harvests, and their concomitant high prices of provisions, while the uncertainties of the situation were aggravated by the changing duties on breadstuffs ; b}^ exaggerated fluctuation in prices ; by in- creased circulation of paper, and increased fluctuation of its amount. A remarkable development of inventions and manufactures falls also within this period, and it is also marked by the exceptional position of England with reference to the ocean ti'ade of Europe, occasioned by Napoleon's attack on British commerce. The following tables indicate the movement of the average of general prices in this period : FROM PROFESSOR JEVONS' TABLE OF PROPORTIONAL VARIATIONS OF AVERAGES OF PRICE.* Year. 1782., 1783.. 1784.. 1785., 178r... 1787.. 1788.. 1789.. 1790 . 1791.. 1792.. 1793., 1794., 1795. 1796., 1797., 1798., 1799. 1800., 1801.. 1802., 1803., \m\.. l8orj.. 1806. Gold. ,. 100. . 100. . 93. Paper. 90... 85... 87... 87... 85... 82... 82. . 93... 99... 98... 117... 125... 110... 118... 130... 141... 140... 110... 125... 119... 132... 130... 153 119 128 122 i:u; 133 i ear. 1807. 1808 1809. 1810. 1811. 1812. 1813 1814. 1815 1810. 1817. 1818. 1819 1820. 1821. 1 822 . 1823. 1824. 1825. 1826. 1827., 1828., 1829. 1830., Gold. . 129. . 145. . 157. 142. . 136. . 121. . 115. . 114. . 109. . 91. . 117. . 132. . 112. . 103. . 94. . 88. . 89. . 88. . 103. . 90. . 90. . 81. . 79. . 81. .... 132 .... 149 .... 161 .... 164 . .. 147 .... 148 .... 149 .... 153 .... 132 ,... 109 .. 120 ... l;!5 ... 117 ... 106 * Jevons. Variations of Prices and Value of Currency since 1782— Journal EXAMPLE OF EXGLAXI). 79 Of the amount of the Paper Currency durinor the period of Ec- stinction trustworthy accounts ai-o not attainable, there being no accurate record of the issues of the Country Banks. The issues of the Bank of Enghind had risen from an average of 10 millions before the Suspension to an average of 17 millions in the early years of the 19th century, and between 21 and 29 millions in the period from 1810 to 1820. Mr. Johnstone, a member of Parliament, before mentioned, gives in debate in 1811 — 5 millions Specie, 23 millions Bank-notes, 32 millions Country-notes, as an estimate for the circulation in 1810. It had been an unvarying feature of the various Bank Eestric- tion Continuance Acts which had from time to time given a new term of life to the inconvertible paper circulation, that the paper should be redeemed within six months after the conclusion of Peace. Among the results of Waterloo came the necessity imposed upon the business world of Great Britain of abandoning Inflation in its various forms and returning to Coin and convertible Notes. The dreaded day was eventually deferred — first to 1818, then to 1819, and again to 1820-23 — but it would seem safe to say the work of preparation was by all interested silently begun at once. In 181G the new S3'stem of coinage was introduced ; the quality of being a genuine " pound sterling" was taken away from Silver; a new Coin, the sovereign of Gold, was made the new pound ster- ling and Monetary Unit and sole unlimited Legal Tender; while the place of the Legal Tender shilling was filled with a new coin- age of Silver tokens, whose paying power was limited to fiui^it; of 40 shillings. of the Statistical Society, 1865, p. 294. In this article the author sets forth fully the Fluctuations of Prices of various groups of articles which he selects in forming his average, and explains the modes of calculation of fluctuation. Without attempting to enter into the question, it may be noted that the "geometric mean" which Jevons adopts in calculating Fluctuations of Prices is purposely selected to secure against overstatement of the fluctuations, and as being most likely to indicate those changes which are especially Jittributable to supply of Gold. "While recognizing the tentative and approximate character of such aver- ages, one may safely accept the figures given as indicating the value of Money to the majority of men in Engliuid :il ihiti time. 80 SILVER AND GOLD. £5,124,000 of new silvei- Coins were issued in 1817 in exchange for worn-out Coin. According to Tooke, the price of Gold in Bank-notes, which showed a premium on gold varying from 35 to |- per cent, in 1815, ranged in 1816 from 3 to | per cent., in 1817 from 2 to 4, in 1818 from 4 to 6, in 1819 from 6^ to Par. In 1817 a partial Resumption or redemption in Coin bj- the Bank of certain classes of Bank-notes ensued, upon which the authorities do not seem to be agreed.* The Eesumption Act of 1819 continued the Eestriction of Cash Payment to February, 1820, and thereafter ordered the redemption by the Bank of its Notes, when demanded in a quantity of not less than sixty ounces of Gold (over 1,000 dollars), in Gold Bullion, at a discount for paper of about 3^- per cent, till October, 1820; from that date till Maj^, 1821, at about 2 per cent, discount ; and there- after till May, 1823, at Pitr, but still in Bullion; while after the latter date all Notes were to be paid in Gold Coin on presentation. The Bank was, however, permitted to pay in Bullion at higher rates in fixed periods, and in Gold Coin after May 1, 1822. A sub- sequent law permitted full redemption after May 1, 1822. The policy of the Bank, hereafter alluded to, having proved suc- cessful, the Bank availed itself of this permission. The Bank-notes rose to Par, and, without any apparent shock to business, Resump- tion of Specie Payment became an accomplished fact. Of the amounts of Specie in the country at this period it is diffi- cult to form a correct estimate. The metallic reserves of the Bank in the months of August and Februarj^, from August, 1816, to February, 1818, were respectively 7^, 9f, 11|, and 10 million pounds. In the "Memorandum" furnished to Parliament b}' the Bank Directors in 1832, they give 20 millions as the aggregate amount which they were obliged to obtain from foreign countries in order to fulfill tlieir duties under the Act of 1819. This, of course, is in addition to the existing reserve, which in August, 1818, stood at 6 million, in 1819 at 3 and 4. In view of these figures and of the low premium in Gold which had prevailed for some years, and the amount of Silver Token Money issued in 1816, it would seem safe to say that the *See Tooke-Newmarch (I. 1, 199), ivnd Levrs History of British Comnaerce, p. 141. EXAMPLE OF ENGLAND. 81 Specie slock of 1821, compared with the Specie stock of 1812 and 1813, must indicate an increase of from 25 to 30 million pounds. A controlling purpose of this great accumulation within the con- ti'ol of the Bank, of Gold obtained from foreign countries was the contemplated substitution of Gold in place of the one and two- pound Notes of the Bank of England, and of the Country Banks as well. It will be remembered that the Act of 1797, which orig- inally authorized their issue, limited their duration to the period of Ecstriction of Cash Paj^nent. 7^ million pounds were accumulated by the Bank to redeem its own Notes of these denominations. In providing as much more for the redemption of the Country- notes, the Directors, according to their own Account, before cited, had anticipated by three years the commands of Parliament. A large part of their own Notes were withdrawn in 1821, and although directed to be ready to redeem the Country-notes before 1825, they had already provided themselves with the necessary Gold in 1822. The effect of this policy of the financial magnates of Great Britain was well and tersely indicated by the words of the Memo- randum of 1832, already cited. This great supplj' of Gold could " only be purchased bj'' reduced prices of commodities." It seems to have been the purpose of the Bank Directors to hasten the period of redemption of the small Notes before the time ordered by law. "Whether and in either case to what extent in this action they were leaders or were led by circumstances, it is difficult to decide ; but Eicai'do himself had suggested beforehand a motive of self- interest for such action. He said in the debate of 1819: "They had no real interest in depreciating the currency : it would be rather their interest to raise it, even to double the value. They were in the situatio'n of creditors, not of debtors; their whole capital being in Money or in Securities representing Money." It now became more and more evident that the substantial inter- ests of the nation were suffering grievous ills, arising from mis- taken legislation. Brougham's proposition to reduce taxation in proportion to what was supposed to be the fall of prices, and the attempt to reduce the sovereign from 20 to 14 shillings fall Avithin the year 1822. In the end the contest was allayed by the passage, in the same year, of a law repealing the provisions of the act of 1810. which 82 SILVER AND GOLD. required that the Country-notes for £1 and £2 should bo with- drawn on and after May 1, 1823. A "respite" was thus granted in the substitution of Coin for Paper. In truth, however, the Grold requisite for the contemplated withdrawal of Paper having been already collected from abroad, the law appears to have set these millions free to produce what may be called a Coin Inflation.* A I'ise of Prices now began and a revival of business, which, upon this new basis of Paper and Coin, swelled into one of the great tidal waves of speculation, whose devastations make epochs in Commercial History. In the space intervening before the crash of 1825 immense in- vestments were made in foreign loans, of which those to the newly recognized South American Ee^Dublics were a large part ; while in 1822-5 companies for new ventures in business found credit enough for a nominal capital of more than a hundred million pounds. But for the purposes of this essay the nature of this ever-mem- orable Crisis is sufficiently indicated by the figures in the Table of Prices, which mark a rise of 17 per cent, in 1825 above the avei-age of the three pi'evious years, while the decline in the yeav following 1825 is hardly less marked. In 182G Parliament decreed the withdrawal before 1829 of Coun- try-notes under £5. 2. DEMONETIZATION IN 1816, AND ITS RELATION TO RESUMPTION. Having thus sketched the outline of events, we may now turn our eyes to those questions suggested which are specially germane to our subject. AVe have seen that within the years 1815 to 1822 (leaving thus a wide margin for possible error) Great Britain had increased her home stock of Precious Metals, of which Gold formed six-sevenths, from 10 or 12 millions to from 35 to 40 million pounds. * There is an interesting analogy between this and the Coin Inflation in Germany, directly and indirectly consequent upon the payment of the War- fine. To use the expression of a German economist, Germany "discounted the War-fine" in specuhition, and the Monetary Policy of the (iovernment added fuel to the flame. Wirth estimates the increase of the Metallic and Paper Currency at 40 per cent. (See Geschichte der liandelskriscn, 1874, pp. 434, 435; also Die Munzkrisis und die Notenbank Reform, pp. 35, 30, 37.1 Was it policy or was it a blunder? Has Bismarck taken a leaf from the book of the authors of "Caisarism?'' For inflation marked the gold-freighted return from Gaul of Caesar, that greatest of statesmen, and the stores of Egypt enabled Augustus in like manner to ble.ss his country. EXAMPLE OF ENGLAND. 83 Prices, accordincj to Professor Jovons' averages, stood as fol- lows: YEAR. GOLD PRICE. BANK-NOTE PRICE. 1815 109 91 117 132 112 103 94 88 89 88 132 1816 109 1817 120 1818 135 1819 117 1820 106 1821 1822 1823 1824 For the earlier years here noted, it will be apparent that the Bank-note Prices are most important, the overwhelming majority of transactions being performed with Paper. The figures of 1815, 181G show in striking manner the effects of the financial crash of those years, a leading feature of which was the withdrawal of a large proportion of the Paper Currency. Considering the averages of the period 1817-1820, when Gold was coming more and more into use, we find that Paper Prices stood at an average of 119^, while a discount for Gold would have lowered the average to 116. AVhen, however, the process of obtaining Gold from abroad had had time to exert its full effect on Prices, and Gold was actually substituted for Paper, the fall took place, as dejDicted in the table of Prices, giving for 1821-1824 an average of 90, in the place of 116 — a difference of level of nearly 23 per cent. The problem of chief interest to us is, of course, what is the connection between this sudden demand for some 25 or 30 million pounds of Gold and this abnormal subsidence of Prices. It should be observed, of course, that it is not the subsidence from Inflation Prices in Paper, properly speaking, of which ac- count is taken. 134;^ is the average of Paper Prices from 1810 to 1820. The last four years show a decided decline from the Inflation level, 152 having been the average from 1810 to 1814. These figures show, of course, the height of Inflation. But, as we have indicated, thei-e were in England, in 1817, 1818, 1819, and 1820, many millions of Specie, Silver Coin, and Gold Coin, and 84 SILVER AND GOLD. Gold and Silver Bullion, used as merchandise of exchange. The Specie then which in those years was exchanged fur commodities would buy, in the years 1821-1824, about 25 per cent, more of the same commodities. Of course, there Avere fewer transactions in Gold in the former than in the latter period. The greater part of business was done in Paper, and hence the average of Gold Prices for the former pe- riod is, to a certain extent, artificial ;* but, nevertheless, the fact, such as it is, is there, and must be explained. We ask, then, is this subsidence of Gold Prices — is this upheaval of the value of Gold (and. nominally at least, of Silver with it, within a few per cent.) — merel}' an internal and self- wrought revo- lution of England's business ; a normal continuance of the reaction from war speculations that had failed, and from rioting in card palaces of credit founded on Paper Money, which marked the former change from a level of Paper Prices of 1810-1814. 152, to 109 in 1816? Or does it indicate a demand for Specie, outstrip- ing the normal supply — a local " Geld-theue?'ung," in Eoscher's phrase — a dearth and dearness of Gold? It is plain that both fiactors must be present. The latter, of course demands our attention. The extent to which it was active can, of course, best be shown by examination of the status quo of the stock on hand, and annual supply of the Precious Metals. Taking, then, the estimates of Jacob (Tooke, Part 7, Appendix 2), we find that, as before stated, the total Gold and Silver used for purposes of exchange in Europe, North Africa, and America, in 1810, is fixed at 380 million pounds. The average annual produc- tion of the two metals, for the period preceding 1810, is estimated at 8 million pounds sterling. About 35 per cent, in value of the total stock, at that time, was in Gold, which fraction, applied to the stock used for exchange, would give 133 millions as the stock of Gold used for that purpose in 1810. For the period 1810-1830, the annual product shows a marked falling off, in part attributable to the wars among the Spanish American Republics. ■' Thi,s matter of nominal Prices — of the importance of the number of trans- actions — is a promising and much neglected field of analysis. Gentlemen rea- son about " Depreciation " of Silver without a thought of the number of ex- changes actually made between Silver and Gold or Silver and other commod- ities in Silver-using countries. The Purchasing Power of Silver in 1876 is a dangerous subject far Gold-monomotalliets. EXAMPLE OF ENGLAND. 85 Jacob gives £5200000 tis the nnnual product for this period, and of this, according to Soetbecr, about 29 per cent, was Gold. This would give, therefore, a total annual supply of about £1^ millions of G-old, and this £1^ million must, beside making good the annual loss, if possible, honor the drafts, not only of the West- ern World, but of Asia, both for use as Money and for the arts. The extent to which the supply was deficient maybe best judged of by the fact that Jacob estimated that the stock of Gold and Sil- ver in use in the Western World for pur])oses of exchange decreased from 1810 to 1830 by about 17 per cent., namely, from £380 to £313 millions. If we make, upon the basis of the preceding approximations, an estimate of the amount of Gold used for exchange in Europe^ Af- rica, and America, in 1820, we shall find that it amounted to about £120 millions. Such being, to the extent to which these approximations can represent it, the status quo upon which the new demand of £25 to £30 millions made itself felt, and wijihin which it caused a redis- tribution of the stock of the world, it is plain the movement thus caused was a formidable one. If we ask further how this determination of Gold to England was brought about, we shall remember that the power wielded by her merchants and financiers inevitablj", under the necessity of Re- sumption, was directed to lowering the price of commodities — and primarily in England itself. For it came, not in solid masses, but little by little, through the labyrinthine avenues of business; and, in order to get it, it was necessary to offer a high price for it, and this could only be done, of course, by low prices of commodities; and, to prevent it from flowing away again, the same causes must remain active, and prices must remain low. We see, then, that it was England's misfortune to bo called upon by regard for national honor, and, in order to free her business from the incubus of inconvertible Paper, to make a new and large demand for Specie, and, in so doing, to reinforce and accelerate a general tendency to decline in Prices, expressed in Coin, which a failure of supply of the Precious Metals had brought upon the world.* *It may be suggestive to recall, in this connection, the state of supply to- day — the annual product of Gold waning, that of Silver increasing, while the total product of the two metals remauis nearly constant. 86 SILVER AND GOLD. Now, Resumption being a necessity. Jind inasmuch as the availa- ble stock of Precious Metals in the Western World was bereft of its accustomed annual renewal, the question naturallj'" arises, AYas not this subsidence of Pi'ices — this upheaval of the Value of Money — equally a necessity ? Was not this the only price at which the inestimable gain of the return to a Specie basis could be attained ? If we look closely at this question, we shall find that it readily resolves itself into— First. A question of percentage of upheaval ; and, Second. A question of suddenness of upheaval. In other words, supposing that a large part of the foil of Prices was necessary, was the whole of this fall necessarj^? — and, sec- ondly, was it desirable that the change should be so abrupt? In connection with either question, it is eminently suggestive to note how little the carrj'ing distance of the artillerj^ brought to bear upon Paper Prices was understood by the best brain of the time. In the debate on the Resumption Act, Ricardo, the leader of the Economists, amid the applause of the House, pronounced the diffi- culty in the way to be only that of raising the currency 3 per cent, in value. Or, he said, if a proposed amendment shortening the time are to be passed, "an extraoi'dinary demand for trold might take place for the purpose of coinage, and this might enhance the value of the currency 3 or 4 per cent., in addition to the first enhance- ment."* Many years after, J. R. McCulloch apologized for the methods of Resumption, on the ground that Parliament could not take into consideration the apjDreciation of the Precious Metals. But even this does not explain the selection of the rarer of the two metals as sole Legal Tender. The distinguished author fails to state why Parliament could not take the appreciation of the Precious Metals into account. If this were the case — if it bo true that Parliament could not do so — certainly Parliament was suff'cr- ing under disabilities which demand attention. But without attempting to discuss either the policy of the mag- nates of the London Money market or that of the Resumption Act, whose effect their policy had fcM-ostallcd, I shall present the ques- * Ilicardo is said to have admitted his error afterward. See WiUiam Ward, Remarks on tho Commercial Leijislatinii ul' 181G. EXAMPLE OF ENGLAND 87 tion of percentage in a manner directly germane to the subject of this essay. Did the establishmont of llio Gold Standard tend to aggravate the fall of jjriccs "which accompanied Resumption, or, in other words, is not the Coinage Act of 181G responsible for a material portion of the ills from which the population of Great Britain suffered ? I do not of coui'se restrict the supposition, to which I here desire to ask consideration, to a coinage of Silver at the existing legal ratio to Gold. The ratio is a question of detail, important of course, but secondary. Whether Silver should be coined at the relation established in 1717, at the suggestion of Sir Isaac Newton, or that adopted in coining the five shilling Dollar in 1804, or at the rate adopted by the American Congress in 1702, or b}- the French Directory in 1803, is a question of detail, upon which much may be said, but which it is not necessary to take into consideration in a general view of the policy of retaining this metal as material for Money, further than to observe that a coincidence of the legal ratio with that of other countries and with the market price ought to be aimed at. The former relation was 1 to 15.21, while on the continent the great stock of France was balanced at 1 to 15i. In Conti- nental markets, Silver was worth less bj' several per cent, than at the old legal relation in England. The plan of restoring Silver was suggested in England after the Coinage Act of 181G, and after the silent preparation for Eesump- tioa in obedience to its provisions in the rarer of the two metals had affected the market and lowered the Gold price of Silver. As far as I can learn, however, this narrow view of adherence to the former legal relation was unfortunately represented on either side of the debate, and I have met in the work of some distin- {jfuished English writer — whose name I can not now recall — an allusion to a '-gain of three per cent, at the risk of i-epudia- tion," or words to this effect, which indicate the complete miscon- ception of the question above suggested, as well as an unconscious- ness of the relative effects ui)on its price, of "monetizing" ami "demonetizing" a metal.* (See Chap. IV.) I desire it also of course to be clearl}' understood that I propose ■■^'Tlie German demand for Nickel for coinage raised the price from 12 franca the kilo, to 30-36. If " monetization" raises one metal 300 per cent., why may it not raise another three per cent.? SILVER AND GOLD. these questions as to the use of Silver with Gold in the work of Eesumption simply and singly with a view to Permanence in the Value of Money, apart from all other grounds which may determine the choice of a metal for Mone}^. It does not admit of argument that Gold is more portable than Silver, but it is also true that he who legislates with a sole view to portability is beyond the reach of argument. Chevalier says : " At that time the men who exercised the great- est influence on the Government and on public opinion, allowed themselves to be unduly influenced by the advantage which Gold possesses of being more portable than Silver. They thought also that Gold fulfilled better, or at least less imperfectly than Silver, the important condition of fixedness of value. In. that they prob- ably deceived themselves." My question is therefore, were they not deceived in thinking that Gold alone was more steady in value, not than Silver, but than Gold and Silver together? It has probably occui-red to the reader that inasmuch as the esti- mates of stock on hand in the Western World and annual product in the period of Eesumption give the amount of available Silver (at the ratio of 1 to 15^) as about twice that of Gold, the burden of proof upon these questions rests with the advocates of the de- monetization of Silver in 181G. The task of proof has, as far as I have been able to observe, never been fairly accepted, and the argu- ment for Gold remains thus far radically defective. The task will appear still greater when one recalls that Europe can at need draw upon the reservoirs of Asia for the Precious Metals, and that that stock consisted chiefly of Silver. What would have been the effect if, after 1815, the magnates of the Money Market had set their hearts to the problem of obtaining Silver from Asia without adding England's demand to the other agencies that were sure to disturb the financial peace of Europe? It appears to me clear, and Avill, I believe, so appear to any one who gives impartial and earnest consideration to the question, that such a course would have procured the meams of Resumption, partly in Gold and largely in Silver, without producing more than a moderate portion of the subsidence of Prices which we have noted.* '^It is interesting to consider further what would have been the result had England adopted the ratio of 1 to 15.V in the coinage of Dollar-s or quarter- sovereigns of Silver! In .spiti.' of England's demonetization of Silver, the Fi'cnch stock of metal EXAMPLE OF ENGLAND. 89 In estimating the influence oi the Act of 1816, it must be remem- bered that the position of Gold in countries of the Silver Standard was by no means that of a demonetized metal. Only about a third of the total Specie in use was Gold, and the Silver in use weighed forty-five times as much as the Gold in use. Gold was as portable then as now, and circulated outside of the country that coined it, and the quantity being small, and the rate in Legal Tenders at which such coin would be receivable in certain quarters being not unfrequently fixed by the authorities, Gold served as a kind of International Money. The bulkier metal could not of course serve such a general pur- pose, although there must have been considerable interchange of Silver also. But under the Act of 181G, the currents of Gold and Silver which before the war could flow in and out of Great Britain indifferently, were henceforth inclosed in dykes and locks. Gold flowed in from the Continent, as we have seen, and bared it of a share of its International Money, but could not flow out in response to some special demand from abroad. The outflow of a small quantity set the reactionary forces of Price in motion, and thus the little that had gone out was presently brought back again. And this was the case, of course, simply because Silver could not flow in to take its place. For Silver was walled out of Great Britain by the Act of 1816, which excluded it from use as Money, excepting of course for the percentage of Silver tokens used as change, which could not mate- rially increase in amount. The nature of the efi'ects of the Coinage Act of 1816 in connec- tion with Resumption will more full}' appear in the following con- sideration of the asserted permanence of the value of Gold. For, while so far as I have been able to learn, the question of Gold and Resumption in England has never been met, in the sense in which we have here slated it: that is. the full comparison has never been made between the upheaval of the value of Gold as it was, and the value of Silver and Gold together as they would has since served as a balance-wheel in keeping the prices of the metal close to her ratio of 1 to 15i. The market ratio of 1803 was the market ratio of 1871, and it was the German demonetization that broke the balance. Had Enghxnd joined Fi'ance in 1816, would not the entire Western "World (including SiWcr- Standard countries, which, like Prussia, coined Gold, and subsequently made it receivable by Government at a certain ratio) have been induced to harmonize upon this ratio? 90 SILVER AND GOLD. have been under the action here suggested; yet in another and sub- ordinate relation, proof in this connection has been supposed to be discovered of the steadiness of Gold. " The Silver price of Gold," it is said, " was not affected by Eng- land's extraordinary demand for Gold ; Gold rose in Purchasing Power, it is true, but Silver rose with it." At first sight it would seem that the logical conclusion was, not that Gold possessed any peculiar permanence, but simply that Sil- ver was as bad as Gold. Na}^, more than this ; if a sudden demand for one-foui*th of the available stock of the yellow metal produced no marked rise in its price as expressed in the white metal, the two forming all the Money in existence, the obvious conclusion is that the white metal was ac- cepted as a substitute for the yellow. If the slightness of the rise of price is to be credited to some mysterious quality of Gold alone, one is led to the admission that the converse of this proposition can not be true ; that is, that while Silver is a substitute for Gold, Gold is not a substitute for Silver. If the latter were true, we should have to credit the " per- manence " to Silver, and thus, on the reasoning of the Gold-mono- metallist, each would would be more permanent than the other ! We see, therefore, that this Bupei'stition about the incomprehen- sible qualities of the more valuable yellow metal is directly reduci- ble ad absurdum. We see, also, that while it was the faculty of taking the place of Gold which the laws of the continent gave to Silver, that prevented the Silver price of Gold from rising Jiigher, Enghmd, by the law of 1816, erected an impassible barrier to that inflow and outflow of both the tide of Gold and Silver (for Gold is to a certain extent held back, there being nothing to take its place), which is the condition of permanence in tiieir relative value. It is, hoAvever, important to inquire into this assertion that the Silver price of Gold was so slightly affected by Resumption. The effect of the Acts of 1799 and 1S16, by which Silver was excluded from use as full-weight Lawful Money in Great Britain, may be clearly seen in a table prepared by Professor Jevons, in which the variations of the Prices in Bank-notes, of Gold and Silver Bullion are given for the ])eriod of Restriction and Re- sumption. I am, unfortunately, unable from information now within my reach to determine what equation between Gold and Silver Prof. EXAMPLE OF ENGLAND. 91 Jevons has assumed as a starting-point in this Tabic, it may pos- sibly be the old legal ratio of I to 15.00, or, perhaps, simp!