o (^94-2 T46 iji^-*" -,» •,>t^^ S; >^ i v;^-Mf^!^^ rm IX -. Ai Cornell University Librar" HG 942.T45 A plain statement of the currency <»"esti 3 1924 013 775 592 A PLAIN STATEMENT OP THE URRENCY QUESTION WITH KEASONS WHY WE SHOULD EESTOEE THE OLD ENGLISH LAW OF BIMETALLISM. BY JOHN HILL TWIG&, M.A. Dub., Late of the Bengal Civil Service, PUBLISHED BY |Iesses. EFFIJJGHAM WILSON & CO., Eoyal Exchange, London. SOLD ALSO BY Messrs. Geoege Robeetson & Co., Melbourne;'^ i Messrs. Fostee, Beown & Co., Montreal. Messrs. Geoege Robeetson & Co., Sydney. Messrs. G. P. Putnam's Sons, 27, W. 23rd Street, New York. Messrs. Thackee & Co., Bombay. Messrs. Kelly & Walsh, Hong Kong. PRICE SIXPENCE. Bights reserved. 1893. PEEFACE. The following pages are intended for popular use and there- fore do not pretend to completeness or to teclinical language. I have been encouraged to write them by the rapidly growing movement in favour of bimetallism and by assurance of aid from coming events, which may give the whole community lessons far sharper than our cotton workers, agriculturists and oriental traders have already received. Material prosperity has been retarded for 20 years and in many quarters there is deep depression, which has. now reached a point requiring either a reduction of wages or a closure of business. Even the bankers and money lenders, among whom are the chief opponents of bimetallism, should consider the danger of such a general struggle between labour and capital. The banking interest is indeed itself in danger with no more than 25 or 30 millions of gold available to' meet depositors' claims of 900 millions payable on demand. As yet only the weak spots of finance and banking, such as the Baring firm and Australian banks, have been touched, but we may be approaching a time when poor people will prefer gold to bank notes and consider an old stocking or a friend's cash box a safer place for their savings than a bank, which pays no interest and perhaps may pay no" principal. These dangers are not of my imagining. They have been discussed by able financiers, such as Mr. Gosohen and Mr. H, Huoks Gibbs, in whom deep study has combined with practice an understanding of things which the practical man merely handles. Many even pf the practical men are taking alarm, as shown by the attempt of London bankers to get together a reserve of gold independent of the Bank of England. If I have strong opinions on this question they are not the result of my connection with India, which has now ceased, nor is this pamphlet much more than a compilation of current literature. Several friends have kindly assisted me in revising the proofs. &-" / '^ 7 7 0^. H. T. Dublin, June, 1893. - / A SIMPLE STATEMENT OF THE CURREJ^CT QUESTION, WITH REASONS WHY WE SHOULD RESTORE THE OLD ENGLISH LAW OP BIME TALLI SM. 1. Buying and selling througliout the ■world require a certain total amount of money. If that total be diminished we must use less money in each transaction ; that is to say, we must give lower prices for everything. For some years the available supply of money has been diminished and consequently the prices of goods Increasing have fallen. Manufacturers and farmers get less money for mone'*^owers their produce and are necessarily reducing wages* or closing ^^^ prices of workshops, abandoning farms and dismissing workmen. The Falling prices capitalist objects to invest or lend money for starting a new ^npple mdus- business or supporting an old one, because there is always a risk meroe, in- of loss with falling prices. Another very wide-spread evil is debtor's bur- the injustice sufEered by debtors. ^ If an employer or workman, enoourage for instance, wishes to earn a pound sterling and pay ofE a ^^i^^^l revolu- . - T tion of a debt with it, he has to produce more goods or work longer, dangerous . . kind. * In consequence of trades unions, custom and other causes, the price of labour falls more slowly than the price of goods and has not been much lowered as yet ; but the fall cannot be long delayed unless our money system is reformed, or unless it is relieved by larger supplies of gold. The struggle may have effects reaching far beyond the mere money question. A 2 Hqw the because the price of goods and labour bas fallen ; in fact, the When is meaning of tbe fall of prices is that njoney is more valuable jncreasei. because of its scarcity. It is true that the debtor is obliged to pay no more moTiey than he promised^ but the money is more yaliKible. He has had to earn it as a labourer by giving more labour, or as an employer by giving more goods than he used to give. Similarly, all charges, such as rent, railway fares and freight, city water rates, &c., which were fixed when money was less valuable, are now unfair. All this disturbance of industry, commerce and propei'ty is creating social and political unrest, with ill-considered demands for revolutionary change in some directions. Cause of the 2. Let US consider the reason why the supply of money has monev^s°tho hecome so insufiicient that people are unable to paj- the old flimimshed prices and scarcely able to pay old debts. Before 1873 silver and silver, as woU as gold, was freely coined for any person '^reato run offering it at the Mints of France and certain other countries upon gold. go there was more money and prices were both steadier and higher than they would have been if gold alone had been used. The law in those countries, forming what was called the Latin Union,* entitled anyone to bring either gold or silver to the Mint and receive it back in the shape of coin.t In 1873, however, those countries began to limit the coinage of silver and stopped it altogether in 1878, thus throwing the whole demand on gold. Since that time other nationsj also, which for some time had coined hardly any gold, have chosen it as their staii- dard metal and have bought up about 200 millions sterling of it, a sum equal to about one-third of the present existing stock The fall of of gold money in Europe and America. Hence there has come to menoed a^Qut ^^ ^ Scramble for gold, not only in those countries, but through- 1873. Qijt the world, and there is not enough gold to make a sufficient supply of coin for the world's wants, which are daily increasing with the advance of population and wealth. * Prance, Italy, Belginm, Greece and Switzerland. + I state the facts in this way for the purpose of explanation. In practice the Mint gave notes for all uncoined gold or silver brought to it, and these notes could be immediately cashed in coin at the Bank of Prance. J The United States, Germany, Holland, Scandinavia and Austria. 