}' what- ever happened to be the ratio of the London Market in 1798. But, whatever the starting-point may have been, the Table must, of course, reveal the combined result of a multiplicity of causes. In seeking to single out separate gi'oups of these causes one nat- urally distinguishes War demand for Gold and its cessation : Causes peculiar to the Paper Currency in which the price of the Metals was measured : Exclusion of Silver from present demand, and from prospective demantl, during and after Kesumption : Prospect of Eesumption in Gold, and Actual Demand for Gold, for Resumption. The latter classes would naturally be included under the head of Demonetization of Silver. Taking Gold as the starting-point, we shall find that Silver which (at the ratio upon which the Table is based) commanded, on the average, from 1798 to 1813, a higher price than Gold, was, after these years, permanently depressed in its Gold price — varying, in fact, according to Professor Jevons' Table, from 21^ to 5f per cent, below the ratio given of 1798. But, of course, in order to make a full comparison between Ke- Bumplion in Gold as it was and Resumption in Silver and Gold as it might have been — and the denial by Gold-monometallists that Re- sumption in Gold affected its Silver Price, raises this whole question — it is necessary to consider, not merely the period of War and Resumption, but the periods preceding and/ following the action of these disturbing causes ; taking account, of course, as far as may be, of all existing causes of alteration, beside that of Resumption in Gold in England. It will be remembered that (as was indicated on page 73) the average ratio in the English Market, in the eighteenth century, was less than 15.06 to 1. Indeed, in 1797, according to Tooke-Newmarch (I. 2, 788) the market ])rice of Bullion varied between 14^ and 14:| to 1. A Table given by Soctbeer (Beitriige und Materialien, etc.) show- ing the ratios of the Metals in Hamburg, yields for the period 1751 to 1791 an average of 14.69 to 1. We see, then, that while the War demand for Gold gave to its Silver price a higher level during the Napoleonic wars than it held 92 SILVER AND GOLD. during the century previous, yet after the war ceased the Price of Gold, instead of falling back to its former level, rose still higher. In fact, the general Gold Price of Silver in England, from 1821 to 1850 (ounce standard, Silver worth Gold 4s. ll^d.) shows a mar- ket ratio, in London, of 15.8-1 to 1. There is, then, a difference of level in the period before 1793 and after 1815 about equal to that between 14.84 and 15.84 — a rise of about seven per cent, in the Silver Price of Gold. How is this general upheaval of the Silver Price of Gold to be accounted for? Was it because Gold was more " portable " than Silver; or, was it because it was more "steady in value ;" or were there any peculiar conditions of demand and supply ? Nay, that we may exhaust the repertory of the magistral economy of the day, we ask whether any serious alteration occurred in the relative " cost of production " of the two metals. Did it require seven per cent or any per cent more "labor" in comparison with silver to mine gold after 1815 than was needed before 1793. From my point of view it is self-evident that the peculiar conditions of demand are controlling factors in the situation, and that among these we must enumerate the high ratio of 15i to 1, fixed by France in time of war, and the exclusion of Silver from England and Eesumption of Specie Payment b}^ Eng- land in Gold. It may occur to the reader that there is a defect in the views here suggested, because, as has been stated. Gold was the chief Currency in use in England in the eighteenth century, and hence the actual difference in the use of Gold in England is inappreciable. This objection might have weight if one were to narrow down the idea of Demonetization to the actual alteration in a certain status quo ante in England itself, produced by the Laws of 1799 and 181G, without reference to what must have occurred if these Laws had not been passed. But I think I am safe in saying that historians and economists do not sanction such a theory of cause and effect as this implies. In reasoning about human affairs, the average tendencies of human action are taken for granted ; indeed the self-interest of man is the general underlying postulate of Economics. When men say that a certain law produced a certain result, the existence and normal actions of i)eople who were affected by the law are taken for granted. If we must enumerate all conditions and conspiring causes, wo EXAMPLE OF ENGLAND. 93 should spend our lives in mere cataloguing. To illustrate — the De- claration of Independence would have been null without protoplasm and sunlight; matter and force ; the American continent, etc., etc. But we do not regard it necessary to mention all these as ele- ments of reasoning about the Declaration. So of the matter in hand : I have expressly, in speaking of Demonetization, stated the proposition broadly, with a view to what would naturally have occurred if the Silver Coinage had not been limited in 1799, and if the Law of 181G had not been passed ; or, again, if fSilver had afterward been restored to its place by the side of Gold, as Law- ful Money in Great Britain for the period of Resumption. Had the Laws of 1799 and 1816 been omitted, the natural work- ing of self-interest which led to the universal use of Gold in England in the eighteenth century would have led to the introduc- tion of Silver as Legal Tender during the period of Hestriction as well as during that of Resumption of Cash Payment.* *It is evident that where there is a scarcity of Metallic Money — and from ■<.vhat else does a " Eestriction of Cash Payment" arise? — voluntarily to cut oneself ofl' from a source of supply is improvident if not suicidal. And yet this process was commenced in England with the limitation of Coinage of Silver of 1799, and completed by the withdrawal of the Legal Tender character from Silver in 1816. The stock of Gold in the Western World in 1799 was only about half that of Silver. To limit the coinage of Silver was, therefore, to cut off from English mints and English debtors two-thirds of the existing potential supply of money-metal among civilized nations. And beyond was Asia, whose money-metal was in like manner excluded. And this at a time of restriction of Cash Payments! Prima facie, abstracting from any preconceived idea that English finance was wisely regulated in 1799, looking simply with the eyes of a plain man of business, this limitation of coinage appears, as I have said, suicidal. What says science? I have never seen any allusion to the fact, except in the work of Ricardo, before quoted, and he makes no comment. I am well aware that it is competent for gentlemen who think of nothing but portability in money-metal, and are enamored of yellow in preference to other colors of coin, to permit themselves to maintain that the views which I have attributed to a "plain man of business"' are incorrect. To show that the plain man of business is in error, it might be said : " If England wanted Gold, she could get it as easily as she could get Silver." This begs the question. But what else is there to be said? Let us, there- fore, examine this assertion. Let us ask if England really could obtain Gold as easily as Silver. Suppose that Gold and Silver in all the Western Nations stood at 15.21, the English par. There being twice as much Silver as Gold, would it not inevita- bly occur that the hundreds of vessels coming to England from American and 94 SILVER AND GOLD. Our question was, in the earlier portion of this chapter : What, under these circumstances, would have been the average Purchasing Power of the Metals? And in our examination of the argument for Gold, the question now is : What, under those circumstances, would have been the Silver Price of Gold? The difference between what was and what would have been, would indicate the effect of Demonetization of Silver in England upon the Silver Price of Gold. Our reasoning leads, in my belief, conclusively to the overthrow, to this extent, of the argument for the peculiar steadiness of the value of Gold, as well as of the argument for Resumption in Gold exclusively, beside indicating plainly that the limitation of Coinage of 1799 seriously aggravated the difficulties attendant upon the use of Paper Money. It is in view of these three questions that the following figures become a most profitable subject of meditation : European ports could conveniently obtain Silver and bring it to England when they could not obtain Gold? In many ports there must have been little or no Gold and much Silver, and the shippers, whose importation might other- wise have reinforced England with cash Silver, could not or would not take the trouble of seeking out the Gold to bring. If friction in exchange, if supply and demand are applicable to anything, they must be applicable to the case before us; and hence it follows that if free coinage were maintained in England in both metals, Silver would more easily and naturally flow to England than Gold. This, of course, on the supposition that the English par was the universal par. But it was not the universal par. There was no universal par. Now, in the vicissitudes of the ratios of Gold and Silver in the hundreds of ports in South and Central and North America, in Africa, Asia, Europe, in the Islands — with all of which the commerce of England had to do — was it likely that the chances should be favorable to the exclusive exportation of one of these metals to England? And if these chances had been so favorable, which metal would naturally be more easily exportable? Could such metal be any other than Silver, seeing that Silver was in exist- ence in an amount at least double that of Gold, that the annual product of it was more than three times that of Gold, and that in the great majority of these ports there could be but little Gold in use at all? Besides this, another all-important fact presents itself Gold, which iiad fallen below 15.21 in the eighteenth century, rose above it at its close. The war demand was effective. Silver became then the metal in which it was cheapest to pay debts in England. Newton's law was coming into effect. To equalize the rise of Gold, Silver was coming back to the mints; Gold was dear and rare; the natural current of the great stock of Silver was ready to pour into England. But no! The mints were closed I No more coinage of Legal-tender Silver. If England can not liave yellow and extremely j)ortable coin, she will have depreciated and irredeemable [)aper. EXAMPLE OF ENGLAND. 95 FROM PROFESSOR JEVONS TABLE, SHOWING THE VARIATION OP THE PRICES OF GOLD AND SILVER BULLION.* Year. 1708 Gold. 100 100 100 Silver. 100 103 Ill Year. 1810 1811 Guld. 116 Silver. Ill 1799 109 118 1800 1812 1813 1814 1815 123 130 13-1 120 122 1801 1802 1803 109 108 10:5 103 103 115 109 108 105 109 108 106 105 106 133 123 105 1804 1810 120 91 1805 1817 1818 1819 1820 1821 103 103 105 103 100 91 180G 1807 1808 1809 103 103 103 103 97 99 93 91 Chevalier, in alluding to this subject, says that it does not ap- pear (judging from the price of Gold at Paris) that the absorption of Gold in Great Britain made any appreciable change in its price. f But would Chevalier reiiard a change of three per cent, as "ap2:)re- ciable?" On the other hand, a consideration of the state of the market at Hamburg, in connection with Dr. Soetbeer's explanation of it, seems to warrant a totally different conclusion. The average Silver price of Gold in the Hamburg market, for the six years, 1814—1819, compared with the five years, 1820-1824, shows a rise from 15.28 to 15.82, or about 3i per cent., and this rise is attributed by Dr. Soetbeer to the demand from England. ' In the United States it has been stated on the authority of cer- tain documents put forth b}^ the Government at Washington, in 1830, that Resumption in England brought about a rise in Gold to the extent of 5 per cent., and a general exportation of Gold.;}: If Gold in this country had been, by any of that vis inertioe which accompanies the phenomenon of local values, held to the legal relation of 1 to 15, the rise when it came and led to exporta- tion, would naturally go up to the prevailing price in Europe, which would give a rise of 5 per cent. A further foot of importance is that the tide of Precious Metals * Journal of the Statistical Society, 1865, p. 309. The table covers the pe- riod from 1798 to 1821, and starts at 100 in 1798. tLa Monnaie, 1866, p. 234.. But according to Leon Say (See Appendix, House of Commons Report) there are no trustworthy accounts published of the market ratio in Paris at that time. J Bankers' Magazine, September. 1876, article of Mr. Geo. M. Weston. 96 SILVER AND GOLD. flowing to Asia in a current then averaging many million pounds per annum, turned completely and flowed westward from Asia to Europe for a time after 1821.* To the question why was there no greater rise in the Silver price of Gold in Europe the condition of the leading commercial pow- ers suggests a partial answer. The United States and France in establishing the Double Legal Tender with the Silver Dollar and Franc as their respective Units had by the respective ratios of 1 to 15 and 1 to 15i, given Gold a Silver Price, which was in the main lower than that of the market. Silver, therefore, being the cheaper Legal Tender, was fixed in general use in these countries, while Gold was readier for export. So, too, the other nations of the continent used Silver as their Lawful Money, chiefly under laws making it chief Legal Tender and Monetary Unit, although Gold was curi*ent and a favorite, as well as legalized, means of payment. Now, it is obvious that in that period of war, which closed in 1815, this war demand had been active. Gold was in great demand for the military chest, the royal treasury, the coff'ers of cambists, and for the hoards which men of every class were led to conceal, and international exchanges had special need of it. When this war demand ceased, much Gold, including that which England herself had poured upon the continent in her struggle against Napoleon, was thus set free before it had through habit or law become indispensable to local business. When the Gold was taken away, Silver to the extent to which it was i)ossible flowed in to the places left vacant, and while low prices of commodities were required to start the current of Gold toward England the Silver Price of Gold need not be disturbed to any great extent. * Tooke-Newmarch. It is worth noticing that the Hamburg price-liats indicate fluctuations which are probably attributable to that '• war demand " for Gold which arises by rea- son of the superior convenience of carrying and concealing it, as compared with Silver, and which admittedly makes its value less permanent for short intervals than that of Silver. (Koscher.) The rate from 1781 to 1700 was 1 to 14.70; about the time of the peace of Amiens it was 1 to 15.20, wiiile in 1813, the year of the Battle of Leipsig, it was 1 to 16.26 It fell in the following year to 1 to 16.04 — seven and one- half per cent.; but tlii-j seems due in about equal proportions to a rise in Silver and to a fall in Gold. EXAMPLE OF ENGLAND. 97 But the mere fiict that this rise in the Silvei" Price of Gold con- comitaiit with the demand for Gold Eesumption was so slight, and hence that, nontiinally at least, Silver accompanied Gold in its rise in England, roall}' avails little to establish a substantial equality of the Purchasing Power of the two metals at that time, and still less to meet our question Avhether HesumpLion in Gold and Silver would not have caused less fall in jirice than attended Resumption in Gold. To-day, in a world encompassed by telegraph-wires, railroads, and steamship lines, the solidarity of the money market has not done away with local and international values ; the averages of prices, the general value of money follow in ever}' countr}^ their own laws. To far greater extent was this true in 1819. In England prices were expressed in Gold, and the Value of Money meant the Value of Gold there and not else- w here. On the continent prices were expressed in Silver, and the Value of Money meant the Value of Silver there and not else- where. The lake of Silver and the lake of Gold were joined to- gether only by the naa-row and tortuous channels of exchange — shallow channels, too, for the great mass of the Silver on the con- tinent, and of Gold in England, under the laws of Legal Tende?', must remain in position below the ordinary tides of change — and they could but feebly communicate their tidal movements to each other. He who would judge, therefore, of the comparative permanence of value of the two metals, must inquire whether the average of Silver prices on the continent fell in the year of Resumption as the average of Gold prices fell in England. It will not be, until this question is answered in the affirmative, that the proof of steadiness of Gold based upon the eflfects of Re- sumption in Gold will be discovered. Until then it remains an invention. To return to the question of the effect of using full-weight Silver in Resumption. It is plain that if there be a certain elasticity in Metallic Money, a given quantity of Silver might (leaving Asia out of the question) have been spai*ed to England by the Western "World with far greater ease than that with which it parted with its Gold. In any case, the English lake of Money would thus have formed aa arm of the sea of continental Money, and a greater portion of 98 SILVER AND GOLD. the fall of Prices might have been distributed over the entire area. It is interesting to observe that one of the arguments of the most advanced advocates of Gold-monometallism leans in this connection in favor of Eesumption in Silver. It is, say M. Mannequin and others, a characteristic of Gold that it tends to control the Price of Silver ; but Silver may fall "without carrying Gold with it. Whatever of truth there is in this view is due, it is safe to say, to the fact that for a large proportion of Silver Currency, Gold is a convenient substitute ; while for a small proportion of a Gold Currency is Silver a convenient substitute. Whether this be the fact or no, one sees clearly that this argu- ment of M. Mannequin leads straight to the view of Eesumption in Silver and Gold, which we have shown by another course: for if Gold, which controls, be seized upon for a new and permanent em- ployment, it must needs rise in Purchasing Power, and Silver must follow it ; but if Gold be left, and Silver be taken. Gold remains as it was. and Silver obeying Gold, remains as it was also ! If, therefore, M. Mannequin's position be jcorrect, — if, in a word, Gold be the keel, the ballast, or unalterable seat of the center of gravity, and controller of movements of the entire bulk of the Precious Metals, — our conclusion seems justified that it was unde- sirable to shift Gold bodily to one side. A still further question may be suggested. Had the Coinage Laws of the United States and France fixed a higher value upon Gold, so that Gold, instead of Silver, had been in 1815-20 the cheaper Legal Tender in these countries, would it have been possi- ble for England to resume Specie Paj^ment in Gold? Again, would it have been possible for England to resume in Gold had the Holy Alliance signalized its triumph over the aspira- tions of Europe by the adoption of the sacro-caesarean metal within the domain of its police? The questions answer themselves. It is evident at a glance that the Acts of 1816 and 1819 existed by favor of the Silver Law of Germano-Austrian countries and the Bi-metallic Law of France and of the United States. It is to the acts of omission and commission of Continental and American Legislation that the English sovereign owes its crea- tion and its power. ?]xpLAKATORY NoTE. — As I Can point to no distinguished authority in EXAMPLE OF ENGLAND. 99 support of the views set forth in this chapter, it occurs to me to add these words of explanation, iu answer to a possible objection, " If this be true, why have we not heard n\' it before?" It is a strange fact, but there is no broad and impartial history of the period of Restriction and Resumption in existence. A library has been written about it, but there is a controversial tone in even the most sober productions from Tooke's History of Prices to Levi's History of British Commerce. The saeva ncce^sitas of war is wont to assert itself wherever science seeks to establish its principles through political triumph, and the irrepressible conflict between Paper and Metal, which raged so fiercely in the days of Restriction, has never yet been entirely set at rest. Now, the Resumption of Specie Payments was the pride and the glory of " the Economists," as they were called par excellence ; and science, turned politics, was intolerant of criticism. While the main question was undecided, the Procrustes bed, " he that is not for us is against us," was set in use for thinkers, and the truth that was arrayed against the form of the measure was sacrificed for the truth that inhered in its sub. stance.* The attack of the opponents of Resumption upon the new Coinage System led to its defense by Peel, and in the then undeveloped state of monetary theory, Gold-monometalism was permitted to become identified with what was sound in the doctrine of Resumption. It was mainly to this companionship that the Gold Standard was in- debted for its dignity. It was allied in men's minds with the resolve of the leading men of England that the Paper issued in time of War must be paid in full in time of Peace, and that in future Bank-notes must forever be convertible into Coin; and so, by a not unnatural confusion of thought. Englishmen came to regard the yellow and light pound sterling Coin of the Regency as something more "honest" and more "English" than the heavier white coins which had made a pound sterling in the time of Elizabeth. Of course, when the contest of Resumption was over, the harm was done: the redistribution of wealth had taken place, and later still the new tide of prosperity swept the field What was done could not be undone. The new distributees of wealth were acquiring vested rights. A counter-revolution of the value of Money, while injuring the interests of all, was not likely to bring com- pensation to those who had lo;5t before. Hence, as far as the adoption of Gold was concerned, no failure of sup- ply supervening, there was no strong reason why by-gones should not be by-gones, and the agitation for the restoration of Silver was lost sight of in the then more absorbing problem of Banking policy * So in like measure to-day in Germany Coinage Reform has become, to the detriment of science, a fertile source of "mutual excoraraimication," and the United States has been assailed with the same danjrer. 100 SILVER AXD GOLD. Meantime the auri sacra fames held uninterrupted sway ! There is a naivete m the attachment which seems to be felt for the yellow Coin, in the presence of which I feel that what I have said of the En- glish (Gold) sovereign would seem in some quarters like lese majesty, and awaken horror as of one who had " imagined the death of the king." O sancta simplicitas ! The readers of Shakespeare will remember how King Duncan learns from Ross the issue of the contest with Scotland's enemies, which made Macbeth the Thane of Cawdor: and how — " Sweno, the Norway's king, craves composition. Nor would we deign him burial of his men Till he disbursed at St. Colme's inch Ten thousand dollars to our general use." It would only be in keeping with the feeling to which I have alluded if in a " Bowdlerized" edition of Shakesi^eare, emended for family use, the latter line should be pioush^ printed : " Two thousand sovereigns to our general use." And of course the feeling is as much an anachronism as the sovereign itself would be in Macbeth, or the dollar in Duncan's Kingdom. It may have been wise policy to make the yellow metal sole unlimited Legal Tender for the period of Resumption ; but neither in the reasons given at the time, nor in the argument of Gold-monometallists of to-day, if I have read them aright, can be found adequate material for assurance of this wisdom. If the upheaval of the value of Gold, which threatens England to-day for the first time since 1816, and the alarms for the future of the British Empire in India, should lead Englishmen to study the bearing of these questions with a view to the interests of the whole people, which rule Eng- land to-day as they did not in 1816, it will, I believe, become apparent to the liberal mind that the demonetization of Silver is perhaps the only relic of the ideas peculiar to Lord Liverpool's administration, which the tide of reform has permitted still to cumber English ground. GOLD-MOXOMETALLISM. 101 CHAPTER VIII. GOLD-MONOMETALLISM AND THE THEORY OF MONEY. Locke's explanation of tUu Value of Jloiiey — Clievalier's criticism— Locke's theory in thf liyht of late oxperieiici' — Tlii- influence of Legislation tipou the Value of Money— The substitution of Gold for Silver and Paper— The movement toward adoption of the Gold Standard in the Western World — The Gold Standard in Asia — Observations of Heer Van der Berg — Upheaval ot the Value of Gold — Great saving of friction in its use as a Medium of Exchange — Prospect of Upheaval of Value denied in the argument for Gold — Question of increase of Production of Gold — The formation of public opinion in favor of Gold Monometallism — Actual increase, 1803-7 — The Paris Conference and the German Handelstag- Opinions of leadinfr thinkers — Depreciation the rule since tlie Discovery of America — Possibility of decrease ignored — Late opinions of Uendriks and Chevalier — Note— The theory of Money and the opinion of Aristotle. In one of his Treatises on the restoration of English Coinage, John Locke, certainly one of the acutest intellects that have ever devoted serious attention to the subject, reraai'ks that the common consent of man has given a value to Silver on account of its fitness for use as Coin. Chevalier, in his great work [La Monnaie, 2d ed., p. 18], cites an opinion of Locke to the effect that this value, which Locke refers to the common consent of man, is an "imaginarj^ value." The distingnisiied Frenchman, albeit his chivalrie devotion to the Sin- gle Standard must have led him to revere Locke as the apostle of that principle, j-et finds nothing to excuse in this opinion as to the "imaginar}'' value of Moaey. '•.It is," he says, "an error which it may be permitted to qualify as gross;" and he adds, the "curious circumstance that one of the first to point out this error was John Law " An ill-omened juxtaposition ! Time, which has d<>alt ill with the reputation of Law, despite his great services as a j)ioneer in the field of Credit, and which, while only increasing the fame of Chevalier, has treated with a certain irony his practical suggestions for Monetary Legislation, is now bringing tardy recognition to the acuteness of Locke. In his '■ Further Considerations concerning Eaising the Value of Mone}'," Locke saj's : " Silver is the Instrument and Measure of Commerce in all the civilized and trading parts of the World. It is the Instrument of Commerce by its intrinsick Value. 102 SILVER AXD GOLD. '' The intrinsick Value of Silver considered as Money is that Esti- mate which common Consent has placed on it, whereby it is made equivalent to all other things, and consequently is the universal Barter or Exchange which men give and receive for other things they would purchase or part with lor a valuable Coneidei'ation." Although this passage does not contain the word "imaginary," which appears to Chevalier reprehensible, the same idea is present, and in my belief justifies itself. Silver in Locke's time occupied in a manner the position which tl>e advocates of Grold-monometalism would now assign to Gold. Applying the theory to the facts of to-day, we may properly reason (as Chevalier indeed has done) as if Locke had said. Gold and Silver, instead of Silver alone. For this assertion of the imaginary value of Gold and Silver is simply a recognition that the demand for and employment of them as Money is an all-important factor of their value. The late fluctuations of these metals will, in my belief, serve as what the Portuguese call a ^- desengano," an " undeceiver." I am much mistaken if the doctrine of the value of Gold and Silver will not eventually be modified by general consent, so that it will be understood to be that general or permanent value which comes chiefly from the fact that all nations use ^hese metals as Money, and it will be understood that a considerable part of ^hat value will disappear should the nations cease to use them as Money. A demonetization of any sort of Money will import then, other things remaining equal, the destruction of the proper proportion of its total value ; and an increased demand, a new monetization, will, other things being equal, imply a proportionate increase of the value of such Money. It is plain then, inasmuch as it is Legislation that determines what shall be Legal Tender, and as men desire that metal which, under the law, can be, more than that metal which can not be, coined into Legal Tender, thi^ Legislation is an underlj-ing and controlling cause of the value of Money. I shall not occupy space in elaborating the argument: events have made it obvious, that while, as Chevalier says, "Gold and Silver had had a recognized value among men, it was on that account that people conceived the idea of using them for pay- ments," yet the mere fact that a new use had been found for them gave them a new value. And as statisticians and economists, Chevalier foremost among them, are agreed that the principal use of the Precious Metals is GOLD-MONOMETALLISM. 103 ill performing the various Functions of Money, one is justified in believing that, with the putting awa}'^ of this use, the greater part of their value in exchange would disappear. The yearly demand of the gilder, the photographer, the dentist, and the manufacturers of ])late and jewelry, would bo but a small affair compared with that which is represented by the employment of these metals as Money by a thousand millions of men. Of course, as has been shown on page 28, not more than one- lialf of the Precious Metals now in the hands of man is reckoned as being in use as a Medium of Exchange. But, as we have already seen in our analysis of the Functions of Money, the use of these Metals for hoarding, as a Store of Value, as an actual Investment, is a recognized use of them as Money. Hence, while the classification is fullj"" justified which excludes from the titJe of Money whatever hoards are for long periods una- vailable for circulation, and all those bodies of Metal, the form of which is not at the time the estimate is made that of simple Bullion or of Coin ; yet, in reasoning upon the value of the Precious Metals, these limits of classification have no proper application. Plate, jewelry, shrines, etc., made of the Precious Metals are, to a certain extent, objects of art or of historic interest; and to that extent their value is a result of their form, and is an individual in- communicable quality, Avhich has nothing which can affect the value of other materials of the same kind, but of different form. To illustrate : The crown of Charlemagne may be worth an im- mense sum ; but it is as Charlemagne's crown, not as gold. Throw it with other Gold into the melting-pot, and the value of Gold Money at the time will determine the amount of other commodities for which the Gold of which that crown was made can be ex- changed. Indeed, the Precious Metals are. to a considerable extent, put into forms of ornament or display expressly with the purpose of usPng them as a Store of Value. In his testimony before the English Silver Committee, Colonel Henr}' Hyde, Director of the Mint at Calcutta, testified (Eeport, Question 947) : '• The natives never invest their Money in the way in which civilized nations look upon an investment. A native, when he realizes a little money, puts it in the form of ornaments upon the females of his family, and in times of scarcity these or- naments are taken to the bankers and sold.' When they are thus exchanged, it is their availability as material 104 SILVER AND GOLD. for Money which chiefly determines their value. Hence it is evi- dent that, as has been stated, while, by allotting the existing stock of the Precious Metals between uses in the Arts and uses as Money, a convenient classification is attained ; yet the Metal in use in the Arts derives the greater part of its value from its being, potentially, Money, or, in other words, transformable into Money. The level of a lake is the limit of the forces under whose im- pulse showers and streams descend into it, and springs well upward in its bed; and in like manner the Metallic Money of the world, by its mass and its infinite exchangeability, controls alike the value of the Metal brought fresh out of the earth or that melted down from ancient hoards. Of course it is also understood that the qualities which make Gold and Silver available for purposes of ornament and display, as well as for the humbler uses of the Arts, are also a conditio sine qua non to their peculiar fitness for use as Money. The question is merely one of causation and of degree of value. Gold and Silver are now raised to a certain degree of value. An ounce of Gold or a pound (avoirdupois) of Silver may, for ex- ample, exchange to-day for a ton of iron. The question to be considered is, of course — supposing Gold and Silver demonetized completel}^ — supplanted, by some better Instrument of Exchange, and used only as iron and lead are used, for how much iron, etc., would Gold or Silver then be exchanged ? If a pound of Gold or 16 pounds of Silver were, in such event, to be exchangeable for only a ton of iron, it would become evident that about 94 per cent, of the value of these metals would be at- tributable to the demand for them as Money. Of course this is a mere supposition. It is impossible that both Gold and Silver can be completely demonetized, but this analj'sis is justified in the search for the conditions of their value. It should also be equally clear that the assertion that Law is a potent factor in the value of Mone}'' does not imply that it is the province of Legislatures to bo passing Laws, in order to affect the value of Money in one way or another. To draw such an inference is to reveal a complete misunder- standing of the subject. The idea of Law and the nature of Money alike demand some- thing tliat is established — unfluctuating. Now, it is a cardinal fact in the History of Mankind, that a law- ful establishmetit of Money has taken place. All that History tells GOLD-MONOMETALLISM. 105 of the economy of nations in organized society points to the use of G-old and Silver as Money, at ratios approximately steady — in other words, to an "institution," in various forms, of Bi-metallic Money. Of Bi-metallism it may be said in ])oetic phrase, "its lino is gone out throughout all the earth ; its words to the end of the world."* The institution is imperfect in this, that hitherto it has been de- veloped in ])eculiar forms in various States, while it has existed for international commerce through the unsteady balancing of the Bi-metallic stock of different States, in connection with States which maintained Gold and States which maintained Silver as their sole Lawful Money. There has thus been an agreement between the various members of the community of mankind that all available Gold and Silver should be accepted as Money, and, directly or indirectly, the World has, through its laws, established within certain limits a settled par of exchange between the two JMetals. This phenomenon of a ])ar of exchange is unique — distinct from price, and chieHj'- a creation of law — and applicable to the two kinds of Money-merchandise alone. f Upon the "credit" thus given to Silver and Gold by the conduct of Governments are based the m3^riad obligations of the business of mankind, public and private, the uninterrupted fulfillment and formation of which are a condition, not merely of prosperity, but of progress, of civilization. lu other words, on the faith of this availability of the two Metals "Of course, the antiquity of the institution creates merely a presumption in its favor. It indicates that it is something based upon the "nature of things." If any one can prove that it is best to have Gold sovereigns, crowns, napoleons, and eagles, and not to have Silver crowns, thalers, ecus, and dollars, well and good. Awaiting this proof, however, we observe that the presumptions are in favor of the institution that extends from the days of the laws of Menu to those of the section of the Bank Acts providing for issue of Bank of England notes on deposit of Silver. Again, exchange being the great desideratum for man, and the exchanges of mankind having been facilitated in the past by the establishment of the two metali at a proper equation as Money, the presumptions are in favor of Gold and Silver. Of course, these presumptions can be overthrown. But what is to overthrow them? A question which Gold-inonometallists have thus far failed to answer! tThe par is a relation of permanent equality in exchangeability between two kinds of Money; price, a temporary relation between merchandise and Money expressed in terms of the latter. See Appendix F. 106 SILVER AND- GOLD. as Money, convenient portions of them have everywhere been used as an Instrument of Valuation. On the faith of their being actii- ull}" forthcoming for that portion of exchanges for which thej' serve bodily as Means of Payment, the existing obligations of civilized man have been based. Upon a situation like this came, in 1799-181(5, the adoption of Gold and demonetization of Silver by England, the history and effects at the time, upon England itself of which movement, are outlined in Chapter VII. The actual disturbance of the existing stock of Metal b}' these measures was comparatively slight. Though demanding Gold. England set free but little Silver, and the immense stock of France, balanced at 1 to 15^, stood the shock with but little difficulty. The Silver Price of Gold rose slightly in Europe, and Prices fell heavily in England. How they stood in Europe generally, I am, I regret to say, not informed. The situation created by the action of Germany, in 1871-6, is entirely diflferent. As will be seen from the figures given below, ="^ for the bulk of the Currency, the projected "Eeform" of German Coinage consists in *The following may serve as a rough estimate of the change proposed: Currency in Germany before 1871 : Total Gold, domestic and foreign Coin, and bars $125 millions. Total Silver, domestic and foreign, full weight and tokens :k")0 " Total Metallic Currency $t75 millions. Of Bank-notes of denominations below 100 marks there may have been $100 millions. Proposed System : Imperial Gold Coinage up to present time about $3G0 millions. Imperial tSilver Coinage up to present time about 65 " Silver sold by the Government, about 35 " Ketired from circulation in addition to above 25 " Bank-notes below 100 marks for the most j)art witiidrawn. What amount of Gold and Silver has been exported, or melted, or still re- mains in circulation, is a subject of doubt and controversy. Mr. Gustavus Pietsch, in his testimony before the House of Commons Com- mittee, gives <£39 millions of Silver as the amount of Crcrman Coins in use in 1873. To this must be added, however, all Austrian aiid other foreign Silver, Coins and bars. The Committee itself adopts afar larger sum, namely, £59 millions, as a max- imum of German Coins in circulation in 1871, but says nothing of foreign Silver Coins in use. GOLD-MONOMETALLISM. 107 an exchange. Approximately, 250 million dollars worth of Gold are to take the place of 250 million dollars worth of Silver. The cliango is at once a demand for Gold, and a rejection of Sil- ver. Each element of change deserves special consideration. Following the move of Enghind, its effect is cumulative. Not only is a new demand created for an amount of Gold equal to about 5 per cent, of the total stock in the hands of man, while about 4 per cent, of the existing Silver in the world is ordered to leave German}^, but the area in which Gold is sole Legal-Tender is doubled, and the principal area in which Silver remained sole Legal- Tender in the Western World is closed. For the future annual supply of Gold, the demand is increased ; of Silver, the demand is lessened. Of course, if this change meant temporary displacement of exist- ing stock; and if this displacement could be effected without a convulsion of business, countries which had Gold would simply serve the convenience of Germany by giving their Gold for Ger- man Silver, and the danger would be restricted to the minimum. But such is not the case. In order to such an exchange, a par must not only be fixed between the two Metals, but there must be a rea- sonable prospect that this par will be maintained in the future. In the circumstances above set forth, this was impossible. Ger- many's action was that of an earthquake to the business of the world. The par of exchange between the Metals, the averages of Mr. Seyd, in his testimony, estimates for 1871 the Metallic circuhition of Germany at : Gold, £80 millions; full value Silver, £60 millions; subsidiary Silver, £16 millions. Ten marks per head of Silver Token.s, which is the amount fixed by the Law of 1873, would give $95 million (nominally) worth of Silver as the limit of Silver coinage in the future. If the above es- timates be correct, there were then in all $255 million [nominally, at the rate of 1 to 15.^] to be disposed of, either by export sale by Government or melting down into plate, etc. Now, it is evident that the Metallic circulation of Germany in the period 1876-1880 needs to be greater by far than in 1871. The Unification of Coin- age has economized Specie, yet the growth of the business and the lack of small notes among people accustomed, as the Germans are, to deal only in cash, must far overbear this saving. Hence Germany must, under the Coinage Reform, demand of Gold a greater amount than the Silver which is to be abandoned — that is, if it is to be aban- doned. The present indications are that a large proportion of Silver will be retained. The present policy points to an enlargement of the per capita figures of the Silver Currency from 10 to 15, and perhaps 20 marks. Meanwhile the Silver Thaler is a "three mark" piece and Legal-Tender. 108 SILVER AND GOLD. Prices, or Purchasing Power of eitlier Metal, were alike doomed to uncertainty. The Metallic stock of France, which, in earlier days, by the Law of Legal-Tender, had maintained the parity of exchange within a few per cent, of 1 to 15i, both through the sharpening of demand for England's Eesumption and through the overflow of supply from the new Mines, could not undertake this greater task.* The proposed displacement by Germany of ^500 millions was enough to threaten the security of the par, supported b^' the Law of the Latin Union. And Germany was not alone in the revolution against the world's '-institution" of Bi-metallic Money. The Scandinavian Countries joined lier, and with them went the United States of America. Plainly the Latin Union could not now maintain free coinage of Silver without losing all its Gold, and in this event the par be- tween the Metals would immediately vanish, and the Latin Union would therefore remain with a depreciated Currency, and deprived of Metal current in other States. The Latin Union was hence compelled to limit, and finally to stop entirely, the coinage of Ijegal-Tender Silver. The necessity thus grounded of refusing to receive the German Silver was, however, obscured in popular debate by the echoes of French agitation for the demonetization of Silver in France.f *■ It needs, I hope, no argument, after what has been said, to show that free coinage of either Metal as Legal-Tender by a nation, or combination of nations, will, under the working of human self-intcre.st, determine the general rate of exchange of the two Metals, provided the metallic stock of such nation bear a fair relation to the displacements effected or fluctuations of demand or of an- nual supply of the Metals. See Reply for the Double Legal-Tender, p. 33. t There wiis, of course, no lack of doctrinaires who were ready to perish with their country, if only their cnuntry would perish for them. In England, the suicidal tendency of the revolution against Bi-metallism, which she had inaugurated, one might say, by mistake, and into which an error of doctrine was now forcing the world, was, as late as 1875, in spite of his great concessions to the reasoning of Wolowski, misunderstood by one of her most distinguished economists. Professor .Jevons, in Money and the Mechanism of K.rchanrje, p. 143, says: "The price of iSilver has fallen in consequence of the (Jerman Currency He- form (to 57ijd.), but it is by no means certain that it will fall further than it has already done." "That any great rise will really happen in the Purchasing Power of Gold is wliolly a matter of speculation. We can not do more than make random GOLD-MONOMETALLISM. 109 In spite of the now universal banishment of Silver as Legal- Tender from the mints of the Western World, and in the presence of a general fall of Prices, extending from 1873 through 1874, 1875, and 187G, indicating, in the altered circumstances, a general rise in the value of Gold,* it has still been assumed that there would be in the end enough Gold for the Western World, and that Asia would take the surplus Silver. But even this latter hope threatens to prove deceitful. guesses on the subject, and as a mere guess I should say that it is not likely to rise. "Gold has, since 1851, been falling in value, and an increased demand for Gold is not likely to do more than slacken, or at most arrest, the progress of depreci- ation."' On page 140, after speaking of the introduction of the franc into Russia by "way of the Finnish marc, a Silver coin of like weight, he says : " A great .step to- wai'd a future international coinage is thus effected. Like changes are impossi- ble among the poor, ignorant, conservative nations of India, China, and the Tropics generally. Hence we arrive, as it seems to me, at a broad, deep dis- tinction. The highly civilized and advancing nations of Western Europe and North America, including also the rising states of Australasia, and some of the better second-rate States, such as Egj^pt, Brazil, and Japan, will all have the Gold Standard. . . . "Asia and Russia seem likely to uphold Silver against the rest of the "SVorld adopting Gold. In such a result, there seems to be nothing to regret." That such were Professor Jevons's views and anticipations, in 1875, is signal proof that the monetary events of the past few years are worthy of making a new era in ]Monetary Science. See page 102 and Appendix A. ■■•• See discussions in Appendix i). The occurrence of a general fall of prices in the Western World seems to be generally admitted. Many, however, refuse to call it a rise in the value of Gold, because they denj' it is caused by a scarcity of Gold. Not being caused by a scarcity of Gold, it is, they say, one of the normal ebb-tides of business, caused by over-speculation (railroad building and German discounting of the War-line, etc.), and in due time the status quo ante will be restored. In a Memoir presented to the Statistical Congress, lately held at Buda-Pestli, by Dr. Engel, the Director of the German Bureau of Statistics, it appears that a comparison of the value of shares of German Stock Companies, in December 31, 187:2, and December 31, 1875, shows a loss of about 1,100 million thalers ! The idea of restoration of the status quo ante is attractive, but, as will be seen on page 69, the normal increase of exchanges demands a constant en- largement of the Money-basis, and the Western World is losing both in interest and principal, for the annual product of Gold is diminishing; the coinage of Silver was first limited and now is stopped entirely, and the nations are aiming at demonetization. How avoid the conclusion sugi^ested in the text? 110 SILVER AND GOLD. Holland and the Scandinavian Countries join her, and the pre- vailing theory is that the Latin Union must follow her lead. How much Gold would these nations require? And the United States, when it resumes Specie Payments! And Asia? Japan has taken the lead with her GJ-old coinage. Why should not China and India follow? True, it is not probable, indeed, it is generally regai'ded as im- practicable, if not impossible. All, however, do not take this view. The j)roposal has been urged with all seriousness — among others, by no less a body than the Chamber of Commerce of G-lasgow. Heer Van der Berg, President of the Bank of Java, writes, at Batavia, March 30, 1876: "A distinguished authority in Bombay has declared the adoption of a Gold Standard for India to be an absolute and indispensable necessity," and Heer "Van der Berg seems to feel that the monetary question is of a cosmopolitan character, and that Asia may eventually have to abandon Silver and adopt Gold in self-defense. "A general appreciation of Gold will be the inevitable conse- quence. The prices of all articles which are exchanged against Gold will fall." "The metal which, by an irresistible force, will introduce itself everywhere as the single Measure of Value will become more and more rare (supposing the production to remain what it is at the present), and the fear does not seem to me illusory that the scarcity of Money will arrest production in general, in the same proportion as that in which it has been stimulated by the increase of the mass of the Precious Metals in the past twenty-five years."* It is unnecessary to add anything to this picture. To an edu- cated imagination it is a sight like that of the Gorgon's head in the Greek fable. But what can Asia do, if it is the policy of the "Western "\Yorld to condemn to hopeless depreciation the chosen metal in which the values of Asia are treasured and expressed? It is curious to observe, in contrast to this horrible picture, that, as far as mere convenience of handling and transporting is con- cerned, in that very Function of Money whicli many of those who write and speak about Money are wont to lay most stress upon — namely, its general Function as a "Medium of Exchange" — this change, so far from injuring, would only increase its usefulness. "Letter to Victor Bonnet, in Journal dcs Economistcs. Paris, March, 1870. GOLD-MONOMETALLISM. Ill In a work already quoted, Ricardo has excellently said : " If the quantity of Gold in the world employed as Money were exceed- ingly small or abundantly great, it would not in the least affect the proportion in which they would be divided among the different nations. The smaller quantit}'' of Money would perform the Func- tions of a Circulating Medium as well as the larger. Ten millions would be as cfFectuul for that purpose as one hundred millions. "=!= And, of course, it would be ten times easier to handle, trans- port, and conceal. Indeed, if we compare the new order of things suggested by Ricardo with business under the Silver Standard, we find that wo have gained in weight for a given value one hun- dred and fifty-five to one. And yet the attainment of this " convenience," this eminent degree of '' portability." would blight the existence of the genera- tions that are now living. Returning to the statement of the danger of an appreciation of Gold which I venture to say leading advocates of Gold-monometal- ism would admit to be true, it must now be frankly admitted that the hypothesis, "other things being equal," is totally excluded in their argument. It has been maintained : First. That the production of Gold is increasing, and will in- crease. Secondly. That the amount of Coin required for employment in circulation will progressively diminish. The latter proposition will be examined in the following chapter. In considering the first proposition it is most important to realize the great influence which this faith in an increasing production of Gold has exerted in molding opinion in favor of adopting the Gold Standard. The discussions for some years before 1871, notably those which centered around the Conference of Paris, in 1867, gave form and impulse to public opinion. Once moved in all its length and depth of course its vis inertia; bore public opinion onward, and gave to the Gold Standard a commandiuir prestige. So, too, in addition to the discussions at Paris, a meeting of the German Ilandelstag, a Convention of Chamber of Commerce, oc- curred in 1868, which was directly instrumental in determining public opinion in Germany. Now, in the years 1862 to 1867, the production of Gold was held * Ricardo. Hifih Price of Bullion, etc. London, 1811. 112 SILVER AXD GOLD. to be decidedly on the increase, and the discovery of mines in Nevada may well have suggested that another California might be latent in America. Xeller, whom we have quoted, expects much from the Pacific Eailroad and the Eailway across the Isthmus (p. 44), and is certain that the production of both Silver and Gold has a great future. So, indeed, Professor Fawcett (Political Economy, p. 4S7, edition of 1874), though advising the insertion in long-time contracts of pro- visions guarding against depreciation of Gold, makes no allusion to appreciation. The world was in fact almost justified in expecting a sudden ftill of Gold like that of 1850 to 1858, while at any rate, even in a nor- mal condition of demand for Gold, it must be remembered that the history of late centuries points to the probability of a general sub- sidence of its value. So little, indeed, was the existing revolution of the relations of both supply and demand understood, that as late as 1873 we find that Professor Knies, in discussing the German Coinage Ketorm, says (work before cited, p. 242) : " And although we have to admit that the extension of the Gold Standard over another country, and one so extensive as Germany, is calculated to form an important factor in a rise in the value of Gold, we must at the same time admit that it is not less calculated to work against a much dreaded depreciation of Gold.*" But in addition to the positive evidence there is also negative ev- dcnce on this point, which is very suggestive. It is a curious trait in the discussions of the advocates of the Gold Standard that the possibility of a failure of the supply and of consequent financial difficulty is but little taken into account. M. Mannequin, one of the most acute and uncompromising as- sailants of the Double Standard, which he characterizes as "absurd and pernicious (absurde et malfaisant) ; aCarlist Insurrection against the elementary principles of Moncj^," says, in a late woi-k : " I have never heard that the civilized world suffei-ed from insufficient supplj'' ■* Professor Soetbeer gives the following amounts of annual product ex in German pounds (See Quensted, Die neuen Deutschen MUnzen, p. 32) 1862 379,000 18G3 385,000 1864 3!)0,00D 18G5 4(H,000 1866 ]I2,.')00 1867 413,000 GOLD-MONOMETALLISM. 113 of the Precious Metals before the discoveries of California and Aus- tralia, and as these two countries have not ceased to inundate us with their products, nor even to threaten us with similar inunda- tions in the future, one doi'S not see why the Precious Metals, and Gold especially, should be wantihaj to-day." In the debate in the Socicted' Economic Politique of Paris, Api-il 5, 187(5, on the Question of the Two Metals. M. Clamagcran made, ■without contradiction, the following remark : ■' In fact, since the Middle Ages, one finds but one epoch in which there was a rise that was really perceptible (un hausse un peu sensible). At the end of the 15th century, the old mines being nearly exhausted, money be- came scarce, and this scarcity could not be compensated by credit which was then in its infancy (compare p. 109). This state of tilings lasted during the first years of the 16th century, under the reign of Louis XII. Soon after the reverse phenomenon appeared." From such statements it would appear that the conditions of su]:»ply of the Precious Metals between 1810 and 1830, and the state of demand for Specie at that time, and the action of Paper Money upon the relation of the two had not been thought worthy of notice. Again, M. Fecr-Herzog says (in the work above cited, p. 77) : "Admitting, with Xeller, that the coined Specie of civilized nations amounts to 13 2 milliards (francs) of Gold, and 6.9 milliards of Sil- ver, and deducting 1.3 milliards for subsidiary Coin from the latter figure, we have 5.6 milliards to be demonetized.* '• Supposing only seven or eight years to be required to bring about the monetary union of all civilized nations, and it will re- quire much more, the current production of Gold, with its 7 or 800 millions a year, will more than fill the vacancy." Five years have passed; the production has averaged 500 instead of 7 or 800 millions, and Germany not only is still in the "transi- tion period," but bids fair to remain in it for many years. But even had the product been 800 millions, how would M. Feer- Herzog jirovide for the yearly losses, for the demands of the arts, for the demands of increasing population ; nay, last and not least, for Resumption in the United States? It is but fair to say that later utterances of advocates of the Gold Standard do not bear out the cheerful anticipations of a few years ago. Mr. Frederick Hondriks, an English writer of known authority, *I understand Xeller to include in his estimate Bullion used in exchanges. 114 SILVEE AXD GOLD. whose orthodoxy on the subject of Gold may be tersel}- attested by the fact that he appears sincere in believing the Double Standard to be a "hybrid monstrosity, utterly beyond the pale of economic sci- ence," said in 1875:* "It seems clear that unless the amount of new supplies of Gold be stimulated and increased by the demand, a period of ten years must elapse before the wants of all [the Western Nations, exclusive of Eussia and Austria] can be satisfied." On examining the data upon which Mr. Hendriks constructs the possibilit}- of providing these countries with Gold within ten years, we find that he reckons with apparent security' upon being able to send to the mints one hundred and eight millions of freshly mined Gold every 3'ear — and makes no provision for use in the arts and for annual loss ! Of course these predictions may prove true: as to the future it is vain to attempt argument. In Homer's phrase, "these things lie in the lap of the gods ! " For the present, however, it is suflScient to know that the annual production of Gold has been gradually diminishing, taking an avei'age of years. To quote the words of the most distinguished advocate, formerly of Silver and now of Gold, Chevalier (Eevue des deux Mondes, Aug. 1, 1876, page 639) : "The fact is that the production of Gold is in the way of diminution, and not of in- crease." ExPL.\NATORY Note. — Since the above chapter was put into type, it has forced itself upon my attention that the explanation of the Value of Money which is suggested in the early pages of it, and which lies, indeed, at the foundation of this essay, may find more ready assent, or at least a fairer hearing, if I explain it more in detail. It has long appeared to me an obvious deduction from what every one observes; but it should be ad- mitted that it appears at least unsanctioned by many authorities. For example, in a late number of the Paris Journal des Economistes (October, 1876, p. 47), M. Joseph Garnier say«: " Money is nothing but a merchandise, under the form of a stamped disc, the value of which has nothing arbitrary and offi- cial, and regulates itself like that of all com- modities." In a note, he adds : " The value of the two metals and of pieces of money is the resultant of cost of production, and supply and demand. Com- * London Economist, Correspondence, Mar. 20, 1876. See also Jan. P>1, ]871. GOLD-MONOMETALLISM. 115 morce must be free to make use of them The issue of full-weight pieces should be free. Coining is made a state monopoly, or put in the hands of a few contractors, merely that agents of the state maj^ certify the weight and the fineness, just as one certifies to the exactness of other weights and measures." Evidently, if M. Garnier's expressions are to be taken in their literal sense, they conflict with the theory of which I have been speaking. For my position is that the demand fi)r the Precious Metals, and hence the local supply in one place, to the extent to which it is affected by local demand in other places, is almost entirely the product of the laws of different countries ; and that the material for Money occupies so peculiar a position among commodities that cost of production is a far remoter factor in its value than in that of other commodities. Hence, it is ob- vious that the value of Gold and Silver is, if one must accept or reject those particular words, "arbitrary and offi- cial," to an extent of which M. Garnier's statement, in the above form at least, takes no account. Of course 1 may misai^prehend M. Garnier, but certainly in much of the political economy of the day, the laisser /aire idea ' has not only invaded the province of what ought to be, but has ob.scured the observation of what is." I say this, of course, without disrespect to that idea itself — my objection apjDlies only to the confounding of an ideal with an actual state of things. As long as civilized government has its finances to look after, and as long as legislation regulates contracts, so long will ideal free trade in money be impossible. Its quality of Lawful Money and Legal Tender, and all that that im- plies, is, in a proper sense, a creature of Law. The reader will not fail to note the controlling importance of the theory of Money in the decision of the practical questions before the world to-day. If cost of production be the controlling factor in the value of Money, Gold is likely to vary with the cost of its production, and Silver to depre- ciate, because the Nevada mines produce it at so little cost. But if the theory which I have above expressed be correct, the main point to be regarded is to keep the demand, which law creates, in a steady rela- tion to the existing supply. Hence, though the cost of production of Gold remain the same, and that of Silver become less, Gold may fall and Silver rise, if nations demonetize Gold and demand large quantities of Silver. Cost of production is in fact efficacious in their value only by af- ecting the supply, and the supply is in one sense everything: for men never have enough of Gold or Silver, .\gain, this theory places itself as a strong-based support to Wolowski's doctrine of Bi-metallic Money. In order to make the point clear, I must recur to first principles. I ask the readers to consider, with me, that peculiarity of money, which, for want of a better word, 1 must call its '' lungibility." " Pardon must be granted,'* says Apuleius, "to the novelty of words when it serves to illuminate the obscurity of things, ' and this Low-Latin 116 SILVER AXD GOLD. word will at least force upon the readers' attention that there is some- thing peculiar about commodities that are used as money. Gold is fungible. Silver is fungible; that is, these metals are both so homogeneous that, if I get a pound of pure gold, for example, it is indif- ferent to me whether it be this pound or that pound, one is as good as another. There is one 23eculiarity of these metals, and it is an eminently im- portant peculiarity. It is " worth Money." B is willing to give A llU pounds of Gold a year hence, if A will give him 100 pounds of Gold now: it is "worth ten per cent." to B. Why? A part of its value lies in its fungibility. Supjiose B had to give A, at the end of the year, the identical Gold which he received. What use could B make of it in the meantime ? If he invested it, how would he be sure to get it back again ? Would it be worth ten per cent, under such circumstances ? Evidently not. Now mankind, in political society, since the dawn of commerce, has, with lew and unimportant exceptions, recognized and, if need be, en- forced this general fungibility of each of these two metals. True, it has always been taken for granted as a truism in the Law of Contract, but it is none the less thei"e because so little is said about it. Again, not only is each metal fungible of itself, but during thousands of years mankind have recognized, with unimportant exceptions, that these metals are mutually fungible; men have established this by local custom, by " common law," by edicts, by decisions of courts, by statutes, by the practice of government, etc. Since the dawn of commerce it has been a prerogative of the incorpo- rated will of political society to control and limit this admitted and uni- versal fungibility, bj' establishing the ratio between the metals used as money. In classic Greece it was numbered first among the subjects of the " Economy of a King," to know '■ what Coin should be raised or lowered in price, and when." An inscription in Egypt is said to tell of an edict of the sixteenth cen- tury B. C, fixing the rates at 1 to 13.^. Livy tells of a treaty of the Romans with the .^Etolians, fixing upon paj ments in Gold and Silver at the relation of 1 to 10. And so the line of laws proceeds till we see Germany, in 1871, announcing a new Coinage of Gold, at the ratio of 1 to 15.V of the existing Silver Coinage. So, likewise, with the exceptions offered by modern demonetization, the Law of Contracts, from the earliest time down, recognizes and enl'orcos this mutual fungibility of Gold and Silver. Now, if, as we have seen, the fungibility — be it given by consant of the parties or by law — of one metal alone is " worth Money," is not the mu- tual fungibility of either metal also "worth Money ?" Evidently it is. And now, even if it be denied that there is anything " arbitrary or offi- cial" in the recognition bv law of the fun.r^ibility of onp metal (and this GOLD-MOXOMETALLISM. 117 point I would not urge), can it be maintained that there is nothing " ar- bitrary or otiicial " in the mutual fungibility of the two? But therfi is still another order of phenomena in which this idea and word fungibility, since wc have undertaken to illustrate it, may be prof- itably followed. " Every commodity has two uses : one peculiar to it, the other less pe- culiar to it. As, for example, a shoe is primarily made to be worn, but still may also be exchanged for something else." In fact, however, shoes are constantly worn, and they are but rarely exchanged for other things. So of most commodities; they are, in general, used for purposes pecu- liar to them. It is evident that this use of being exchanged for some- thing else is not peculiar to any one commodity, but is shared by all com- modities. But for what are Gold and .Silver used? For what are they "made," in the sense of being mined and purified? Are they made or chiefly used for uses peculiar to Gold and Silver — for gilding, or for jewelry or plate, or what not ? Or are they made and chiefly used for this purpose which they share with all other commodities — namely, to be exchanged? Plainly the latter. They are therefore different in this from all other commodities: that their chief use is not their primary use, as individual commodities, but their secondary use, which they share with all other commodities. In fact, they have been given by man a position in the midst of all other commodities as the medium — the means of comparison ; and they have received what we may call an universal fungibility, in this — that they are exchangeable for any and all commodities. This is the very nature of Money. '' With regard to a future exchange Money is, as it were, our security; for it is necessary that he who brings it should be able to get what he wants." This was true at the dawn of commerce, and is true to-day. In mod- ern parlance, " Money is an order payable to bearer, on wealth in general." Recurring again to this matter of fungibility, we ask, is not this third sort of fungibility — this representability in all exchangeable commodities which attends Money — also " worth Money ?" Evidently it is. We see, then, that the first kind of fungibility is worth sonietiiing; the second kind of fungibility is also worth much; and the third kind of fungibility is evidently worth more. Now, does the fact that the common consent of mankind has made Gold and Silver Money — an universal order payable to bearer, on wealth in general — exclude or include that there is something " arbitrary and official" in this establishment of this prerogative? True, it is a jiart of what the elder jurists called " natural law." The Jesuit, Schwartz, says, in his compilation of "Institutes" (Venice, 1700, vol. I, p. 21(3): '• The obligation of accepting money, and of recog- nizing its value (speaking generally, and abstracting from circumstances), io introduced jure gentium." 118 SILVER AXD GOLD. But is it for that any the less "arbitrary and official?" Has the Law of the different nations of the world, the Law of Contract, the Law of Legal Tender, has the practice of Governments, the collection of customs, of taxes, the assessment of Money fines, and damages, the appraisement of property for taxation or in litigation, etc., exerted ariy influence of omission or commission upon this universal " fungibility " or exchangeability of Gold and Silver ? And is there nothing "arbitrary or official" in this? If Shoes and Stockings were unlimited Legal Tender between men, or if the law pro- vided taxes, fines, salaries of officers, damages, fees, etc., should be paid in Shoes or Stockings, would there be nothing "arbitrary or official" ia this? And, then, if Stockings were demonetized, what would be the effect of this change on the value of the stock on hand ? Of course the reader will understand that in speaking of what is arbitrary and ofticial, it is not im- plied that law can entirely destroy, nor that it can inordinately increase the value of either Shoes or Stockings, or of Gold or Silver, but that within certain bounds law can materially affect their value in one way or another. If this be correct, the theory of cost of production, and supply, and demand, when applied to money, should, in the interest of clearness, take account of the peculiarities of this " arbitrary and official " control over demand, and over supply, in the sense of withdrawal of demand. There is, as I have already indicated in my citation of Locke, nothing new in the idea. Feeling, however, that I might appear to be in a minority upon this subject, it occurred to me to inquire whether Aristotle had not illumined this department of the Money Question, as well as others. The reader will understand the feeling with which I read in the Nichomachean Ethics, Book v., Chap. V. : " Money {vouirfia)^ ' nomisma," is, as it were, a substitute for " chreia" (xpeia), demand, or the thing needed; and, hence, it has the name "no- misma," because it is not so by nature but {v6/i(o) by (nomos) law, and be- cause it is in our own power to change it and render it useless." Is it not evident that Aristotle was speaking of the Legal Tender char- acter which the law gave to the commodities used as Money, and vvLich the law can take away. If it should be suggested that the Greek vouoj (nomos), means "cus- tom" as well as law," the answer lies upon the surface, that, as contrasted with "nature," the custom alluded to inevitably includes law, and, there- fore, in any case, justifies me in saying, after this quotation, " (Jimoc/ erat demonstrandum?" It is proper to add that the above quotations as to the " Economy of a King," and upon the " two uses of Shoes," and upon " Money as a Secu- rity," are also from the expressions of the Father of Science upon the Money Question. O lor an hour of Aristotle, before a Congress of the Nations! ckp:dit anu the ecOxNomy uf specie. 119 CHAPTER IX. CREDIT EXCHANGES AND THE ECONOMY OF SPECIE. Belief that gcnoial adoptiou of Gold Standard will Becureecoiioiiiy of Specie — Increased use of Credit as an adniissablo alternative — Opinions of thiukert — Dangers of this alter- native in present situation of the United States — Examination of the alternative of in- creased economy of Specie— Hypothesis of substitution of Gold for Silver and Paper, in 1881, in certain Western Nations — Modes of economizing Specie — Prospects of Fusion of Currencies — Prosi^'Cts of International Money — Prospect of International Bank Notes and Clearing IIuusi^s — Economy in Domestic Kxchauges — Efficii-ncy of Money analyzed — Relation of Bloiiey to prospciity — Rai)idity of Circulation, and perfection of machinery of Credit Exchanges — ('an ratio of Specie to Credit Exchanges be diminishing — General impression on this subject— Prosperity and Speculaiiou — Example of England— Steam, tho Tel 'groph, Clearing House, Ciieck and Deposit systems — Home stock of Specie in Great Britain, lSll-7-1— Increase of population — Estimates of McCulloch — Effects of De- preciation of Gold— Effect of Bank Acts — Prospect of change — Uncovered Bank Notes on the Continent — Accumulation of Specie in periods of depression of business. Prominent among the arguments for the adoption of Gold (seo page 99), as the universal material for Money, is the assertion that its general introduction, by increasing the efficiency of Money, would secure an economy of Specie hitheito unattainable. This anticipation is sliil further extended to confront the danger of a rise in the value of Gold, as if through this saving of Money the existing Hupi)lies of GoJd could be made equal to the task of replacing tho existing Silver and Paper Currencies. Still a third count is added to complete the argument, which is to the effect that it, in the period of transition to the universal use of Gold, the wide cxloiision of the demand made upon the existing supplies should ilircauMi a general lowering of Prices, such unto- ward event can be guarded against by a temporaiy extension of Credit into the domain, which, in a normal condition of affairs, would be assigned to Gold alone. In his work already quoted, M. Mannequin alludes with confi- dence to the institutions of Credit which, in spite of war, had extended their sphere of action. M. Victor Bonnet is understood to base his confidence in the sufficiency of Gold, even in the event which M. Van der Berg regards as so ominous, upon Credit, as well as upon the assumed existence of immense hoards of Gold in non-specie-paying coun- tries. 120 SILVER AXD GOLD. He is confident, for example, that there are some IIGO million dollars worth of Specie in France, a large part of it in the pockets of the people, stricken, as he says, with immobility (frappe d'im- mobilite), because of the circulation of Paper. Inasmuch, however, as the same gentleman is represented as finding similar comfort in the imagined existence, in one of the principal Banks of the United States of a reserve of 150 raillion dollars, the greater part of which is Gold (!), it is safe to say that the more solid facts which are to sustain the argument are to be found in the extension of Credit* M. Feer-Herzog anticipates that monetary unification will have the consequence of reducing the quantity of Coin necessaiy for a certain quantity of transactions. The reservoir of Universal Money need not be by far as great as the sum of existing stock of National Monej's. And he suggests that an International Clear- ing-house would accomplish for all the nations what the Clearing- house of England does for English Commerce. He further quotes, with approval, the plan of M. Emile Granier for the "Internationalization of the Bank-note," for a syndicate of the Banks of the Western World, whose bills, expressed in Dollars of the Union, are to pay the Clearing-house balances of the nation, and to do away with the need of transporting Gold across the bor- ders or the ocean for that purpose. J. Meyer, in an interesting exposition of the plan of an Interna- tional Money, on the basis of 1^ grammes of fine Gold, which grew out of the so-called Private Monetary Conference, at Vienna, in 1878, Confronts, with clear view, the difficulties which a rise in the value of Gold may bring to states whose present stock consists largely of Silver Coin, and likewise, and in greater proportion, to those which are under the domain of Paper Money ; and, in the latter case, he suggests the advisability of continuing the use of Paper Money, or of deferring the Resumption of Specie Paj'ment, until more fortunate conditions of the supply of Gold enable them to obtain the requisite amount. f In the meantime, tbc introduction of the International Money could be partially attained b}^ coining it to be used for payment of international bahinces. * Sfie La Question Monetaire. Discussiona la Society d'Economie Politique Beige, November 16, 1873. Bruxolles et Paris, 1874. Journal d'Economie Politique. Paris, May, 1870, p. 299. •j-Das Miinzwesen auf Einheitlicher Grundlage. Berlin, 1875. CREDIT AND THE ECONOMY OF SPECIE. 121 As we htive seen, Mr. Hendriks, a leading advocate of Gold in England, allowed ten years from 1874 for the completion of the re- form of coinage. As yet, however, the first actual step toward Specie Payment in this country has yet to be made, and other nations have the start of us in obtaining Gold. It would seem, then, on Mr. Hendriks' plan, that it will only be in 188G or 1889 that our Specie stock will be complete. It is, however, but fair to admit, at the start, in general, that, to him who regards the adoption of Gold-monometallism as an im- portant step forward in civilization, removing the friction of the world's exchanges, as the rail and the locomotive remove and over- come the frictions of transjjortation, the thought lies near that, in- asmuch as the friction largely consists in using Coin, and the re- moval of it must, in large part, consist in an increase of legitimate Credit exchanges, any difficulties of procuring the Gold which is to i^erform this miraculous service would be profitably surmounted by a temporary use of forms of Credit whose use might otherwise not seem desirable. It will be apparent, however, on examination, that what is meant by this is merely the adoption, in a special form, of the traditional expedient for pecuniary embarrassment. Roscher had already observed, in his great work, that a dearth of Metallic Money might necessitate and justify an issue of Paper Money. " The state," he says,* " has more control over a fall than over a rise of Prices; since, in the former case, it can interfere actively by reduction of taxation and by issue of Paper Money." To one familiar with American politics of late years, comment will be unnecessary. This ''extension of Credit into the domain of Specie" — this "issue of Paper Money" — this ^- delay of return to Specie Pay- ments" — which is recognized by persons of authority as one of the alternatives presented with the adoption of Gold — what do they mean in this countr}^, and at this time, but the abandonment of the field to Inflation, after the battle is won? Is it not clear that, with a Banking S3'stem such as ours — which, however excellent in some respects, is not secure against the modi- fied Suspension of Payment implied by the Certified Check, and offers no security against a Suspension of Specie Payment — with *Grundlagen der National Oeconomie, §141. 122 SILVER AND GOLD. the existing Greenback Party, and "Soft Money" Democratic Party, and " Soft-Money " Republican Party, the entrance of the advo- cates of Sound Finance upon a career of Credit Currency is fraught with peculiar dangers ? And this matter is all the more worthj- of earnest consideration, from the fact that many of those who have hitherto been cham- pions of Sound Finance in this country, appear utterly uncon- scious of this feature of the situation. vSuch being the character of one alternative presented, it is pe- culiarly profitable to inquire as closely as may be into the nature of the other alternative, namely, of new agencies for economizing Specie, which, upon the substitution of Gold for Silver and Paper, by Powers now meditating the change, may fairly be expected to come into play. Let us suppose, for example, that, in 1881, Germany will have succeeded in disposing of her Silver and in retaining her quota of Gold ; that the Northern States of Europe and the countries of the Latin Union will have replaced their hundreds of millions of Sil- ver with new Gold ; and that Italy and the United States will have redeemed their Legal Tender Paper with Gold and their Fractional Currency with Silver tokens. For the sake of the hypothesis, Austria and Russia may be left to Paper, while the semi-civilized world contents itself with Silver. We should also premise, in justice to the argument, that Brazil and Portugal are not to be supposed to be under Suspension of Specie Payment. The main supposition, of course, does violence to probability, but will none the less conduce to clearness in estimating the argu- ment for increased Economy of Specie. Of the §9GJ millions of Gold which make the annual supply of the past five years, it is safe to say that one-third will be needed to replace the annual loss of the woi-ld, and the requirements of the arts. What, then, are the agencies which can be relied u])on to secure economy of Gold, to so great an extent that, without lowering General Prices or checking the normal increase of business in tlie nations affected, the difference can be bridged over between the few hundred millions of new Gold from the mines or old Gold from Asia and the thousand or more millions whoso place is, upon our supposition, to be filled by Gold? Can the Unification of Coinage be relied upon? Is there any CREDIT AND THE ECONOMY OF SPECIE. 123 prospect of tbo occurrence of this change which, to those who la- bored for it, once seemed almost secure? Certainly, as far as we may judge from the general tone of dis- cussion and public action, it seems most probable that in the Gold Exchanges of the near future the Sovereign, the Napoleon, the Eagle, and the Crown will still occupj^ the field. Despite the exertions and hopes of financial reformers, the late action of Germany seems to point to an indefinite postponement of the scheme. Instead of striking Coins whose weight in fine Gold would have offered at least a multiple or sub-multiple of the fi-anc, the dollar, or the shilling, the imperial Gold Coin of Germany diversifies, in- stead of unifying the coinage of civilized nations. In theory, also, as well as in practice, national independence is maintained as a guiding principle of coinage ; and, if one may trust the spirited advocate and apologist of the German " Munz-reform,"* the supposed demand of international cxcthanges for anything more than unity of metal, ot alloj-, and remedy is merely Utopian. But can the "unification" of metal, which we suppose to take place, very appreciably affect the use of Coin? The Commercial nations, including those who have held Silver and Paper at home, have always been wont to use moi'e or less Gold in international trade. Indeed, the countries of the Double Standard have, in practice, been, as the advocates of Gold are wont to observe, for a quarter of a century, countries of the Gold Stan- dard, the greater part of their Specie having been Gold. The Commercial nations may, in 1881, use considerably more Gold than before, and there Avill be, in all these countries, a larger reserve on hand for international pa3'ments. But, taken as a whole, international business seems to bid fair to flow, in 1881, in the same currents, if not in wider currents, of gold than before. Again, can an International Money, growing up by the side of various national coinages, and especially devoted to international business, serve to any great extent to economize Specie? The future of this project is in no sense assured; and if it were, it does not appear that Specie would be economized through its agency' to any great extent : for there has always been more or less of what is in practice equivalent to International Money. The melting of Gold Coins does not always follow their exportation, and * Ludwig Bamberger. 124 SILVER AND GOLD. the ingot and the stamped bar have long sei'ved as essentially an International Money, and it is difficult to believe therefore that the proposed change can promise any ver}' marked reduction of the quantity of metal necessar}^ for international exchanges. In like manner it must be admitted that National Clearing- houses, and International Clearing-houses, and International Bank- notes, however devoutly these consummations of the Credit System may be wished, yet are hardly to be relied upon as elements in the problem now before us. It is safe to say that the nations which we suppose to have se- cured a Gold Currency in 1881 will then make their international clearances by balancing bills of exchange, etc., and by Specie Ship- ment, as now. We come then to what we must admit to be a pi'omising field for the economy of Specie, to the domestic exchanges of the separate states, and the home stock of Specie which effects those exchanges. But first a few words as to the '• efficiency of Money." The data for consideration will be for a given country and for a given pe- riod : 1. The amount of Specie in the country ; 2. The amount and kinds of Credit circulation ; 3. The various amount of debts, prices, wages paid in Specie ; 4. The various amounts of exchanges made through various forms of Credit; and still beyond these questions, it should be asked. What portion of the Specie Currency was entirelj^ dor- mant, what was merely latent, what part was effective in actual payment, what as a special guarantee of Credit, and what was the rate of circulation of different bodies of Specie? Strictly speaking, of course the problem will remain insoluble until perfection is attained in statistics; but lair estimates of some of the data are attainable, and offer valuable suggestions upon the point now in question. In general, it may be observed tiiat the business habits of the people have the controlling influence upon the efficiency of Money, and that prosperity and activity in business tend to increase, and dejjression to diminish, the efficiency of a given stock of Money. In considering the probable economy of Specie upon the basis of a given stock, in a given nation, within a given space of time, wo are therefore confronted with the question. Will the business habits of this people remain what they have been? Will these years bo years of prosperity, and do they follow a period of de- pression or of activity? CREDIT AND THE ECONOMY OF SPECIE. 125 Let us suppose, for the sake of the argument, that the business habits of the people are to remain the same, and that these years are to be years of prosperity, following years of prosperity. "We now meet the obvious conclusion that, other things being equal — 1. An increase of population will x'equire an increased amount of Specie; and, 2. An increase of business beyond the increase of population will require a further increase of Specie. Now, prosperit}' implies an increase of business beyond, indeed far beyond, the increase of population. If, then, with prosperity, a smaller stock of Specie is to be re- quired, it appears that either A, the rapidit}' of circulation of Specie must have been in- creased indefinitely, or B, the ratio of Credit to Specie exchanges must have been increased indefinitely, or, of course, what would naturallj^ be the case, that both these causes must have conspired to produce the result. But, in any case, the existing Specie is alread}' but the metallic framework which is strained in giving stability to a colossal struc- ture of Credit Exchanges. Transfers of capital from place to place, and direct purchases with Specie, are being made, while the mass of outstanding obliga- tions are being liquidated by other obligations, simply because, al- though demandable, they are not demanded, in Specie. Unless, then, this increased rapidity of circulation of Specie, which we have inferred, be secured in permanence bej'ond danger of failure to the country in question, it is ]ilain that whatever econ- omy of Specie is attained is accompanied by an increased insecurity of business in a ratio not far from the full percentage, both of saving of Specie over the former stock and of increase of Credit Exchanges over the total of former exchanges combined. It is evident that nothing but a revolution in the business habits of the Western World could secure this rapidity of circulation of Money and perfection of the machinery of Credit, which would not only justify that immense expansion of exchanges which prosperit}' implies, upon the basis of the given stock of Specie, but would permit the base of the entire structure at the same time to be nar- rowed. Is any such change in progress on the continent of Europe or in the United States ? Is there anything that promises the realieation of such hopes ? 126 SILVER AND GOLD. There is, it is true, among well-informed persons, a general im- pression that rapidity of circulation is being attained in an increas- ing degree, and that Credit Exchanges are notably on the increase. Locomotion by steam, the Telegraph, the Clearing-house, the Check and Deposit System, etc., are the powerful agents of this change. On the European Continent, the latter agencies are in an embry- onic condition, while the United States offers a wide field for the development of them all. On the other baud, it is to be considered that there is a wide field for economy of Specie in the habits of Asiatics, while at the same time the percentage of the annual product of Silver, which they chiefly use, as compared with the total stock of Silver, is about one- half of that of the percentage of annual to total Gold pi'oduct. But all this, and more than this, maj- be true, and yet not con- tain a satisfactoiy answer to our question. For prosperity means an immense increase of the sum total of values; an immense increase of production; an immense increase of exchanges ; an increased proportion of men enjoying competence. Now, the efficiency of money may increase to an extraordinary degree, and yet not equal the rate of increase of the use of Money. What we ask is, will the efficiency of Money, in a given country, during its prosperity, increase (without endangering the security of its business) to such an extent as not only to keep pace with, but to outstrip the constantly growing demands of business ? Will there be a progressive and extreme diminution of the ratio of that stock of Specie which shall be needed to give stability as compared with the sum total of business, which is expressed in terms of money?* If it will not, then to diminish the stock of Specie is, in the proper degree, to turn prosperity into dangerous speculation cer- tain to collapse, or more probably to bring about a fall of prices, which will check production, and abolish prosperity altogether. In seeking for light upon this difficult subject, we naturally ask what suggestion the experience of England has to offer. As tlie chosen home of the machinery for the economy of Coin ; with Steam and Electricity exceptionally under command; with * A comparison of Cash Balances paid to Credit Exchanges of the New York Clearing House from 1853 to 1876 shows that in tlic liitt(3r half of the period the percentage of cash to exchanges was about 4, while in the earlier half it was about 5 to the hundred. But the " Cash " was largely paper. CREDIT AND THE ECONOMY OF SPECIE. 127 fully- developed Banking, Clearing House, and Deposit Systems, it is plain that England presents to other nations an exemplar in business habits and facilities which none of the Powers now under consideration can for many years hope to equal. True, it may be said, her prosperity is exceptionally great. Lon- don is the Bank and Clearing House for the world ; the amount of business which centers in London can not be regarded as a cri- terion for that which even excessive prosperity could bring to the United States, to France, Germany, or Ital}^ On the other hand, it may bo asked : •' Why not, as far as this single matter of Economy of Specie is concerned? The greater centralization the greater economy." So, too, it may be answei-ed: Compare England in 1874 to Eng- land in 1844; has her proportionate share of the business of the world materially increased in that space of time? Has her business increased in a higher ratio than that of the other nations? Admitting, however, that any definite conclusion on this subject of actual increase of exchanges is beyond our reach, it can not be unprofitable to examine the facts as far as we can discover them. According to what seem to be most trustworthy estimates, the stock of Specie in permanent use in Great Britain, in 1844, was about £50 millions.* In 1874, the stock of Specie in Great Britain was (including the deposits in the Issue Department of the Bank) over £120 mill- ions. f Let us, however, for the purposes of our present discussion, that we may understate rather than run the risk of over-stating, sup- pose that the Specie stock of 1874 was only double that of 1844, or £100 million. The population of Great Britain is given in a work of authority as 25,-\ millions in 1851, and 31y\ in 1871. A sufficiently close ap- proximation, taking into account the great losses by emigration in the years preceding 1850, would give for 1844 and 1874 about 24^ and 33 millions respectivelj^, an increase of nearly 33 per cent. If, therefore, business kept pace with population, and Specie with business, we might expect that the stock of Specie in Great Brit- ain, in 1874, would be thirty-three per cent, greater than in 1844, or 66^ millions. * Tooke-Newmarch, II., 2, G93. f Seyd, Geld Wiibrungs und Bankfragen, p. 90. These estimates are confirmed by other authorities. 128 SILVER AXD GOLD. But as it is, 33J millions, one-third of the existing stock, are left to be accounted for, and we see that the ratio of actual increase of Specie is three times greater than that of the population. Again, in 1858, McCulloch estimated the annual increase of Spe- cie required for use in the "Western nations as currency at 2 per per cent, of the existing stock of currency (500 mil. £ or 10 mil. £ per annum).* " It is impossible," he says, " supposing this estimate not to be very wide of the mark, at present to conjecture how long the cur- rency will go on increasing in this ratio. It ma}'', as we have seen, be safely taken for granted that the sphere of civilization and com- merce is destined rapidly to extend. But its expansion will no doubt be accompanied by various contrivances for economizing the use of Metallic Money, so that the quantity of it in circulation may not increase for any very lengthened period at the ratio above stated. If it did it would absorb an immense supply of Gold." How, then, does the increase of the stock in Great Britain com- pare with the percentage given by McCulloch in 1858?! An annual increase of two per cent, since 1844 would give a total stock for 1874 of £90 millions, thus leaving £10 millions to be accounted for. Attention should, however, be called to the fact that this esti- mate was made in full view of the inflow of Gold from California and Australia into the commerce of the Western World, and of course includes besides the demand of increasing population. That McCulloch does not admit a fall in the value of Gold, makes his testimony the stronger. For, while in view of the Gold Dis- coveries he finds that the commerce of the "Western Woi'ld shows an average annual gain of 2 per cent., the facts hitherto developed as to England show that England gained more than two per cent, on an average during long periods both before and after this inflow of Gold. On the other hand, a fall in the value of Gold is, in spite of minor divergencies of theory, fully established by the labors of Newmarch, Jevons, Cairnes, and should properly be taken into * I do not understand that the annual loss by wear and tear is included in this percentage. Encyclopaedia Britannica, art. Precious Metals. tit will be remembered that (see page 25), according to Xeller, the stock of metallic Money in the Western World in 180(3 was about 55 per cent, greater than in 1847. From this datum we may assume a general increa-se of metallic Money in the Western World from 1844 to 1874 of 76 per cent, at least. CREDIT AND THE ECONOMY OF SPECIE. 129 account as an important though indeterminate factor in account- ing for a large portion of the increase of Specie. This, however, would not exclude a further and most important question, to what extent was the prosperity of Great liritain due to this redundance of the supply of Gold. There is perhaps another consideration worthy of mention in this place. About twelve per cent, of British Coin is Tokerr Mone}^ ; the half sovereign is the lowest full-weight Coin, and there are in England, where the greater proportion of business is done, no Notes below £5. Debased Coin naturally offers little temptation to hoarding, and at the same time offers a diminished encouragement to the accu- mulation of savings, being comparatively unavailable for banking purposes.* Such being the currency with which the majority of the popula- tion have to do, an influx of Gold Coin and a rise of Prices might, amid their complex results, embrace a change in the use of Coin by the poorer classes, and an increased permanent use by them of full-weight Coin. Are there other exceptional conditions which affect the fitness of England as a basis for illustration? In view of the present state of the Currency controversy, it seems proper to note the peculiar features of the Bank Acts which took effect at the commencement of the period under considera- tion : . 1. The absorption of Coin to serve as a deposit for issue of Bank- notes. 2. The limitation of issue of Bank and Country Notes (of which the former are Legal Tender, except at the Bank, so long as they remain convertible at par). It will be asserted by some that had the "Banking Principle" been commissioned in 1844-5 to direct English finance instead of the "Currency Principle," the Specie, which in these thirty j'ears has been locked up in the Issue Department, would have been effective as a basis of Credit, and would have made a smaller stock suflBcient for metallic exchanges ; and further, that a circulation of "uncovered" Baiik-notes would have set free other large sums of Coin. '•• This point is controverted. But see Ernst Seyd (Geld Wahrungs und Bank Fragen, Elberfeld, 1871, pp. 134-152), who attributes the debased condition of the poor in England in considerable portion to their false Money. 130 SILYEE AND GOLD. On the other hand, it may be asserted that ttiese provisions of the law, although apparently compelling the presence of addi- tional Specie in England, yet made that Specie all the more effect- ual, as keel or ballast for an increased spread of canvas of Credit Exchanges. Yiews upon this subject will naturally reflect the respective opin- ions of the disciples of Tooke and of Overstone. In any case, it will be necessar}^, in attributing any portion of the increased stock of Specie in 1874 to the limitations of the Bank Acts, to take account of the fact that the present tone of opinion seems adverse to an}^ decrease of the stock of Specie in England. Mr. Bagehot's work on "Lombard Street, '\published in 1873, is a warning of the necessity of increased reserves of Specie, and the Economist has repeatedly placed England's total annual demand upon the annual Product of Gold at £5 millions — more than a fourth of the whole ; while even Mr. Hendriks expects England to absorb in the next ten years £3 millions per annum for her home use. And in the mean time the Bank Acts stand firm. As enforcing the application of the example of England to the future demands for Specie of the nations whose future enters into our hypothesis, it should also be remembered that the entrance of United Germunj'^ into the field of finance marks a turn in the battle of the Bank-notes in favor of "metallic" Paper; although the numerous and able German assailants of the theory of " Peel's Bank Act" make a breach in it, by the 9th clause in the German Bank Act.* Indeed it is worth noticing that a considerable body of German thinkers reject all securities but Specie : are opposed, in a word, to Bank-notes in any form, except that of a warrant of deposit of Specie. So also the attitude of France, the historic policy of her Bank *The Banking Law of March 14, '75, creates an Imperial Bank, whose posi- tion and privileges somewhat resemble those of the Bank of Franco, but whose issue of uncovered notes is fi.\ed at $57^ millions, while thirty-two existing local banks are permittetl to issue uncovered notes to the amount of '^ol mill- ions. For all notes issued in excess of the cash on hand (accounts arc published every week), they are to pay a tax of five per cent., but they are permitted to reckon as cash not merely German Coin, Foreign Gold Coin, and Gold in bars, but also Government Treasury notes and the notes of other German Banks: no note to be issued for less than 100 marks ($23.00). CREDIT AND THE ECONOMY OF SPECIE. 131 and the habits of the Frencli people, together with the fact of Franco's absorption of immense quantities of Gold in the period 1850-1870, offer little that is encouraging to the prospect of dimi- nution of the ratio of the stock of Specie to exchanges in France. If then anj' portion of the millions of ])ounds sterling of increase of British Specie can be laid at the doorof tlie Bank Acts, it is safe to say that the greater part of such proportion of the Specit; stock of the Continental nations, as well as of Great Britain, is for the next few years at least safe from the attack of the agencies which are to secure the expected economy of Specie. On the other hand, the future policy of the United States is en- veloped in doubt. Our hj'pothesis, however, demands that the United States shall possess a sufficient basis of Specie to give stability to the constantly increasing exchanges of prosperity, and we are not informed of any method of compassing this end Avith a stock of Specie which shall fall behind the ratio of Specie to exchanges in England. On the contrar}', the fact that our population is scattered over such an ex- panse of territory, necessitates the use of a flir larger pi'oportion of Specie than would be necessary for the same population con- centrated as that of England is. There is, however, one branch of the situation which promises a certain abatement from the conclusions to which we have hitherto been led. It was observed on a former page that depression of business led to a diminution of the efficiency of M.oney, and in our further illus- tration we supposed that the years of prosperity under considera- tion had been preceded, not by years of depression, but by other prosperous years. But in this latter regard the illustration does not apply to the caso in hand. The nations of the European Continent and the United States have suffered since 1873 a general check of produc- tive activity. It is therefore not improbable that under the force of circum- stances, which we need not now attempt to analyze, a surplus of Specie may have been accumulated in these nations to an extent which, in the event of a return of prosperity, would for a time sat- isfy the demand for Specie. The condition of the European Banks and rates of discount would seem to corroborate this theory. So in the non-specie-paying countries, there is Specie, which is, comparatively speaking, idle, tind which, if a return to Specie 132 SILVEPi AND GOLD. Piiyments accompanied a return of prosperity, would develop an efficiency which might perhaps equal its own former efficiency and that of the Paper Money, which it displaces, combined. Note. — The invaluable Report of Mr. Goschen for the Committee of the House of Commons, appointed to examine the Fall of the Gold Price of Silver (which has come into my hands since this essay was in type), announces the following conclusions: "Your Committee are of opinion that the evidence taken conclusively shows that the fall in the price of Silver is due to the following causes: "(1.) To the discovery of new Silver Mines of great richness in the State of Nevada. "(2.) To the introduction of a Gold currency into Gei'many in place of the previous Silver currency. This operation commenced at the end of 1871. "(3.) To the decreased demand for Silver for expoi't to India. " It should be added — " (4.) That the Scandinavian Governments have also substituted Gold for Silver in their currency. "(5.) That the Latin Union, comprising France, Belgium, Switzer- land, Italy, and Greece, have since 1874 limited the amount of Silver to be coined yearly in the Mints of each member of the Union, sus- pending the privilege formerly accorded to all holders of Silver bullion, of claiming to have that bullion turned into coin without restriction. "(0.) That Holland has also jjassed a temporary Act prohibiting, except on account of the Government, the coining of Silver, and authorizing the coining of Gold. "It will be observed that two sets of causes have been simultaneously in operation. The increased production of the newly-discovered Mines, and the surplus Silver thi'own on the market by Germany, have affected the supply. At the same time the decreased amounts required for India, and the decreased purchases of Silver by the members of the Latin Union, have affected the demand. A serious fall in the price of Silver was therefore inevitable." In a later portion of the Report appears (what well might have been more conspicuously stated) the fact that the overt and disturbing acts ol Demonetization by fJermany took place in 1S73-4, and tliat at that very time the United States gave notice to the world that its doors were closed against Silver. When nations "discount" War Fines, it would seem that an announce- nu-nt like that of the United States might fan the flames of a panic. 1 might also add, although perhajjs sutliciently obvious to any one, that if there liad beiui no Demonetization by Germany, by the Northern Coun- tries, by the Latin Union (for the limitation of Coinage is to a certain CREDIT AM) THE ECONOMY OF SPECIE. 133 extent a Demonetization), and by the United States, the increased pro- duct of tlie Silver mines would have been absorbed by these countries, and the substitution of Paper for Silver in the India Trade would hardly have caused a ripple in the Gold Price or the Purchasing Power of Silver. But Demonetization once granted, the decreased demand of India and increased product of Nevada of course added an impulse to the fall of Silver; although without any Demonetization, the two combined would not have caused it to fall. Hence, although the latter two elements of the question are most important facts, yet it is after all Demonetization, which on any proper theory of causation is "responsible" for the fall of Silver. So also it is fair to say, that inasmuch as Germany through her policy of Demonetization, as it were, compelled the other nations to demone- tize, she is the efficient cause of the present situation. On the effect of Demonetization, indeed, the Report itself speaks in the strongest terms : " Your Committee on this point would further remark, that it is obvious that if effect should be given to the policy of substituting Gold for Silver wherever it is feasible, and giving Gold, for the sake of its advantages in international commerce, the preference, ... no possible limits could be assigned to the further fall of its value." There is, however, no fiirther expression of opinion: the Committee were limited to this subject — the "Causes of the Depreciation of the Price of Silver, and the Effects of such Depreciation upon the Exchange between India and England." The reader will understand clearly it is not Depreciation of the Pur- chasing Power of Silver, it is the lowering the Gold Price of Silver, which the distinguished Committee examined. It is also interesting to observe that they reckon expressly upon the United States " coining full weight Silver," but " only on a contracted scale, and only available for Legal Tender for a limited amount." Nothing of course could be said in the Report upon the prospect of England itself vmdertaking a share in the restoration of Silver. Tiie tone of the Report, however, and the expressions of some of the distinguished witnesses who testified before the Committee, indicate that the dogma of Gold-monometallism has by no means so strong a hold upon opinion in tone-giving circles in England as has been supposed. When Mr. Bagehot observes (Question 1389), "Silver is the normal cun-oncy of the world," one is deterred from anticipating an English crusade against Silver, and indeed, if Englishmen can be found whose courage is equal to the task of consistently carrying the reasonings and admissions of the London Economist into action, Silver will be, ere long, again Legal Tender in England. 134 SILVER AND GOLD. CHAPTER X. MONETARY TREATIES AND MONETARY REFORM. ' National self-interest, and the need of contract — Present attitude of the Great Powers — monetary Treaties and tlie German Coinage Reform — Bamberger's " Keiclisgold" — A Defense of Gold-Monometallism and the Demonetization of Silver in Germany— The sit- uation in Germany — Bamberger's argument on Monetary Treaties — Money Circulation and the circulation of the blood — The Germano-Austrian Treaty of 1857 — The Latin Union — Fusion of Currencies and Mutual Legal Tender — The limit of Monetary Unifiea- ti( n — Treaties for Bi-Metallic Money — Bamberger's argument for Unity of Metal — The Mathematician and the Economist — The future of Gold-Monometallism — International Union and Bi-Mctallic Money. In the introdactoiy pages of this essay I have adverted to that need of concert of action in the Monetary Legislation of the na- tions which the events of the last three years so clearly demon- strate. My attempt to present the main features of the situation would therefore be incomplete if I failed to call attention to the relation of Monetary Ti'eaties to Monetary Eeform* For it seems probable that this "union and mutual support," if brought about at all, will require, like other advances in civiliza- tion, some legal sanction to give permanence to this "disposing mind" — this \nQhoato aggregatio mentium — which a sense of com- mon danger has aroused. But the way is new. The management of the circulating me- dium of a nation has been treated as a matter of internal adminis- tration, and has rarely become the subject of international con- tract. Independent self-sufficing action, directed solely with a view to the supposed self-interest of the legislating nation, has been the rule. *Tn a lato meeting of the American Social Science Association (at Saratoga, September 0, 1870), the rouding of interesting papers on tiie "Silver Ques- tion" was followed by a general dcjbate, in the course of whicli the suggestions of an International Conference and of Treaties for Bi-metallic Money, as well as <>f the general views set fortii in this Essay, were bri(!fly presentinl by the writer. See Appendix II concerning the views of Mr. IJaich, of Philadelphia; Mr. Walker, of New York; Mr. Nourse, of Boston; and Mr. White, of C'hicago. The lir.sl public mention in this country of a proposal of an International Congress was made, unless I am mistaken, by Senator Jones, of Nevada, in the Senate, April 24, I87G. See Appendix K. MONETARY TREATIES. 135 This was, as we have seen, eminently the case with England in 1816, and in 1876 the various nations of Christendom seem in- clined to pursue the same policy. Each nation is observini; the othei" with a view to defensive, if not to offensive action ; and the latest product of Evolution, the Bclf-conscious Body Politic, wielding the polite weapons of financial legislation, lives like tlie Ishmaelite of pre-Christian days, his band against every man and eveiy man's hand against him.* Certainly the ga]) is wide between a state of affairs like this and the dream of the "Confederation of the World" — a "Parliament of Man" — or, to translate it into narrower and prosaic language, the owners of the Planet Terra going into Committee of the Whole on the question of Money. And yet all are glad to dream that "one touch of nature makes the whole world kin," and the universal danger to prosperity ap- peals to motives in man of every race and station, the force ot which is as stable as it is strong. In the few pages I shall devote to this subject, I can, I believe, best suggest to the reader an outline of the situation by introducing him at once to the controver.-^3- which naturally arose in connection with the late action of Germany in changing its Money System. A favorable opportunity for doing this is offered by late utter- ances on this subject of a gentleman who has the reputation of being the author of some of the Laws which brought about the German Coinage Reform. The most notable experience which the nations have gathered upon international contracts on the subject of Money is that em- bodied in the Monetary Treaty of 1867 between Austria and the German States, and in that of 1865 between Italy, Switzerland, Belgium, and France. On the other hand, the most notable instance of the dangers to which the neglect of such considerations exposes them is that which the attempted substitution b}' Germany of Gold in the place of Silver has occasioned. The utterances of flerr Bamberger are therefoi*e peculiai-lj" en- * Professor Knies said (^Geld and Kredit I. 257), in 1873 : " We believe that I'rance and its allies, immediately after payment of the War-fine to Germany, ■will abandon its present ^Monetary System, and that, for that very reason, Ger- many ought to make no further delay in completing her adoption of the Single Gold Standard. Till that period, the Double Standard will remain in practice in France." 136 SILVER AND GOLD. titled to consideration, on account of the central position which ho obviously occupies with reference to the entire question. The work to which allusion is made bears the title "Reichsgold," which, to a German, must suggest inspiring memories of " Rhine- gold," and call up in a shadowy manner some analogy between present conditions and the fabled Hoard of the Nibelungs enshrined in Teutonic song. The book was written in 1875, and had reached a third edition early in 1876. In his closing chapter (p. 198), the author gives the following account of the genesis of the work : " When, about midsummer of this year (1875), the German Coinage Reform became the subject of a feeling almost of despair, the resolve to overcome this feeling put the pen into my hand. "A triple object was to be attained : " First, in view of the obvious fact that conviction [on this sub- ject] had not j-et been firmly enough established, my task was to prove from the outset, by clearing up the principles involved, the necessity and the propriety of our great undertaking. " Then, to restore confidence in its final success. " And, finally, to urge strenuousl}'' that this transition state, from which this uneasiness had pi'oceeded, be put out of the way as soon as possible." The following titles of chapters will brieflj' indicate the scope of the work : 2. The Exportation of Gold from Germany neither caused nor made more easy by the Coinage Relbrm. 3. Neither the necessity nor the possibility of Exportation of Gold brought about by the Coinage Reform. 4. The ability to emigrate to foreign countries a fundamental condition of all good Money. 5. The Utopia of Universal Money and Monetary Treaties. 6. The Unity of Metal the only practicable and proper realiza- tion of Universal Money and subject of exchanges. 7. The proper limit for Variety of Money in Unity of Metal. 8. The sensitiveness of a Money System a sj-mptom of its sound- ness. 10. The Single Standard a result of the Unity of Metal. 11. Ravages of the Double Standard.* 12. Wolowski's Theory. Verheeronde Wirkungeii der Uoppelwahung !" MONETARY TREATIES. 137 18. Germany's share in the causes of the Depreciation of Silver. The curious reader will observe that the "great undertaking' whose propriety these and the other chapters are intended to prove, was not what all will recognize as truly a "great undertak- ing," namely, the Unification of German Coinage, the substitution of one centralized system in the place of a score of sectional sys- tems. The necessity and propriety of unification, of union and mutual support which this great undertaking implies, requires no proof w h a t s e V e r. It is as apparent as the sun at noonday. That which, however, eminently does require proof is tho special scheme or form of the new coinage sj'^stem, which the reformers, Ilerr Bamberger at their head, carried against all oppo- sition through Parliament and Privy Councils. It is the peculiar all-overshadowing feature of this scheme, that on]y one metal shall be Legid Tender, and that metal Gold. A glance at the titles of Herr Ijamberger's chapters will at once show clearly that it was this peculiar feature of the s 3^ stem that had alone brought Germany to the verge of despair. It was not unification of coinage, it was not the abolition of the seignorial rights of coinage of the diffei-ent German States, it was not that the mark was made the Unit of coinage, which caused distress and alarm. It was not upon these subjects that public oi:)inion was not " clearl}^ convinced." It was not the " final success " of these features of the Coinage form, in which " confidence" required to be restored. On the contrary, the eyes of the German Public are evidenth" turned to this attempted substitution of Gold for Silver, in which, of all other features of their policy, the Legis- lators of the New Empire had taken pride, but which to many men of common practical sense" and of science as well, had seemed from the first not merely an unnecessary feature, but a fatal defect in the armament of reform. True, it was a grand move in the duel between France and Ger- many, but if Germany had introduced the Teutonic element into the Latin Union, this final establishment of Bi-metallic Money would have put an end to their contest in this field. But not merely the adoption of the franc, but the Bi-metallic Standard also, were put aside by Reform when Germany entered the arena to struggle for 138 SILVER AND GOLD. Gold. France accepted the challenge, and by the policy of late 3'ear8 has helped to tie the hands of Germany. In the meantime, depression has weighed upon the productive industries of Europe. Such being the situation, and the tone of jjublic opinion in Ger- many beiiig what Herr Bamberger describes, we must remember that in undertaking the task of defending Gold-monometallism against all comers he is really fighting jjro oris et focis. We should add in justice that he does his work with an aggres- siveness and dash worthy of the best of causes. His book is a novelty in monetary discussions — a very Charge of the Light Brigade — '" Theirs not to reason why, Theirs but to do and die !' "Monetary Treaties." says Bamberger, " belong to that order of conti'acts which are as contrary to the nature of International Law as the Contract of Slavery is opposed to the Eights of Persons. "A man can not alienate his freedom by contract, and a State can not alienate its freedom by a Monetary Treaty. "In its Monetary System lies the principle of its bodily and spiritual existence. " Its Circulation of Money is like the Circulation of Blood, one of the fundamental conditions of its preservation, and to chain this necessity of one's own existence to the existence of others is as pernicious as it is impracticable." In justice to this picturesque analogy of the circulation of Money and the circulation of blood, let us hasten to observe that this is not a mere trick of rhetoric. By no means. For, apart from other reasons, there is a Money which will really circulate in the manner suggested by Herr Bamberger — that is, in the national body, not out of it. This Money is cheap, too. It can be had at the minimum of expense. There is no question of stock on hand or annual product. All that is required is a print- ing press, ink, and paper. The United States adopted the idea in 1862, and after fourteeji years still contains statesmen to whom this analogy of the circula- tion of the blood is a trusty allv in the cause of " national inde- pendence " of Money circulation. France, also, has of late, with an inspiration of genius, been making this sort of Money its servant in preventing the exporta- tion of French Gold to Germany. It would, however, be doing Herr Bamberger injustice not to MONETARY TREATIES. 139 say at once that, being a man of science, he is no more than Leon Say a believer in Paper Money, and tliat, in his discussions of the mechanism of exchange, his acuteness and knowledge are only equaled by the brilliancy of his style. A reference to chapters 2, 3, 4, and 8, of Eeichsgold will reveal the fact that, to his mind, the fundamental condition of good Money, or life-blood, is that it should be able to circulate outside of the body to which it belongs. From this, of course, the distance is not great to the familiar view, suggested in the introduction of this essay, that the World is the one Body whose Life-blood is Money Circulation, and that the nations are the different members of this Body. I would fur- ther add that they are at present in a state of revolt, with results closely resembling those set forth in the well-known fable of jEsop. But it will be asked, Why, then, this onslaught upon Monotaiy Treaties? For answers to this question, I can only refer the reader to the perilous situation in which the German Coinage Keform has placed Herr Bamberger. It will be remembered that he is under fire. He has assumed the task of proving the necessitj'' and propriety of Gold-monometallism. Moreover, there are motives of patriotism for his position on the subject of Monetary Treaties. Koniggratz put an end to the Austrian Treaty of 1857. and Ger- many is annoj^ed with Austrian Silver gulden and thaler pieces, which Germany is obliged to keep in circulation at home, in place of Gold that is going across her borders, in obedience to the princi- ples of chapters 4 and 8. Again, France is the head of the Latin Union, and Bamberger sa3's (p. 40)* "that all that prevents the other states of the Latin Union from withdrawing from the Union is a feeling of political dependence on France, who would be sorry to see this remant of her supremacy torn away, and to whom the sympathy of the Catholics who are at the helm in Belgium gladly brings this tribute, while the ruling party in Italy is inspired with the same symi:)athy, and she, in her own helpless embarrass- ment, with her debt and her Paper Money, takes no interest in an- nulling a Treaty, whose tattered folds serves to cover her own na- kednosss with a remnant of respectability." * '' Da schwur er beim Eisen, Gar zornic^ unci hart, Deni Franz 111 aim zu weisen Die deutsche Art! " 140 SILVER AND GOLD. It is, I think, plain that, in his peculiar situation, calm reasoning as to the capabilities and future development of Monetary Treaties is not to be expected, even from a man of Herr Bamberger's ge- nius. But it is only fair to point out, in his digression, for it is but just to say that so he calls it, upon the Utopia of Universal Money and Monetary Treaties, it is plain that h(i is speaking of the one as connected with the others — that is, of Monetary Treaties which contemplate a Fusion of Currencies. Hence the objections already noted to the German-Austrian Treaty of 1857. But the force of this objection is somewhat modified by the fact that the troublQ was caused mainly by this — that, after the treaty was nullified, Germany abandoned Silver and adopt- ed Gold-monometallism. So, likewise, the criticism upon the Latin Union is one-sided as it is caustic. " It had not lasted five years," he says, " before three of the states saw themselves compelled to break it." France and Italy suspended Specie Payment; Switzerland was compelled, dur- ing the Franco-German war, to give currency to English sover- eigns. Greece and Italy coin tokens, and they are sent, at a profit, to France for circulation, so that some of the states suffer just as Germany does from Austrian gulden and thalers. Hence, to use Bamberger's expression, " a treat}' between a few neighboring states became, within a few years, a knife without a handle, and without a blade." And ho quotes Kern, Fecr Herzog and Fr^re-Orban, to show that the original treaty of 18G5 is practically abrogated, and the so-called supplementary treaties, made in 1873 and since, are really "brand-new treaties." From these jiremises, he concludes that all Monetary Treaties "spring from an abstract idea remote from fact." But what he means is, of course, all treaties which ordain a Fusion of Curren- cies, and notably where there is a coinage of Silver tokens. But it is obvious that the statesmen of these countries which made the Treaty of 1865, and still more those who have made new trea- ties, if such they be, in 1873 and since, not only must have had some good reasons for making those treaties, but also reasons which overbear the disadvantages of which Bambei-ger speaks. A judgment as to the good and evil results of the Treaties of 1857 and 1805, and a statement of the balance, is therefore, in spite of Herr Bamberirer'H ai-t'umeut, still to be desired. MONETARY TREATIES. 141 The romarindoi* of tho chapter of Bamberger's work is devoted to reasoning in the same narrow circle : " To conclude a Monetary Treat}'' is to bind one's self never to suffer war, revolution, or a bad harvest!" Why? Because either of these might bring a Suspension of Specie payment. Again, of the common circulation of Coins he aptly exclaims: "What irony in a currency which at Paris is coined with tho motto, ' Dieu protege la France ' (that is to say, God is to restore us M.etz and Strasburg), and at Berlin, with the motto, ' Gott mit uns' (that is to say, God will help us to set your plans at naught)." " For the Universal Money (Weltmuenze), the time will not come until the motto can be, ' God protect the World.' When that time will come, the Peace Congresses may decide." While acknowk-tlging the force of the author's remarks on Fu- sion of Currencies, or " Mutualit}- of Legal Tender," and without attempting to discuss the question of International Monc}', I will simply note here that difficulties growing out of a Token Coinage, or a subsequent substitution of one metal for another, are not inev- itable and inherent in the subject, however they may have infected the two Treaties discussed ; and that as for Suspension of Specie paj'ment, the thing requiring proof is not whether, in case of sus- pension of one ally, the others suffer, but rather whether they suf- fered more than they otherwise would have suffered. Passing by, then, the question of Treaties, which chiefl}" aim to secure a Fusion of Currencies, we come to the consideration of a Treaty simply providing that each contracting party for a certain time will make and keep Gold and Silver at a certain ratio. Legal Tender, for all sums, and will maintain free coinage of both met- als, reserving the privilege of coining its Silver and Copper Tokens as it shall please. ^i^ '•■■'Of course, among the po.ssibilities of the present situation, Unitioution of Coinage will naturally occupy a prominent place in the minds of thinkers, if not of Legislators; not necessarily, however, with the idea that the "unifj'ing" nations are called on to admit other's Coins as Legal Tender, but with a view to simplifying accounts, and to the use of certain " Trade" Coin as a medium of exchange with other nations. Uniiication implies of course that some nation must alter its present Unit, although the German writers accuse tho French of limiting "Unification"' to the adoption of the franc ! The four-shilling dollar, one-fifth of a sovereign (the introduclion of which is advocated in England), and the five-franc piece are prominent candidates for the choice of the Coinage Reform in this direction. 142 SILVER AND GOLD. Let us suppose then that the chief powers should join in an In- ternational Conference, and form a mutual compact to this effect. It would seem safe to assume that it need be no part of the effect of such a Treaty that the Coins of the contracting parties should have a circulation outside of the country of their creation appreci- ably greater than they now have, and that the control of each nation over the counterfeiting of its Coins would be as efficient as it now is. If this be true, such a Treaty would therefore not conflict with Bamberger's chief demands for the interest of " national independ- ence of money circulation." Would it involve a limitation of independence in other direc- tions? Certainly it is not apparent that the situation under such a Treaty could, in any conceivable event, be made worse than it is. Why should the effect upon other nations of a bad crop, of a Sus- pension of Specie paj'ments, of a war in one, be increased by an agreement of the nations to make Gold and Silver Legal Tender at the same ratio ? On the contrary, it seems, certainly at first glance, that the effect of such an agreement would be to guarantee as far as it is possible the other nations against a financial or commercial shock. The jDrobabilities, in fact, are all in favor of the belief that this supposed agreement of the nations to use the two metals as one Bimetallic Money would give to the Money of the world that elasticity which is needed to secure stability. Would not such Treaties, in fact, realize what Herr Bamberger himself admits to be his ideal of the Money of the future? "It is true," he sa3^8, '-that Universal Money of metal is fully justified as theory,* but the only mode of realizing this theory leads precisely to the path which the German Empire has trodden, namely, to provide a Money calculated to have f the same value and currency in the entire world." "He who looks only to the outward appearance of things be- lieves that he can reach this goal b}^ proposing to give to the Coins of all countries the same imprint and the same denomination." "But the true solution," ho says, "is Unity of Metal, and of course with this should go Unity of Alloy, and, as far as feasible, Unity of Eeraedy." *Aiuli(]io wirkliche Weltmiinze aus Edelmetall hat als Gedanke ihr Ber- echtigun!;. t Gcltung. MONETARY TREATIES. 143 But, we ask, is not this Unity of Metal substantially attained by the consent of the nations to use the two Metals as one Bi-metallic Monej'. True, as the reader has observed, the perfection of the quality of "one-ness," of " unity," is lacking, but the reader must also con- sider that Ilerr Bamberger can not take umbrage at this. lie knows that this is not a question of abstract science, of mathematical unity : it is a practical matter, and the real question is not whether one-ness, unit}^ of Money throughout the world is attainable in perfection with Bimetallic Money, but whether Permanence of Value and the security of being receivable as a Means of Payment throughout the world, is not attainable in a greater degree through the adoption of Bi-metallic Money than through the adoption of the stricter " unity " of Gold. In answer to the reproaches cast by various critics upon Germany for choosing as her new Unit a Coin standing in no simple relation to the French Metrical System (which is based on the circumfer- ence of the earth, and has been adopted in the greater part of its surface), Herr Bamberger excellently says : " What misleads them to make this salto morfale, this break-neck leap from the meter and the kilogramm to a piece of Money, is simply this, that they are mathematicians ; that is to say, people who live merely among the abstract ideas of measures, which in themselves are without substance ; and when they speak of Money, they are thinking only of the form, not of the object.* Hence, by his own reasoning, we sa}^ Herr Bamberger should be led to the admission : First, that it is desirable tha-t the whole world should unite upon a Unity of Metal, and therefore this Unity of Metal must be such that all the Commercial Powers, including those of Asia, can par- take of the benefits of its use. And, secondly, that it is a purely practical question whether sub- stantial Unity with Bi-metallic Money is more for the interest of the world than Mathematical and Metrical Unity with the adop- tion of the Single Gold Standard throughout the circumference of the planet. But no one believes that the universal adoption of the Gold Standard by this generation is possible. *This criticism applies with singular felicity to the action of the American Academy of (Natural) Science at Buffalo, August, 1876, on the Single and Double Standards. 144 SILVER AND GOLD. To those who have considered the question it is evident that the change, if consummated, would be a general winding up of civilized nations. Each would require to be put in the hands of a Lio- ceiver, and the Government would become a Court of Bankruptcy or a Court of Repudiation, as the Gold monometallist may choose to name it. The Parliament of Man would then be ready for dissolution at the order of the Register of Bankruptcy who could command the best artillery. On the other hand, the adoption of the Bi-metallic Money by the Great Powers is, humanly speaking, feasible, and promises to harmonize the interests of nations, which the worship of golden portability has endangered, to restore the orderly march of pros- perity, which has been interrupted by the undignified " steeple- chase for Gold." Returning to our hypothesis of a Treaty of the Great Powers (including India with England), it would seem that upon the gen- eral establishment of free coinage in either metal, and Legal Ten- der character of both, the metals would " find their level," so to speak, in all countries. Business on a large scale would be done with Gold ; that on a smaller Scale with Silver. If such a body of nations agree that they will accept one as a substitute for the other, at the same ratio, there can be little ques- tion that the market rate will substantially conform to the legal value. This position of Wolowski's is imjjregnable. Bamberger eludes the hypothesis by denying that the nations will agree ! Professor Knies maintains with some force that in one nation, in the case of a permanent and far-reaching change in jiroduction and amount of the two metals, the market value will override the legal value ; and why not, he asks, in the entire world ? But, granting the correctness of the conclusion suggested, the supposition is so improbable as to be of no practical moment* * So one might suppose a shower of aerolites of solid Gold falling in various parts of the earth at the time of a complete failure of the Silver mines, or vice versa I SuflBce it to say, that Wolowski's position would stand the shock of a second Siberia, Australia, California, or all combined. The annual product of Gold in 1853 was more than four times, and the aver- MONETARY TREATIES. 145 Apart from the impossibilities below suggested, the equation thus established by the gravitation of human self-interest, regulated by Jjaws of Free Coinage and of Legal Tender, would be unalterable by any fluctuations of production of the Precious Metals.* age annual product from 1852 to 1876 was three times that of 1846, and yet the relative value of the metals was disturbed by a very small percentage. As for the present situation, the annual product of Silver in the last five years is only double that of 1846, and the average percentage of Silver in the total annual product of the Precious Motals is less by one-sixth than it was in 1846. I5ut with old Silver for sale and new Silver refused at the mints, Silver has touched 20 per cent, discount. Of course, if the leading nations had supported France in the ratio of 1 to 15i, the period 1850-1870 would not have witnessed even 3 per cent, disturb- ance of the legal ratio. (See Chap. VIII. 101.) It is evident, on considera- tion, that so long as men can get the scarcer metal by giving the more abundant metal ut 1 to 15.}, the price of the scarcer will not rise above that of the more abundant metal. In other woids, so long as both are cuiTcnt as money, so long will the legal equation prevail. To break up the ratio of a union of the nations, it is necessary that one of the metals should cease to be current as money, which implies, of course, that man should suddenly lose the greater part of existing Gold or Silver, or else proceed to use the entire stock of one of them in the arts. But this event is no less improbable than the discovery of the Philosopher's Stone, and when the golden treasures of Troy and Mycenae are being uncov- ered, the dream of alchemy seems hardly more improbable than the hypothesis of loss of the Precious Metals. The Philosopher's Stone would, in practice, demonetize both metals by that well-known instinctive demonetization which, under proper circumstances, leads to the use of Paper Money as material for kindling fires. Man would turn alchemist, and make Gold or Silver, or both, so plentiful that one or both would cease to be used as legal tender. But be there loss or increase, contraction or inflation, so long as both were current as money, so long would the legal equation prevail. *In a late number of the Journal des Economistes (December, 1876), I note a letter of Professor Walras, of Lausanne, upon this subject, which appears as a criticism of M. Cernuschi's "Silver Vindicated," with the reply of M. Cer- nuschi. Professor "Walras' reasoning, clothed in mathematical formula?, rests, as M. . Cernuschi shows, upon the supposition that the value of money-merchandise is distinct from the value of money, which M. Cernuschi denies. It is important, however, to observe that the substance of Professor Walras' letter hardly war- rants the form of criticism assumed in it. From these explanations, it follows, he says, that the adversaries of M. Cernuschi deceive themselves if they affirm, absolutely that "to promise the irrevocability of the 15.} is to promise the im- possible." "This irrevocability is possible in certain limits without prejudice to freedom of competition," says Prof. Walras. And what are the limits?" 146 SILVER AND GOLD. The only remaining danger -would be that the nations might prove false to their faith ; that the Treaties might be broken. Of course the same objection would apply to Treaties in general; and yet Treaties have been made and have been observed. It is safe to say thaj, the great majority of contracts, public and private, are honorably fulfilled. So Treaties for Free Coinage of Bi- metallic Money might pass this objection with the average. Of course, if need be, they could be made for a term often years, subject to withdrawal at pleasui'e at the end of the term. But, after all, why should anj^ one Avish to break them ? The recalcitrant party would be outlawed as an enemy of the race. Demonetization would assert itself in the consciousness of civilized man as a sort of National 'Piracy. But, beside this, what could such nation gain by breaking the Treaty ? Has the situation of the British-Indian, or of the German Em- pire, been so attractive as to invite imitation of their policy? The same as those I have above suggested — when, namely, the demand for use of either metal as merchandise removes it from use as money. But this is as conceivable and as possible as the Philosopher's Stone. The Tetter is therefore an admission from the author of the Elements (F economie politique pure, that M. Cernuschi is right, and that his adversaries are Avrong. It is also a fact most worthy of attention that Professor Soetbeer, in an .article in the Neue Freie Presse (October, 187G), in criticising Dr. Hertzka's incursion into the field of monetary discussion, in his "Wahi-U7iff und Handel" latelj' published, expressly gives his adhesion to the opinion, that if the great nations establish free coinage of either metal as a legal tender at one ratio, the metals will not vary appreciably in price. (See Appendix I.) So, too, Professor Jevons and H. D. McLead have expressed to M. Cernuschi their assent to this proposition. When Soetbeor, Walras, .Jevons, and ^NIcLeod agree with the bi-metallists, what more is there to be said? M. Esquirol de Parieu, Vice-President of the Council of State of tlie French Empire, in his report as head of the Monetary Commission of ISOU, in which Wolowski was so often in a minority of one, said : "This equation established by the legislator between a gramme of gold and \b\ grammes of silver, does it not seem impertinent {temerairc) in the presence of the economical ideas of the day, upon the general cause of the price of things — namely, the relation between supply and demand ? "That, at an epoch when the movements of production or of circulation were less rapid than to-day, and when also men had still a remnant of faith in the power of the legislator over the facts of commereG, men could believe in the permanence of a legal equation between the two metals, is, it may be ad- mitted, comprehensible; but to-day, to rate one of the metals b}' the other is a conception of legislation which is repelled by the consciousness of economic laws." Evidently, since 1869, the logic of events has been cogent — tho labors of (thinkers have not been in vain I CONDITIONS OF SUCCESSFUL RESUMPTION. 147 CHAPTER XI. THE CONDITIONS OF SUCCESSFUL RESUMPTION OF SPECIE PAYMENT BY Till: UNITED STATES. The meaning of "Successful" IteBumption stated — General Conclusions established by this Treatise — Necessity of a steady par between Gold and Silver — Dangers to America of the continuance, in Europe, of the Policy of DemuaetiEation — The True Policy of the United States. We have now attained a position from which we can sum up the j'csults of our investigation, with a view to their practical a])plica- tion to the present situation of the United States. We ask, then, what are the conditions precedent for successful Resumption of Specie Payment? I say successful Resumption, for the interests of the people, as well as the honor of American statesmanship, demand that ap- proach to the minimum of unfavorable, and to the maximum of favorable results, which, in so arduous an undertaking, is worthy to be called success. As a basis of discussion, I shall assume that 375 millions' worth of Legal-Tender Paper (including fractional currency), are to be can- celed and withdrawn, and that the existing non-legaltender cur- rency of National Bank notes is to continue in circulation. The currency will then consist of Specie, and notes issued on deposit of bonds, and convertible on demand under strict penalties. Success in Resumption ought, of course, to carry with it the cer- tainty that this convertibility of the non-legal-tender currency should be permanently secured. We shall need, therefore, coin enough to serve as the basis of ])rosperity, as the foundation and framework of a colossal structure of exchanges, whose security depends upon the proper admixture of Specie to credit — of Specie itself, among the endless transfers of titles to the ownership of Specie. How much Specie, including change, will be needed — in 1879, we will say? With the present double standard of Gold and Paper, there are in the country about 525 millions of Legal-Tender. The Gold, however, is the only unlimited Legal-Tender, the 148 SILVER AND GOLD. Paper not being Legal-Tender for customs dues, nor payable by the Government for intei-est on the public debt. But Limitations of Legal-Tender are alike in this, that they ob- struct the efficiency of Money. It is to be hoped that half-measures of this kind, which belong to an order of opinion now obsolete, will absent themselves from legislation, and that the lawful Metallic Money of the United States may be made universal and unlimited means of paj^ment.* In this event we may, for the present discussion, assume that S-450 millions of specie will safely serve the business of the country. We may further assume that an average annual increase, for the present, of some three per cent, will suflSce. The country ah-ead}^ possesses §120 millions of Gold, and $20 millions of Silver. Whence and how are the 310 millions, and the annual increase, to be obtained? And by what measures are these millions, with the existing Specie, to be substituted for Paper? Success means that this S2:)ecie shall neither be obtained nor sub- stituted for Paper at the cost of a serious disturbance of the equi- librium of business, nor shall its accession be accompanied nor followed by a great general upheaval of the value of Money. It means, in a word, that the lessons of the example of England, in Eestriction and Eesumption, shall be understood and acted upon by American statesmen. As to the particular measures to be taken for the substitution of Specie for Paper — whether it is desirable that the Treasury redeem the greenbacks in coin, or whether the Paper should be funded and the banks compelled to bear the burden of Eesumption — this order of questions I shall not attempt to discuss. The title of this treatise points merelj^ to the question of Silver and Gold and their relation to the Problem of Eesumption. Shall the $310 millions to be added to the $140 millions, be of Silver or of Gold? or shall the}' be of the two metals together? Under what system and under what guai*anties shall the coinage of Money-metal proceed? I have endeavored, in this treatise, to set forth the facte which command the answer to these questions, and the theory which is the logical structure and inter-connection of those facts. To one who has followed it thus far, the statement has itself already suggested the nature of the answer and its justification. *<)f course this is apart from the question of the payment of the Bonds See Chapter VI, 1. CONDITIONS OF SUCCESSFUL RESUMPTION. 149 The following conclusions have become a])pnrcnt: That Civilization has been dependent upon a reguhition, by law, of Money, which is an instrument for making exchanges in Space and in Time, without which division of labor, the certainty that hibor will have its reward, and the satisfaction of the progressive needs of man, would all be impossible. That prosperity, not merely of a nation, but of the world, is do- pendent upon a wise constitution of Money. That the use of Silver and Gold as Money, is an institution not of a nation, but of mankind; and the existing scales of prices, of debit and credit, expenditures, investments, and of valuations of property in general throughout the world, are dependent upon this past consensus of mankind as a totality to use existing Gold and Silver as Money. That for Mankind, as a whole, to demonetize either metal would be suicidal. That the injury done by the demonetization of either inctal, within the borders of a single nation, depends upon the less or greater disturbance, through the displacement of metal, of the equi- librium hitherto maintained, and the amount of exchangeability of existing Money thereby temporarily or permanently destroyed. That the total amount of exchanges made possible by Money depend largely on the mutual fungibility of Gold and Silver, and that this mutual fungibility is only made practicable by the main- tenance of at least an apj^roximately steady par between the two metals. That the existence of a steady par is chiefly the resultant of laws of Legal-Tender, the nominal par itself being a creation of the law of Bi- metallic countries, while the laws of Mono-metallic countries az'c negatively effective by balancing each other and thus securing the par from distui-bance. That the steadiness of the par must depend on the relative amounts of the stock of Bi-metallic countries and of Mono-metallic countries — and the permanent adjustment between the latter. That this steadiness of the par can safelj* be guaranteed, through Treaty, between a sufficient number of nations, for unlimited Legal-Tender, with free coinage of their own Gold and Silver Coin. Hence, in returning to Specie Payment, it must be at an}- time the duty and interest of the United States, in causing a displace- ment of existing Specie, and inflow of it, and of a share of the an- nual product into her borders, to make such law and take such metal 150 SILVER AND GOLD. as would not only not weaken, but would give additional gmaranty to the present and future steadiness of the par. In 18GG, to have resumed Specie Payment in Gold alone would have weakened the par ; to have resumed Specie Payment in Silver alone would have disturbed it still more ; to have attempted to re- sume in Gold and Silvei*, at the ratio of 1 to 16, would have been ineffectual so long as France maintained the ratio of 15J ; while to have resumed at the same ratio with France would have strength- ened the par, and perhaps have guarded the world against the later effects of German Demonetization. To-day Eesumption presents^difficulties and dangers of which thinkers had, in 186G, no conception. The attempted demonetization of Silver by Germany (whose stock of Silver had hitherto balanced the Gold of England), was an attack upon the par of Gold and Silver throughout the world, and compelled other countries, in self-defense, to withdraw from coinage of Silver. Hence, not only was the balance of Gold and Silver in Mono- metallic countries destroyed, but the fixed support of the center of gravity, the free coinage in Bi-metallic France, which has served to guaranty the stability of the business of the Nineteenth Century, has been held incapable of further maintaining the equilibrium of the two Money-metals. Under these circumstances, what course is left open to the United States ? It must be recognized that the movement towai'd demonetization of Silver in Europe has in no proper sense spent its force. Mo- tives, i)owerful to move nations, as well as individuals, are still active in pronaoting it. It Avas urged in France, before the Franco-German Avar, that in demonetizing Silver, France would be enabled to sell its Silver to Germany ; and after the war, the similar expectation was held as to the sale of German Silver to France. The pride of leading personages in Europe is enlisted not mcrclj- in the maintenance, but also in the further extension of the Gold Standard ; and it is from the demand for Silver for the United States that the relief is expected which may facilitate the spread of their great ei-ror. It is '' on the cards," and is an event upon wliich leading men in Euro])e calculate, that the United States may be trusted to fail to comproliend its true interest, and hence to deal crudely with this momentous subject — in a word, that it may con- tribute its 8i;>0 millions of goUl to the stock of Europe, and with- CONDITIONS OF SUCCESSFUL RESUMPTION. 151 draw the weight of its demand for existing stock and annual pro- duct of Gold. It is obvious that for the United States alone to attempt to cstab- lisli the Bi-metallic Standard, would result in failure to secure aught but the one depreciated metal. The par of Silver and Gold would be left in the air. The attempt to pay the bonds in Silver would lead to an emigration of Amei-ican titles of debt to the United States, and the Silver Currency would assume a character not remote from that of the pi'csent Legal-Ten- der Paper In brief, instead of the Bi-metallic Standard, the result would be Mono-metallic inflation in the Dollar of the Fathers.* So far from furthering, such action might serve indefinitely to postpone that solution of the question, which we have seen to be a require- ment for the interest of the United States and of the world. Of Resumption in Silver of course the same observation holds good. Without guaranty of a par, there is no security. Until the par is restored and secured by free coinage of Gold and Silver as Legal-Tender in a union of nations, there is no monetary peace. Until this end is attained, mere temporizing and fluctuation, and interruption of prosperity, are the order of the day. On the other hand, Resumption in Gold, within the time now contemplated, fulfilling what I have stated as the conditions of suc- cess, is impracticable. . What, then, is to be done? We know that it is to the interest of the people of the United 8 ates as well as of the world that the monetary peace of the world should be restored; that its future should be guaranteed by the establishment by the civilized nations of an Universal Money; and that this can only be accomplished by the establishment of Bi- metallic Money at one and the same ratio. We know that the logic of events and the labors of thinkers have been rapidly convincing the better minds in different nations of the necessity of Monetary Union. It is therefore the plain duty of the Government of the United States to assist in the inauguration of this just reform, and to that end to be ready to delay action, if need be, and to descend into the * A mode of avoiding the mechanical difficulty of obtaining Silver Coin has lately been suggested. The mints of Belgium (and why not of other countries?) arc ready to coin Silver Dollars. Nothing could be better, unless the Silver ihiis coined be demonetised Silver. 152 SILVER AND GOLD. arena and meet the misguided and blindly self-seeking legislation of other nations upon its own ground, and by its competition for Gold to convince unpersuaded nations of the necessity of union. The policy of the United States, with reference to Resumption, should bo molded with the purpose of attaining the proper solu- tion of this question at the hands of Germany and of England as well as of the Latin Union, even at the cost of a delay of measures lor Resumption. There is far more to be lost by haste than by delay.* In the guaranty of the par of Gold and Silver, by international Treaty, lies the Golden (and the Silver) opi^ortunity for the future development of this country. In the meantime it is not the interest of the people of the United Statesf that the Indian difficulties of England and the em- barrassment of the German Government should be removed by a rise in the price of Silver, caused by the demand of the United States, either for a coinage of Tokens or of Dollars of the Fathers. The solution need not demand long delay. The willingness of the United States to enter into such Treaties as we have above characterized, and to adopt the ratio| in which the overwhelming majority of existing coins are struck, and of existing values are expressed ; and the refusal of the United States to coin Silver ex- cept with the concurrence of a sufficient body of nations, would make the consolidation of the Monetary Peace of the United States and of the world a mere question of time. *See Appendix L. The Address to the King of the Netherlands, hy the Society for the Progress of Industry, of July, 187G, urging the calling of an international conference, for the object of bringing about Bi-metallic Union at one ratio also distinctly declares for (page 13) the adoption of the Gold Standard in Holland and the East Indian Colonies, in case of the failure of the projected Bi-metallic Union. tNay, it is not even the interest of the owners of Silver Mines. X To adopt the ratio of 15J instead of 15, of 1792, or IG of 18:54, is a concession; but without mutual concession union is impossible, and the monetary situation, with paper as the chief currency and but one metallic standard is most favor- able to a change. To ask Europe to change would be asking Europe to re-coin ten times the amount of Gold coin now in the possession of the United States. The cheapest mode to make the change would be to coin a new Silver Dollar at 3'.)0.9 grains fine; the best mode would be once more to coin the Dollar of the Fathers and to re-coin the existing stock of Gold in dollars containing three per cent, more Gold than the present dollar. Compared with the benefits which the United States would derive from Mon- etary Union for Bi-metallic Money, the cost of ro-coining the Gold dollars wo\ild not reach an appreciable fraction of one per cent. APPENDIX. A. The Theory of Money — A Personal Explanation — Postscript to the Second Edition. In a postscript, which serves as preface to this Treatise (page 17), I stated that 1 had approached my subject " without prepossessions." The general view of the nature of Money, however, upon which this Treatise is based is admitted to bo in conflict with a certain exaggeration of Laissez-faire doctrine, which has hitlierto been uttered, ex cathedra, by the economical science of the day, and, unfortunately for mankind, has been permitted to control monetary legislation. But, notwithstanding this admission, this general view of Money is treated (and on page 114 is expresshf^ characterized) as an " obvious deduction from what every one observes." It is proper that I should recognize and explain what may seem, in the latter, a partial contradiction of the former statement. I say partial, because, in speaking of " prepossessions," I referred pri- marily to Silver versus Gold, the Single versus the Double Standard, about which contentions I had as little preconceived knowledge or interest as about the mines of Nevada. With my view of the nature of Money and causation of its value, it was different. The general theory set forth in the foregoing pages — and it occurs to me that, in justice to myself, I may owe some expression on this point to the many expositors of views from which it is not dissim- ilar, the publication of whose works has preceded that of this Treatise* — had long ago taken clear shape in my mind, before I had read a page of monetary controversy. When the late disturbance of the monetary equilibrium of the world attracted my study, and I came to review the armament of the Battle of the Standards, I could discover no doctrine that was strong to resist the all-overpowering logic of the monetary events of the last three years. They seemed to me worthy to serve as a complete " desengano," or unde- ceivor, laying bare to any seeing eye what I felt was the true view of the nature of Money, and hence the true policy of legislation. In this, as I have since realized, 1 failed to recognize with what persistence it was possible that magistral and professorial economy could still seek to conti'ol monetary legislation in the spirit of past error, introducing the politician's "consistency" into science. * Notably to Cernuschi, De Laveleye, and Seyd, among the honored living, and chiefly to Wolowski, among the honored dead. (153) 154 APPENDIX. And yet one would think it need not be peculiarly galling to a think- er's pride to admit the new, and yet old, truth — except, perhaps, to those who have chiefly won what has been fame by their public championship of the view now known to be ei-roneous. Science is a sort of coral growth, laboriously built up by the accretion of minds ; and the contribution of each mind is naturally conditioned by the events which present to him practical problems for solution. Since Adam Smith's time, the uninterrupted warfare waged in all commercial nations between Paper Money and Metallic Money has nat- urally emphasized the contrast of commodity and credit. Thinkers were obliged to "draw the line; " and, in so doing, they enrolled all merchan- dise under the same banner. And there was no one to force these makers of theory upon which gov- ernments act to learn that child's lesson upon the two uses of shoes (see page 117), taught ages ago by Aristotle, whose works they leave silent upon their library shelves; — no one to force them to comprehend that money-merchandise was no more subject to the same laws as all mer- chandise than is the gold nugget identical with the gravel which sur rounds it. "Whence woes unnumbered to the Achseans came." I can not help having faith, however, that gentlemen who have found it imjsossible to yield to contemporary thinkers, or to admit their power- lessness before the events of the past few years, will, in due time, find it comports with their dignity to render up their rebellious swords to Aris- totle. When that time comes — to revert to the subject of this digression — the partial contradictions between my statements, which I have above en- deavored to explain, will no longer be apparent. The foregoing treatise was, for the most part, written in the summer of 1870, and was in the hands of the printer in October. After the body of the text was in type, certain explanatoa-y notes were added, and having been stereotyped, these necessarily remain in the same form, to the detriment of the arrangement of the work. An edition was printed in November for private distribution. The present edition has been considerably enlarged, chiefly by the addition of the A[)pendix. It occurs to me to add in this piace a wora of explanation concerning the citations, which will be found in the foregoing pages, of Euroi)oan authorities, both antique and contemporary, It has been suggested to me by friendly voices that too great prominence is given to this reference to authority. Certainly, if it has detracted from clearness, 1 must admit my regret, and confess that I should gladly rewrite this treatise. For the I'est, I can simply say tliat 1 souglit to attain two diverse objects — to state fact and jjrinciple fit to guide the conclusions of the man of busi- APPENDIX. 155 ness, and at the samG time to afford to the thinker in as full measure as possible material and suggestion not likely to bo generally available. Of course, the latter attempt is cumulative to the former, and adds many pages which would otherwise not be needed. To the man of business, who has time for nothing but the " bottom facts," I can, in justification of my adoption of this cumbrous method of treating my subject, cite to my defense that " bottom fact" of all, which it is the interest of every tax-payer, of every business man, of every citizen, to lay to heart — viz., that the world we live in, was, is, and will be "run" on theory. From theory there is no escape. The only choice is between theories farther from or nearer to the truth. The life, liberty, happiness, and honor of men are at the mercy of false theories. " Practice" thinks it rebels against " theory ;" but " theory" might soliloquize as the Deity of the Brahmins: " They reckon ill who leave me out When me they fly — / am tlie wings!" Now, the interest of the man of business, of the tax-payer, of the citi- zen, is that the prevailing theories should be true theories. Evidently, in distinguishing the true from the false, the history, the origin and de- velojtment of theory atlbrds invaluable insight. PoMEKoy, Ohio, January, 1877. B. Bl-METALLISM AND THE STANDARD OF DESIDERATA. So far as I am aware, no satisfactory solution has been suggested of the problem of applying the Standard of Desiderata in practice, on a large scale. It seems, however, more than probable that if such solution were at- tained. Money-merchandise would still serve as a material Means of Pay- ment of Purchase and of Transporting and Preserving Value; while the api^lication of the Standard of Desiderata would consist in correcting the disorders arising from the fluctuations of the Purchasing Power of Money. It would add to the Instrument of Valuation an attachment by which fluctuations in the instrument itself are compensated. The regulation of Money, however, would still remain a matter of prime importance, and the more secure existing Money-merchandise can be made against fluctuations in Purchasing Power, the less need of the compensating attachment, and, in any case, the less the difficulty of its application. Hence, notwithstanding tlie importance of a comprehension of the Standard of Desiderata, both for theory and as an ojiening for future practical improvement, yet the practical questions of Gold and Silver still demand attention, as if the question of the Standard of Desiderata had not been raised. Of course it may be admitted, without prejudice to what has been said. 156 APPENDIX. that it is conceivable that such perfection may be attained in the ap- plication of the Standard of Desiderata as would deprive fluctuations of the value of Money-merchandise of any influence upon business, or, in- deed, might largely do away wdth their use. In such event, it is conceivable that neither the Gold Standard nor the Bi- metallic Standard would need to be, or could be said to be, consistently established. It is, however, clear that such application is, for this generation, neither probable nor possible. Applying, then, to the Bi-metallic Standard the test of permanence in the value of Money, for which the Standard of Desiderata gives the touch- stone, we see clearly that the elements of permanence are present in the maximum degree. We have seen that an increase of Money is necessary, and that Money flows through the world as blood through the veins, and so a sudden in- crease of supply of Money-metal must be felt wherever that metal. is Money, and history and the doctrine of chances are in favor of the annual product of Silver and Gold giving a steadier supjsly of Bi-metallic Money- metal than the annual pi'oduct of either can give of Mono-metallic Money- metal. But more than this. We see that the status quo was Bi-metallic; that the balance of power was held by France ; and that the world is indebted to her Bi-metallic system for the par of exchange by which the fungibility of the metals was guaranteed and commerce given room for growth. We see that if Mono-metallism be true for one, it ought to be true for all; we see also that if the legal ratio between the metals be destroysd, the whole world will either have to adopt one standard or enter upon a career of gaming contracts, which is eminently undesirable. But the success of this Mono-metallic Revolution would be to sin against the very principle of Money and purpose of the Standard of Desiderata. Its complete success would paralyze exchanges, and would, for an indefi- nite number of years, raise or lower the value of what has been Money- metal, just as its partial success has done hitherto. Hence, it is obvious not only that the Bi-metallic Standard, if adopted by a sufficient number of nations, answers the highest requirements of Money, but that there is no alternative worthy of the name. The Mono-metallic Standard, if only consistently established in the countries that have nominally adopted it, would serve the business of mankind much as the defuelization of bituminous coal would serve their needs for heat. Anthracite and wood would rise in price, and half the heat would be gone. Mono-fuelist or mono-metallist, the logic of the po- sition is the same — that is, of course, until the world shall have accom- modated itself to the new order of things. (See page 110.) And how long would this accommodation require in a woi'ld that bristles with na- tional debts, bonds, insurance, annuities, stock companies, etc.? APPENDIX. 157 In connection with the discussions in Chapter IV, the following note from a late German work (Dr. Karl Walcker's Die Silber-ent.verthungs- fruze, Si-rasbiirg, 1877) may be of interest: " Further progress in this direction [a better regulated monetary sys- tem] is merely a question of time. "Count Soden, Roscher, and Schaffle have rightly recommended mi.x.cl Rents, reckoned by the values of Precious Metals, Breadstufiri, and Cloths, and the writer [Dr. Walcker] has proposed that the state should make obligations expressed in these terms. " Inde2)endently of Count Soden, who wrote about 180"), the Englishmen Lowe and Poulett Scrope, in 1822 and 1833, made similar propositions. Compare Jevons, ' Money,' etc., who, however, is in error in this, that he maintains that general commerce, in which obligations of payment are or ought to be settled without delay, could make use of such a Money. For such a purpose it would be too cumbrous. Soden's idea is applicable only to taxes, salaries, state obligations, and perhaps for purchase-money of real estate, etc. Compare Walcker's Zeitfragen, 1875, p. 153, and Dens Lehrbuch der Nat-Oekonomie, 1875, pp. 72, 73. Compare, also, Rod- bertus Creditnoth des Grundbesitzes, 2 B., 1869." I hazard the remark that Dr. Walcker is not fully aware of the orig- inality and the scope of Lowe's invention. C. Of Merchaxdise-moxey, Paper-money, and Credit. In Chapter IX, I have made use of the word Credit to characterize those exchanges and compensations which are made through what are generally termed Instruments of Credit. McLeod (Economical Philosophy I., 194) defines Credit as "anything which is of no direct use, but which is taken in exchange for something else, in the belief or confidence that we have the right to exchange it away again " If this definition be accepted, it is plain not only that Metallic Money is Credit, as McLeod maintains, but that any investment, even the most ■'solid," made for the purpose of future exchange, partakes of the same nature. The view which is suggested in this Treatise as to the totality of Laws of Legal-Tender being the efficient cause of the greater part of the value of Gold and Silver, must, in a certain degree, support this view. L'nder this definition, (Jold and Silver are thus regarded, as Edmund Burke has said, "as i-epresenting the lasting conventional credit of mankind." The well known utterances of Aristotle, of Baudeau the Physiocrat, of Adam Smitli, and of Bastiat, treating Money as an order j^ayable to bearer on wealth in general, point also to the truth of this generalization. But, however important may be this recognition that the various kinds of property and modes of transfer of property are dependent for their 158 APPENDIX. value and efficacy upon the confidence of some men in the future action of others, yet it must be remembered that scientific language exists for the purpose of facilitating and expressing thought, and that the gulf be- tween a granite building and a shinplaster is too wide to be safely bridged by a popular word like "Credit," which is in daily use among men in senses remote from that above set forth. The granite building, the gold eagle, and the shinplaster may, either of them, be taken in the belief that we have a right to exchange it away again; but the points of resemblance between them are so few, and the points of difference so many, that while in elaborating a theory to classify them under one head is proper, yet to make the classification popular by giving to the genus thus segregated a name like that of "Credit" is to invite misunderstanding. In adopting in the foregoing Treatise the contrast of Commodity and Credit, and applying the latter term to instruments, which embody a dis- tinct promise that a commodity shall in time be forthcoming, 1 have used the word credit in a sense consonant with the popular acceptation of the term, and in a far less degree liable to misconstruction. Since this Treatise was printed, my attention has been called to a dis- tinction set forth by M. Cernuschi, in his Mecanique de L'Echange (Paris, 1858), Chap. XXXIV. M. Cernuschi assigns the name of genuine credit, credit veritable, to a loan on simple personal guaranty. So, too, a delivery of goods on commission is credit, but it is credit in merchandise. A loan on security of any sort is, on the other hand, an exchange of cajiital for Money. A bill, or check, is really an instrument for the transfer of Money. A clear understanding of these terms would make imjjossible the error which so often misrepresents the growth of modern commerce as a growth of "Credit" per se, and which hence obscures the fact that the substantial improvement is really in the mode of economizing the bodily transfer of merchandise, including Money, largely by facilitating the convenient transfer of the ownership of such merchandise. A further distinction between Paper-^Money and ^otes. Bills, and Chocks, is, that while the former serves actually as Money (elevated, one might say, by law to the dignity of being itself a commodity), the latter are rather modes of economizing the use of Money. Hence, M. Cernuschi has suggested and used in his works the term "economical payments," as a substitute for what are usually called cred- its, credit exchanges, etc. The expression " transfers of title to Money" might also be serviceable. APPENDIX. 159 D. The Fall of Silver vs. The Rise of Gold — Price and Purchasing Power of Demonetized Metal and of Legal-Tender. The discussion of the " Depreciation " of Silver has given rise to a curious contrariety of inference. Here Silver is condemned, as if it were already ruined, beyond hope of redemption; there it is maintained that it is Gold that has risen, and not Silver that has fallen. Both statements harbor fallacies, and falla- cies that tend to obstruct the safe solution of the questions at issue. The latter doctrine, sometimes based upon the "Minute of the Indian Government," has, of course, its truth for India — applied to Europe, the share of truth is reduced to a minute fraction. To what extent Gold has risen, is a most important question; but an increase of Purchasing Power of freely Coinable Legal-Tender Gold is incommensurate with the fact that certain quantities of non-Legal-Tender Metal brought a Gold Price lower than they brought when the latter was Legal-Tender at a statutory par with Gold. So, the fall of Silver is often misunderstood. As has been shown, the real " Fall " of Silver is the fall of existing Bullion and much Coin from being freely Coinable into Legal-Tender to not being Coinable at all. Free Coinage, at a fixed ratio, is the regulator of the fluctuations of Money Metals. The regulator has been removed. In Europe and Amer- ica Gold is the only freely Coinable Money-Metal. Tlie story can not be told in a few words. The single expression. Fall or Depreciation, does not tell the whole story. It is only by keep- ing clearly in view the nature of Price, the phenomenon of Local Prices the variety of Laws as to Monej'-Metal in different countries, that one can guard against misunderstanding. The following may serve as an illustration: Reasoning about human events, with a view to action, may be said to take the form: "a and b occurred ; if a and b had not occurred, or if yn or n had occurred, then X OT y would have been the result." This is true from framing a Consti- tution ^o drivinc a nail, and, of course, is essential to reasoning about Price. A says, " The Price of Silver in London gives the price for the world. Silver has fallen 20 per cent, below loj in London; ergo, the 1,000 millions dollars of Silver Coin in Europe and America are "depre- ciated " 20 per cent. Here are two isolated facts. Silver is sold in London at 20 per cent, below par 1,000 millions Dollars of Silver Coin exist in the Western Hemisphere, and are not sold in London at any price, nor anywhere else, that is for Gold. The object of A\s observation is to gain a correct view of the status of the 1,000 million Dollars. A deduces x and y from m and n. What means A when he says Silver is "depreciated?" Let him take his place in the "if" and "then " categories. Let him deduce .r and y from m or n. A answers (m), " If you want to sell your Silver for Gold in London or (n) elsewhere, you will {.c and y) find you will get the 160 APPENDIX. London price for it — 20 per cent, below par." To which I observe, That depends on how much is sold. What will the London Price be if Silver becomes Legal-Tender in London ? What will be the London Price if 1,000 millions Dollars of Westei'n Silver be offered for sale at once? What will be the London Price if the Indian Government asks for bids for 1,000 millions Dollars of Indian Silver? It would be bought by the ton. We should have Silver roofs instead of tin roofs; and the cans, l^ans, and pails would be of Silver. But if it were Legal-Tender in London it would be permanently at par. It may be said, but the same ifs and thens assert themselves about all prices, and yet people are safe in drawing deductions from the "market I^rice." Xot at all; "prices" and "market price" relate to the exchangeable value of merchandise expressed in terms of Money. The price of Silver is the value of one Money-Merchandise in another, and, as we know, Mone3--Merchandise exists chiefly not for uses peculiar to it, but for a use common to all commodities, namely, to be exchanged ; and the stock on hand of Silver and Gold exists, and its value is built up chiefly because of the Laws of Legal-Tender. To tell of the price of one in the other is another way of saying the Nations have been passing laws that, under actions of existing self-interest, Silver exchanges for 20 per cent, less than what once was 2oar. It would be more descriptive of the state of affairs to say the Abandon- ment of Silver instead of Depreciation of Silver; for the former expres- sion would suggest the two salient points of the situation — both cause and effect. In considering the Purchasing Power of Silver we discover another problem. Depreciation of Silver, Rise in Gold, are both at fault here. If the averages of price have fallen 10 per cent, on the continent within the past two years, then the Purchasing Power of one thousand millions of Silver has gained one hundred millions in spite of the Fall and De- preciation. A rise of the Purchasing Power of Money on the continent is a rist^ of the Purchasing Power of five-franc pieces and thalers as well as of Na- poleons and Crowns. True the thalers and five-franc pieces are really in the situation of Tokens; for a percentage of this value they are like Greenbacks. P>ut suppose the averages of price had fallen 10 per cent., and the Gold price of Silver in London is 10 per cent, below the sfahis quo ante, can it be then .said that there has been no change of the Purchasing Power of Silver, but merely a rise in the Purchasing Power of Gold? Of course it can not be stated as & fad, for the thalers and ecus are legal tender, and the holder of them does not retui*n to the seller 10 per cent, of all the goods he has purchased. It must then be stated in the categories of "if" and "then." And how would it be stated? APPENDIX. 161 If tho reader will attempt to state his conditions and consequences, he will at onoe see the impossibility of exhausting the subject by the few words which would be applicable to simple merchandise compared with a "Standard of Value." A Demonetized Metal held for sale — a currency consisting largely of metal which has ceased to be freely coinable — a Money-metal, the total demand for which is all at once largely increased — two metals, one of which is Money here, and the other Money there, and between which the statutory international and national par has just Vjeen destroyed — all these are important elements of a chaotic situation, in which the Standard of Desiderata is the only safe foundation in theory and the check of the development of exchanges the salient fact. The thing that is made to be used is compared with that which is made to be exchanged — the thing that is perishable with that which is inde- structible — the thing of which thei'e is a small stock on hand with that of which the total stock is sufficient if it be only used for Money, but if it be ousted from the position of Money is in excess, and has no claim for its former value. E. Valorimetre, Evaluateur, and Instrument op Valuation. (See note, p. 43, and pp. G4, 65, 66.) I desire to suggest to the thoughtful reader a comparison of the ex- pressions Instrument of Valuation and valorimetre and evaluateur. To measure length, weight, or space, is, in simple phrase, to find how many times a certain length, weight, or jjortion of space, assumed as a measure, is contained in the thing measured. The magnitudes are cognizable through the senses, and the process is a comparison of one magnitude with another magnitude. For securing substantial identity in the material used as a measure of length, weight, and space, existing arrangements suffice. So long as the physical identity of the thing measured is preserved, the result of measurement will be substantially the same for all persons, times, and places. Neither of these distinctive features of simple measurement is found in the ascertainment of value. Here the measure and the thing measured are disparate. Weight, length, space, offer no suggestion ; the magnitudes become commensura- ble only by their exchangeability for other magnitudes. Hence, of course, the measurement of value is really a calculation of the possibilities of future exchange — a resultant of nice inferences and intuitions (if one may use so dangerous a word) as to the possible or probable acts of men. One might say, indeed, that, as compared with ordinary measurement, the ascertainment of the value of a thing is distinctively a mental pro- cess. The numerical calculation how many times the thing measured contains the measure is merely the last stage of the process. 162 APPENDIX. Again, the physical identity of measure and the thing measured may be preserved, and yet the ascertainment of the value of a commodity ■will produce a diflferent result with different persons, or at different places and times. Such being the case, the expression Measure of Value is, strictly speak- ing, inapplicable to Money ; while the expression Standard of Value is likewise open to misconstruction, seeing that though, in referring to the material of which Money is made as being that to which all values are visually referred, the phrase " Standard of Value" is applicable; yet, in- asmuch as this reference to Money-merchandise presupposes the segrega- tion of some definite portion of that Money-merchandise as a unit of measurement, the idea of measuring, in the ordinary sense, is inevitably suggested. Impi'essed with this view, I cast about for a name of this Function of Money in " measuring value," which would exclude those fallacies which have housed themselves in the words Standard and Measure, and clearly indicate the peculiar nature of the process of comparison of which I have been speaking. After much consideration, it seemed to me that the expression " Instru- ment of Valuation" would be, within certain limits, a sufficient substitute for both Standard of Value and Measure of Value ; that " Instrument" would cut off the fallacies of metrology which infect "Measure" and en- danger the usefulness of "Standard;" while, by using "Valuation" in the place of " Value," the idea of a process is substituted for that of a condi- tion ; the transitive verb — the verb of action, to value — by its attendant noun, supplants the idea. Value, as a thing at rest, permanent, and com- pleted. The general term " Instrument of Valuation" would not, of course, ex- ' elude characterizing Money-merchandise as the " Standard of Valua- tion;" while a definite weight of such Money-merchandise, established, perhaps, as the Unit of Coinage, might be described as the Standard Unit of Valuation of a particular country. Whether "Instrument of Valuation" is really worthy of the place I have assigned to it, is a question for others. The words evalaateur, suggested by Wolowski, and valonmetre, suggested by Garnier, have the advantage of being simple, single words. The obvious criticisms may be made against these, however, that "val- uator" suggests automatic action, while " valorimeter" suggests a Measure of Value with improved adjustment, and hence would rather point to the outcome of the Taljular Standard of Value, which I have called the Standard of Desiderata, than to metallic Money. To the thoughtful reader, no apology is needed for this digression. The fallacies that lurk in words are the quicksands of theory; and as the conduct of nations is built on theory, the correction of woi*d- fallacies is the never ending labor of Science. APPENDIX. 163 Fortunate if the words can themselves be abandoned ! Conceive to what extent legislation has been affected by the treacher- ous engagingness of the word " Protection." Voters and legislators are instinctively in favor of protection — that is of the weak against the strong, but not vice versa. Again, the party, in this country, one of whose great aims was, at one time, the perpetuation of slavery, owed much of its popular vote to the name Democracy. What could the foreign-born voter find in " Wliiggery" to excite an equal enthusiasm. Had the world fully recognized Money as an " Instrument of Valua- tion," rather than as a "Measure of Value," the panic of 1873 might never have reached its portentous height, and certainly the depression of 1874, 1875, 1876 (and 1877?) would never, to such a grievous degree, have troubled the progress of the world. F. FuNGiBiLiTT, Freedom of Trade, and Demonetization'. The following citations and remarks will serve as a commentary and elucidation of the remarks made in the text upon the above .subject : The first is from Julius Paulus, who, with Ulpian Papinian and Gains, is one of the chief pillars of Roman Law. "A loan of the kind, called ' jinttuKm,' says Paulus (Dig. xii, 1, 1), must be of those things that {consistunt) are allied in their nature to weight, number, or measure. By giving these, we are enabled' to make a loan, because it is returnable in commodities of the same general character {quia in genere ,mo funcdonem recipiunt per solutionem magis quam in specie) ; for, in other things, we can not make a loan {ire in creditum, give credit), be- cause, in such case, a loan of one commodity can not be paid with an- other commodity without the consent of the creditor." Where tlic credit is given in things which " consist" in number, weight. or measure, the consent of the creditor is not necessary: the debtor re- pays the loan in commodities of the same genus, and evidently at his option. In things of this kind, the Law permits the borrower who re- ceives a to make restitution by retui'ning to the lender, .r, or y, or z. Here, then-, is a public guaranty to the debtor that the Law will enforce the fungibility of things which " consist" in number, weiglit, or measure. A considt'ration of the subject will apprize the reader that debit and credit in articles of this kind is one of the conditions precedent to pro- gress in civilization; that fungibility is in a manner the sunlight which makes jiossible the growth of commerce. Now, Gold and Silver are materials of this sort, and it is plain that numerata pecunia, nummus, numisma (Lawful Money), whose admitted fungibility had, as Aristotle had recognized, made it an instrument of such credit that it was necessary that he who had it should be able to get what he wanted, was, in practice, the chief material of this contract of 164 APPENDIX. which Panlus is speaking, as well as of the greater number of others of which the Pandects treat. Now, both as bullion and as Coin, the law recognized the mutual fungibility of these metals. But how was this possible? In what weight, or number, or measure, do these two individual metals " consist," that the Law could recognize them as fungible ? If A borrow good wheat, he fulfills his obligation by returning this or that good wheat, as he pleases. So if he borrow a pound of Gold, he pays his debt by returning this or that pound of Gold, as he pleases. So if he borrow a pound of Silver, he may take this Silver or that Silver with which to pay his debt, and the Law will protect him against the vexatious creditor who demands the identical Silver which he lent. But what says the Law, if he seek to return Silver, having borrowed Gold? Can he borrow a pound of Gold, and cancel his debt by returning a pound of Silver? What says the Law? I repeat. The creditor has nothing to say : if the metals are mutually fungible, the selection of the material in which to pay is with the debtor. How does he exercise his option ? By what bridge does he cross the abyss which nature has placed between two of the primordial elements? Where is the common ground of weight, or number, or measure, between the two? Is it'equality in their attributes? Could he cancel his debt of a pound of Gold by returning a pound of Silver? Are ten pieces of Silver a return for ten pieces of Gold? or is a cubic inch of Silver dust an equivalent of a cubic inch of Gold ? Plainly one of them is the best; this is all that " nature" can suggest. What says the Law ? By its laws of coinage and its recognition of price in either metal, it creates an equation foreign to nature, artificial and arbitrary, distinct from that ordinarily associated with barter, exchange, or price. And from this Legal Ratio comes the mutual fungibility of the two Metals, by which the domain of exchanges is indefinitely enlarged; by which much Credit is made possible, which otherwise could not have existed ; by which Commerce and Civilization are extended. Now, it might be said that Justinian's Code made the mutual fungi- bility of Gold and Silver in a manner a statute of the Empire, and that therefore later it became a statute of the Holy Roman Empire of the flerman Nation, and it is a part of the foundation of Saxon and Latin civilization. Again, in his De Jure Belli et Pacis (Lib. IT. 12, § 17, Pecunia quomodo functionem recipiat, edition of the two Cocceii), Grotius says (the transla- tions are my own) APPENDIX. 16^J "As to Money, it must be recognized that naturally Money is fungible,* not in its mere material, nor in its special appellation or form, but in a far wider sense — namely, in the sense that it can be compared with other things; either all things, or at least those things for which there is great- est need. His editor, Gronovius, observes of that untranslatable exi)ression,/'/nc- tionem redpere, that it means " to suffer that one thing shall be given for another, or another thing for the first, or the first for something else' {alia pro alia, ct aliud pro ea, et ipsa pro alio). As to " Materia" he notes, '" as Gold for Silver, and vice versa;" of " appellatione aut forma" as "Denarii for sestercii, philips for thalers, if only the sum be delivered in some sort of good money." Of magis coinmuni, he notes " in the broadest sense of all exchangeable or vendible things, in so far as it is made equal to them, and is either ex- pended or received for them." Cocceii notes tliat Gold and Silver are not, per se, fungible, nor is the form or name of Coin fungible, " but the quantity or valuation {cestima- tio), which by public faith and authority is conferred upon Coin." Upon genere magis commuiii he observes: "More rightly, Money derives its fungibility from the fact that the value (quaniUas ccstimationis) is defined by public autliority, and therefore is always certain." Hence, he says, "Aristotle calls Money a guaranty (sponsor), because he who has it has all things that he needs, — can, indeed, compare all tilings with tliis Money as a measure." He further remarks of Gold and Silver: . . . " It is clear that tliis metal (lie seems, in the spirit of Bi-metallism, to refer to the two together as one) can provide such a measure of things as is discoverable in this world, and one that will suffice for the uses of human life, at least if abuse be avoided and proper care be devoted to this thing (publice) by the state, and that beyond all other materijjl this metal is most convenient for this purj^ose." It is, by the way, suggestive tliat Cocceii, the distinguislied Jurist just quoted, was Privy Councillor of tlie King of Prussia. ® Naturaliter functionem recipere. I can think of no better translation. An old translation (by "several bands," London, 1725) renders the passage thus: "Now as for Money, we must observe that it naturally derives its Cur- rency or Equivalence not from the matter only," etc. The Paragraph is enti- tled: How Money goes for everything else. Whewell gives it as follows: "Concerning Money, it is to be noted that it naturally operates functionally — that is, one portion of it may do the office of another; and this, not only as to the material [Gold for Silver, and reciprocally], nor in its special appella- tion and form [crowns for dollars], but in a more general sense." The German translation gives "to be represented" as the rendering of func- tionem recipere, while the French reads "la monnaie est d'uao nature fonc- tionnaire." 166 APPENDIX. So, likewise, Graumann, the Director of the Mint, quoted on page 13, from whose work I add the following citation as germane to the subject : " Money was regarded by the Romans as sacred, and was coined in their Temples at the cost of the State. " And such is still the fact with those nations that understand their in- terest and the nature of Commerce and of Money, and withal regard the rules of Equity as a duty. " Money is a part of the general law of nations (des allgemeinen Volker- rechts), and it is therefore necessary that a Prince, in establishing their true value jiut [the Money of his State] into a correct relation to the Coins of other States, if hi.s subjects are to deal with them without loss. "Alterations of Money have at all times carried great disorder in States, and have been most injui'ious to the common weal." What would Paulus or C4rotius have said of demonetization of Silver? Evidently, unless there be a miraculous substitution of Gold for Silver, the demonetization of Silver must be an annihilation, pro tanto, of fungi- bility. The eflFect of such a measure upon freedom of Exchange is a subject that will repay meditation. It must, of course, be understood that there is a radical distinction between "par" and "price." The par is an equation between different kinds of Legal Tender; price is the equation of merchandise with Legal Tender, expressed in terms of the latter. Two distinct effects of demonetization present themselves at once. 1. By ceasing to be Legal Tender — among the civilized nations, for exam- ]>le — it is substantially banished from local exchanges in those countries. 2. By the destruction of the par, the security of business, and hence the sum of exchanges, is dinninished. On comparing the results of such action with the constant increase of exchanges under a perfected institution of Bi-metallic Money, it will oecome apparent that it is legitimate to speak of demonetization as an offense against the " Law of Nature and of Nations." It may serve for further illustration to note objections that may not unnaturally occur to the reader. The distinction between Money-merchandise and merchandise in gen- eral, and the influence of law upon the former, is not aflected by the fact that Money may exist independently of law. It is not probable that Aris- totle or Paulus or Grotius were ignorant of the fact familiar to the reader, that savages use some sort of Money. A savage or a child may, in his sjK'aking, use all tlie figures of rhetoric ; and yet the poetic art — literary criticism — is identified with civilization. So, too, there were just men before Menu, and Moses, and Solon ; and yet tlie world .still has need of jurists and moralists. Again, it does not touch the argument to say tliat the metals owe their position as Money to their intrinsic (lualities. Tliese are conditions which tli(! free-will of man may make ineflcctive. Witness the Legal Tender APPENDIX. 167 Acts and the German " Mimz-reform." So the Gold and Silver whicli were, it is said, Money in Egypt sixteen centuries before the Christian era, at the rate of 1 to 13J, had the qualities which fitted either or both to serve as security for Bank of England Notes, thirty-six centuries later. For all that, no one thinks of denying the efficacy of the Bank Charter Acts. Again, it is of no avail to object that law is the creator of law books, of cannon, of speakers' desks, and Congressional reports; or, again, that law is a condition of civilization, and, without law, there would be no steam-engines, machinery, telegraphs, etc. Compared with this or that commodity, or with all commodities, Money is infinite; for it is the measure of all property, and instrument of all exchanges, and the figures of the exchanges which it mal8 46,000 1829 *<> f^Ci(\ $3,506 26,000 22,000 45,000 66,300 33,000 42,400 140,000 46() 000 isp.n 91 nnn $212,000 1 76,000 140,000 216,000 415,000 310,900 1831 1832 1833 1834 1835 26,000 34,000 104,000 62,000 60,400 $1,000 1,000 7,000 3,000 100 520,000 678,000 868,000 898,000 698,500 312,000 2,317,500 242,900 1,478,900 12,100 1,000 12,200 4,377,500 APPENDIX. 183 THE SILVER BILL IN CONGRESS. [The following appeared as an article in The Banker's Magazine and Statisti- cal Register (of New York) for January, 1877. The text of the Silver Bill, of which it is a criticism, and which passed the House of Representatives on December nth, 1876, is given on page .] The Bland Bill means mischief ! The Bill proposes that the old silver dollar shall be coined as legal tender side by side with the gold dollar. In effect, it therefore restores the monetary system, which obtained before 1873, with its ratio of one to sixteen. Payments are to be made in dollars, of which the silver weighs sixteen times as much as the gold dollar. Silver becomes legal coin, and laws ordering payments in gold alone become an anomaly, inviting speedy repeal. This bill is really an attack upon the Bi-metallic Sys- tem, the restoration of which is needed for the future prosperity of the world ; and if it becomes law it will prove an obstruction to the prosperity of the United States. Our situation with reference to the two metals is well known. There are few silver dollars in existence, and there is but little silver bullion in the country. Of gold, we have some 130 million dollars worth, coined and uncoined. The reader is, doubtless, well aware of the late vicissitudes of the price of silver brought on chiefly by demonetization in Germany. Silver has fallen, and has risen and fallen again, driven hither and thither like a rudderless ship in a storm. Germany, alarmed at the depreciation of the metal she had to sell, has calmed the panic by with- drawing for awhile from the market ; while the United States, unconscious of its truest interest, has powerfully sus- tained the price of silver in London by its demand for coinage of tokens. Turning to Europe, we observe that there the coinage of legal tender silver is at an end. Germany's demonetization has put the world into a state of siege on that subject. The Latin Union has been compelled to abandon the half- measure of partial limitation of coinage, which she adopted in self-defence against Germany, and has stopped the mintage of silver entirely. So Holland is in a state of dead-lock, awaiting the convocation of an International Conference. The causes of the stoppage of silver coinage are not, in any proper sense, temporary. So long as the policy of demonetization prevails in a country which has silver to sell, other countries must abstain from maintaining free coinage of silver as legal tender, or consent to part with their gold in return for the silver thrown upon the market by their neighbor state. 184 APPENDIX. Free coinage of a metal as legal tender, is a standing statutory bid for all of that metal that there may be for sale at the price. But if a nation loses all its gold, while gold remains an international money, and receives in its place silver, which is no longer an international money (being demonetized), no proper par is maintainable between it and other countries. The country' that takes the silver becomes a sort of India to the serious detriment of international commerce. But if a sufficient number of nations coin silver at one fixed equation with gold, silver would remain an inter- national money ; the par would be secured in permanence, and there would be no danger of the latter event above suggested. This was abundantly illustrated in the case of Holland, whose demonetization of a circulating metal (gold) in 1849 was made possible by the working of the Bi-metallic System in France and other countries. All is different to day. The northern countries of Europe are demonetizing silver ; the product is increasing, and no great combination of nations exists to neutralize so violent a disturbance of the equilibrium of the metals. Hence it is plain that the action of the Latin Union in refusing to coin legal tender silver, is in the present phase of the question, final. It is an adjournment, sine die. There can be no further action until the entire situation is changed. Another vital fact as to the possible action of the Latin Union is also clear. The legal ratio is there i to 15/^. The silver franc weighs 15^'^ gold francs. The Latiji Union can not coin silver at any other ratio. It is a sine qua non for the asumption of coinage of legal tender silver in the Latin Union, that the situation should be such as to make it a wise course for her to coin at that ratio and at no other. The causes of this necessity are apparent. France pos- sesses a stock of about a thousand millions of dollars, about half gold and half silver. For the last sixty years business has been done in coin (for paper being at par has not altered this fact). To change the ratio of gold and silver, would compel France to melt down and recoin 2}^ milliards of francs, either of gold or of silver. The same observation holds good of the remainder of the continent. It is worth remarking, also, that the entire gold- mark and silver-thaler stock of Germany stands (in nearly equal amount) at this same ratio of i to 15/^, so that the hope of inducing Germany to abandon demonetization is bound up in this maintenance of the i to 15/^. It is evident that if silver is to be coined again as legal tender in Europe, it must be at the ratio of i to 15/^. Now in this struggle against demonetization, the franc is the natural ally of the dollar. The English sovereign APPENDIX. 185 declared war on silver in 1816, and the German mark has entered the field of conquest with fatal force. The franc has been compelled to withdraw within the fortifications of coin- age, and for the present, legal tender silver is unknown in European mints. What shall the dollar do ? Shall it come to the help of the silver franc, and restore silver to its rightful position, or shall it reinforce the mark and the sovereign, and prevent silver from becoming an international money in Europe ? Now to coin silver dollars at i to 16, is to take the latter course. Coinage at i to- 16 in the United States, while it may for a time raise the price of silver in London, and so serve the prejudices of Germany and England, yet deprives silver of its chief supporter in Europe. Coinage at i to 16 drives the Latin Union out of the field. For there is a difference of about three per cent, between the equations i to 15^ and i to 16. Water flows readily at an inclination of three feet to the 100, and silver will move as readily at the call of three per cent. If the Latin Union coins at i to 15/^, while the United States coins at i to 16, the irresistible gravitation of self- interest will carry all available silver with steady flow to the mints of France. Not a single silver dollar would be coined in the United States. A similar experience was made long ago. From 1834 to 1873 the market-price of silver in London was controlled by the French ratio of i to 15/^, and the ratio of i to 16, which the monetary legislation of 1834 had attempted to make effective, failed to bring to pass the coinage of Silver dollars in the United States. Had the statesmen of Jackson's administration, in abandoning i to 15 in 1834, adopted the 15}^ instead of 16, the silver dollar might have been coined side by side with the gold dollar down to the present time. Here was Benton's mistake ! Had not this mistake been made, the proverbial palmy days of Hard Money Demo- cracy would have deserved the name. It is sufficiently obvious that the Leaders of the Latin Union are cognizant of these facts, and they are men who are not likely to stultify themselves. The Latin Union can not coin the silver franc if we coin the silver dollar at one to sixteen. She can not become at once the sole receptacle of all the silver demonetized in Germany, and of the new silver from American mines. Hence we say, if the United States coins silver at i to 16, it will be without supporters in the Western World — and will alone assume the Asiatic role. What will be its situa- tion in such event ? How will it bear the shock of this silver inflation ? Of course England and Germany ( bondholders excepted ) will hail with pleasure the acceptance by the United States 186 APPENDIX. of the rejections of Europe. Our hundred and thirty millions of gold are a glittering prize for Germany, and, while the annual product of the gold mines diminishes, Gold-monometal- lists will be glad to see the United States unconsciously binding itself not to employ gold at home, and precluding itself from sending silver to Europe. But in the meantime what will be the condition of the monetary par between America and Europe ? Our silver legal tender, like our paper legal tender, will not have the character of money in Europe. In Asia, of course, it will be money and this is an advantage. But how will our dealings with Europe be regulated ? Can there be anything in the nature of a steady " par " between the two systems of money ? Will the gold market in New York, under the new regime, take the place of the silver market of Lon- don, in chronicling the fluctuations of silver the American money ? Will silver be more steady in value than paper has been — or will the Whiteback be coupled in popular imagina- tion with the Grayback and the Greenback which it replaces ? How will our balances, our interest, be paid to Europe ? We cannot pay in silver for it is not money in Europe. If we pay in gold we must buy the gold and Europe will determine what quantity of silver we must give in exchange for it. I leave the answers of these questions to the thoughts of men of business, and will simply sum up the result in a word. If the United States are alone in coining silver we lose our gold ; we are flooded with a legal tender which is not a legal tender in Europe, the chief country with which we deal ; we weight ourselves with coin which has ceased to be an international money, and we have destroyed the par between our money and that of Europe. And we are a debtor nation ! In view of these considerations I think I am justified in saying that the Bland Silver Bill means mischief. A word as to restoration of silver at i to i5/4. It is obviously the wise policy of the United States to make easy the way of resumption of specie payments, and assure a speedy return of prosperity. To do this it is necessary to have free coinage of silver and gold at full- weight as unlimited legal tender. But as we have seen, we can not do this alone, and if we coin at i to i6 we are inevit- ably alone in restoring silver. The occasion is one for diplomacy. The time demands a success greater even than that of the Treaty of Washing- ton. If the spirit of Alexander Hamilton, could direct our diplomacy an International Conference might induce Eng- land and Germany to join the United States and the Latin Union in free coinage of gold and silver at the equa- APPENDIX. 187 tion of I to 15/4. This would be the inauguration, if not of universal, at least of comparative monetary peace through- out the world. There are many signs that the fulness of time for this has come. It has long been evident that the labors of Wolowski were not in vain — and opinion is break- ing down before the crusade which Cernuschi has organized in Europe. Austria is hoping for a Conference, and the President of the Chamber of Commerce of Liverpool, is writing philippics in favor of bi-metallic money. The presses of Carlsruhe have just put forth a work, ( Die Silberentwerthungs frage — Dr. Karl Walcker — 1877) which proves that the German coinage reform was a mistake ; that the spirit of the time demands bi-metallic money, and that an International Mone- tary Union is not only necessary but practicable. But failing to obtain the support of Germany and England, the other parties to this need of restoration of silver may join by treaty, and secure a settlement second only in excel- lence to that just suggested. That this solution is entirely within our reach, there can be no doubt. In the meantime a practical question may be suggested, as an appropriate subject of public discussion. In adopting the ratio of i to 15^ shall we leave the gold dollar as it is, and coin a new silver dollar weighing 399.9 grains, 3 per cent, less than the " Dollar of the Fathers," or shall we recoin the Dollar of the Fathers, — make the existing gold dollar legal tender at 97 cents, until we can recoin the existing stock of gold into new dollars containing 3 per cent, more gold than the present coin ? There is but one other alternative : to make a complete break with the past and mint coins of different weight from either the gold dollar of the sons, or the silver dollar of the fathers. In the debate on the Silver Question at the meeting of the Social Science Association, at Saratoga, in September last, I had occasion to make a brief presentation of the views which are above set forth in full ( as applied to the criticism of the silver bill). For the fuller development of these views however, and for security in discussing the probable action of European coun- tries, it is to me a pleasure to be able to express my indebtedness to the conversation, criticism and suggestions of the distinguished author of the word " Bi-metallism," and most devoted living promoter of the Monetary Peace of the world. In extending to America that impassioned activity which has already borne such fruit in Europe, M. Cernuschi has laid the cause of sound finance in this country under obligations, of which posterity will owe its share. s. d. h. APPENDIX. A PABTIAL LIST OF WORKS TREATING OF THE QUESTIONS DISCUSSED IN THIS ESSAY. Selected from Appendix A of Dr. Soetbeer's Denkschrift betreffend Deutsche Miinze in igung. 1838—1848. J. G. Hoffmann. Die Lehre vom Gekle als Anleitiing zu griindlichen Urtheilen iiber das Geldwesen. Mit besonderer Beziehung auf den Preussiscben Staat vorgetragen. Berlin 1838. A. VON Humboldt. Ueber die Scbwankungen der Goldproduction, mit Riicksicht auf staatswirth-schaftlicbe Probleme. (Deutsche Viertel- jabrs-Schr. IV, S. 1—40, Stuttg. 1838) F. Nebeniu.s. Ueber die Scbwankungen des circulirenden Mediums in Europa und deren Einfluss auf die Geldpreise der Dinge in den letzten funf Decennien. (D. V. Scbr. XII, 1—72.) Stuttg. 1841. J. Helferich. Von ,den periodiscben Scbwankungen im Werthe der edlen Metalle, von der Entdeckung Amerika's bis zum Jabre 1830. Eine bistoriscbokonomische Monographie. Niirnberg 1843. A. SoETBEER. Denkscbrift fiber Hamburg's Miinzverbaltnisse, Hamburg 1846. W. NoRDLTNGER. Vorscbliige zu einem allgemeinen deutschen Miinz- Maass- und Gewichtsystem. Mai 1848. St. Clair Duport. De la production des metaux j^i'^cieux au Mexique etc. Paris 1843. L. Faucheb. Recherches sur I'or et I'argent, consideres comme etalon de la valeur. Memoire lu a I'Academie des sciences morales. Paris 1843. M. Chevalier. Des mines d'argent et d'or du Nouveau Monde. (Revue des deux mondes. Nouv. Ser XVI, 980-1035, Paris 1846.) W. Ward. Remarks on the monetary legislation of Great Britain. Lon- don 1857. 1849-1800. A. SoETBEER. Andeutungen in Bezug auf die vermebrte Goldproduktion und ihren Einfluss. Hamburg 1852. Beitnige und Materialien zur Beurthoilung von Geld-und Bankfra- gen mit besonderer Riicksicht auf Ilamhurg. Hamburg 1855. Die Wichtigkeit dor Silbcrwabiiing fur Deutscbland. Frankf. a. M. 1853. Denkscbrift, betrefTcnd dioEiiifiihruug dor Culdwabrung in Deutscb- land, mit besonderer Riicksicbt auf die hamburger Bankvaluta. Aus- (188) APPENDIX. 189 gearbeitet in Auflrage der Commerz-Deputation in Hamburg (von A. S o e t b e e r). Hamburg 1 856. S. Oppexiikim. Die Natur des (ieldes. Mainz 1855. Die Deutsche Mun- zeinigung. (D. V. Schr. LXXI II. Stuttg. 1856.) A. V. Batjmoartnek. Die edlen Metalle und ilire natiirliche Kangordnung als Geldstoffe. Wien 1857. F. Keller. Die Gold- und Silberfrage. Ein Versuch. St. Gallen 1860. A. Vrolik. Le systeme monetaire du Royaume de.s Pays Bas, la refonto des vieilles monnaies d'argent et de la demonetisation de I'or. Utrecht 1853. M. Chev.\i,ier. De la baisse probable de I'or, des consequences, commer- ciales et sociales qu'elle peut avoir et des mesures qu'elle provoque. Paris 1859. On the probable fall in the value of gold etc. Translated from the French, with preface by R. C ob d e n Manchester 1859. L. Fauchkr. De la production et de la demonetisation de I'or. — La de- monetisation en Hollande et la production en Russie, en Amerique et dans I'Australie. (Rev. d. d. m. Aout. 1852.) A. P. Frichot. Etudes monetaires au point de vue de I'adoption par tons les peuples de I'uniformite de poids, de mesures et de monnaies. Paris 1855. C. T.\rassenko-Otreschkoff. De I'or et 1' argent, leur origine, quantite ex- traite etc. etc. T. I. Paris 1856. E. DE Pariett. La question monetaire. (Revue contemporaine, Octobre 1858.) E. de Laveleye. La question de I'or en Belgique. Bruxelles 1860. J. T. Dansox. Of the quantit}'' of gold and silver supposed to have passed from America to Europe, from the discovery of the former country to the present time. (Journ. of the Stat. Soc. of London. XIV, 11 — 44, 1851.) J. Ward. A history of gold as a commodity and as a measure of value. Its fluctuations both in ancient and modern times, with an estimate of the probable supplies from California and Australia. Lond. 1852. F. Scheer. Observations on the eflFect of the Californian and Australian gold; and on the impossibility of continuing the present standard, in the event of gold becoming seriously depreciated. Lond. 1852. P. F. Stirling. The Australian and Californian gold discoveries and their probable consequences etc. Lond. 1853. W. Austin. On the imminent depreciation of gold and how to avoid loss. Lond. 1853. W. Newmakch. The new supplies of gold; facts, and statements, relative to their actual amount, and their i)resent and probable effects. Lond. 1853. 1861—1866. (H. Weibezahn.) Die deutsche Miinzfrage. Versuch einer Losung der- selben in einheitlicher Richtung, unter Anbahnungdes Uebergangs zur Goldwahrung. Rinteln 1861. 190 ' APPENDIX. A. SoETBEER. Zusammenstellung der Erklarungen von 35 deutschen Han- delskammern in BetrefFder Goldansmunzung in Deutschland. Ileraus- gegeben von dem bleibenden Ausschusse des deutschen Handelstags im Marz 1865. Berlin I860. Antrag in Bezug auf Herstellung einer allgemeinen deutschen Miin- zeinheit, seitens der Vor-Commission des ersten deutschen Handelstags (Ad. S o e t b e e r Berichterstatter.) Heidelb 1891. Verbandlungen d. vierten deutsch. Handelstags liber die Frage der Herstellung deutsch. MUnzeinheit u. Annahme d. Goldwahrung, Berlin am 20 u. 21 Oct. 1868. Berichterstatter Ad. So etbeer. (Aus dem stenograph. Berichte.) H. Landrin. Traite de I'or. Monographie: histoire naturelle, explora- tion statistique etc. Paris 1863. BoRDET. L'or et I'argent en 1864. Paris 1864. C. RoswAG. Les metaux precieux consideres au point de vue economique. Paris 1865. M. Chevalier. Cours d'economie politique etc. TIT. vol. 2. ed. refondue et considerablement augmentee. La monnaie. Paris 1866. W. S. Jevoxs. a serious fall in the value of gold ascertained, and its lo- cal effects set forth. AVith two diagrams. London 1863. W. Nassau Lees. The drain of silver to the East, and the currency of India. London 1864. W. R. Mansfield. On the introduction of a gold currency into India. London 1864. F. Hexdriks. Decimal coinage; a plan for its immediate extension in England, in connection with the international coinage of France and other countries. London 1866. 1867—1869 (April). A. Lammers. Deutschlands Aufgabe in der Miinzfrage. Bremen 1868. G. Hartmaxn. Ueber den rechtlichen Begrijff des Geldes u. d. Inhalt v. Geldschulden. Braunsch. 1868. H. Contzen. Ueber die Geschichte des Geldes und iiber Goldwahrung. Leipzig 1868. ■ Der Uebergang zur Goldwahrung- Eine Sammlung von Prcisschrif ten, herausgegeben v. d. bleibenden Ausschuss des deutsch. Handel, stages. Berlin 1868. Einleitung V.— XV. H. Grote. Der Uebergang v. der Silberwahrung zu der Goldwahrung. S. 1—76. G. MiLLAUER. Die Einfuhrung der Goldwahrung in Deutschland. S. 77—127. II. Weibezahn. Zur deutschen Miinzreforni. 8. 128 — 161. \i. Bach. Die nothvvendigon Vorbereitungen fi'ir den Uebergang z. Goldwahrung. S. 163 — 216. J. G. Killer.mann. Beantwortung der PreisiVage. G. D. AuospuuG. Zur deutschen Miinzfrage Bremen 1868. Zur dcutsclien Miinzfi'age. J I. — Naclitnige. Bremen 1868 Zur deutsclieu MilnziVage. 111. Bremen 1869. APPENDIX. 191 F. Xellf.r (Bergrath und Miinzwardein in Stuttgart). Die Frage der In- ternationalen Miinzeinigung u. der Reform des dentschen Miinzwesens, mit besonderer Riicksicht auf Siiddeutschland. Stuttgart 1869. P. J. B.'VcniENi:. De internationale Mont-Conferentie in 1867, Gravenhage, September 1868. (Overgedrukt uit de Economist 1S68.) ENGEi.ENBURr.. Proeven van wetont werpen ter invoering van het franken- steLsel etc. Nimwegen 1868. Ministere des finances — Rapport de la commission chargee d'etudier la question de I'Etalon monetaire. Paris, 1867. Conference monetaire internationale. Proces verbaux. Paris, 1867. Ministere des finances. Documents relatifs a la question monetaire. Paris, 1868. 4°. Rapport de la Commission chargee d'etudier la question de I'etalon monetaire. Paris, Mars 1869. Va.sques Queipo. La cuadruple Convencion monetaria considerada en su origen, objeto etc. Madrid 1867. T. M.wxEQnx. Uniformito monetaire. Rapport au comite syndical des republiques de I'Amerique ceiitrale et meridionale. Paris 1807. S. RcGULEs. Report to the Department of State. Washington, 1867. Memorandum. Metrical system of international coinage. (Washington, Treasury Department, April, 1869). J. Ross Brown. Report on the mineral resources of the States and Terri- tories west of the Rocky Mountains. Communicated to Congress, March 5, 1868. Washington 1868, pp. 674. J. W. Taylor. Report to the Treasury Department on the mineral re- sources of the United States, east of the Rocky Mountains, May 2, 1868. Washington 1868. Report of the international conference on weight, measures, and coins, held in Paris .Tune, 1867; communicated to Lord Stanley by Professor Leone Levi, and Report of the master of the mint and Mr. Rivers Wilson on the international monetary conference held in Paris .June, 1867. London, March, 1868. (Pari pap.) Report from the Royal Commission on international coinage, together with the minutes of evidence and appendix. Presented to both houses of Parliament by command of Uer Majesty. London 1868. (Pari, pap.) W. Stanley -Tevons. On the condition of the metallic currency of the United Kingdom, with reference to the question of internationale coin- age. London, November, 1868. (.Tourn. of the Statistical Society of London. Vol. XXXI, part. IV.) E. Seyu. Bullion and foreign exchanges theoretically and practically considered; followed by a defence of the double valuation, with special reference to the proposed system of universal coinage. London, 1868. Die Munz Wahrungs, und Bank-fragen in Deutschland. Elborfeldt 1871. The Fall of the Price of Silver. London 1876. W. Bagehot. a practical plan for assimulating theEngli.