8. From the same year, 1873, when this run upon gold and 'J'lio average rejection of silver commenced, the prices* of goods began to ^"33"°^°'" fall and this fall now amounts, on the average of goods, to '^™*'' ^^^ ^^ , 00^ continuing, about seven shillnigs in the pound, or one-third, with every prospect of continuing. 4. "What the world now needs is to stop this artificial fall Need for a of prices and raise them slowly, to a moderate level. The only of prices to a practicable means of doing this is to restore the old law of ^^^^^y 1®^^'- coming silver as freely as gold and to let people pay their debts sible only in either metal at the choice of the debtor. This arrangement met°alUsiu'* is called bimetallism, or the use of a joint standard.f What is bi- 1 ■ • metalliam ? 5. We have seen that bimetallism was the law of the Latin Bimetallism Union of nations, including France, up to 1873, and it was the *hatisthe ° 7 r ' tree coinage laAv of England also up to 1816, when she adopted the gold of silver and standard. At present under the gold standard anyone in law of England can, by law, take a quarter of an ounce j of gold to the f^fg^"^*^ *''^ Mint and get it back coined into a sovereign of that weight ; The present but silver is almost entirely boycotted, so to speak, and rejected ^°^^'!^ ^^^ at the Mint ; thus we are deprived of it as a material for money, tically ex- . , eluded silver excepting small change. Ihe English law now denies to private from coinage, persons. the right of having silver coined at the Mint, and does * Wholesale prices are meant. They are more directly regulated by com; petition and are therefore the true test of the purchasing power of money. The retail prices charged in fashionable shops are rather a test of their customers' character and such prices have probably not fallen on the average) her have school fees, or similar charges, which are regulated by custom rather than by competition. The tables of wholesale prices, carefully collected by various authorities under the name of index numbers, agree wonderfully, and the general result is not disputed, namely, a fall of about 33 per cent, on the average since 1873. ■f The scarcity of money could, no doubt, be relieved and prices raised, if more bank notes were issued on the credit of Government, and if in business there were more book credits, book transfers, and the like, to avoid the use of money. We cannot, however, make any great and permanent increase of paper money or credit in this country, though temporary expansions may be large, nor can such a thing be done quickly in other countries. Paper money and Credit, moreover, simply represent bo much coin and the prices we give for goods are falling because that coin is growing scarcer and more valuable through the insufficiency of gold to meet the world's growing demand for it. Some persons seem to imagine that the gold sovereign is a sort of counter, which would be almost equally good if made of brass. In reality paper money and credits are the counters or representatives of the gold in sovereigns, and the value of the gold fixes the value of all the counters then in use. J More exactly i23'27 grains standard gold. not even give them a right to pay with it any debt exceeding forty shillings, though all debts, large and small, may be law- fully paid in gold coin. The supply of silver coin is, in fact, dependent on the small quantities which Government chooses Important occasionally to coin. Under bimetallism, as above stated, silver bim?tamsiii°* would be as freely coined as gold for anyone bringing it to the Mint and all debts would be payable in either coin at the debtor's choice. Immediate 6. Let us see what would happen if bimetallism were adopted. bimetallism Silver, as we have said, is not freely received for coinage at the Mints and is consequently so cheap that one can buy for seven or eight pence enough of it in the uncoined state to make a shilling. Silver, therefore, in greater abundance than gold, would be taken to the Mint on its first opening under bimetallism and this demand for silver would at once raise its value, so that the silver required for coining twenty shillings would be always worth twenty shillings, because anyone could get the twenty shillings at the Mint and no one would take less than he could The metal iu get. Through bimetallism we would thus have the free coinage oo^s^miuld^'^ of silver, in addition to the present free coinage of gold, and our become eqnal silver coins would be equal in value to the metal of which they to the coins in . it- jt value. are made, 3ust as our gold coins are at present.* 7. No one seriously disputes the fact just stated, that under Silver coins bimetallism the uncoined silver required for coining a shilling remain^rat^ would always be worth a shilling, just as the gold in a sovereign present, equal jg jiQ-yy -vyorth a sovereign, but some persons deny that the correspond- twenty silver shillings would always be worth a gold sovereign. ing gold coins. * Some people find it hard to believe that gold can vary in value while 123 grains of it always fetch a sovereign at the Mint. The value of gold reckoned in gold money cannot change, for the sovereign can always be melted into gold, or the gold minted into a sovereign free of cost ; but while these two things, the coin and the metal, must have always one and the same value, that value may be very changeable in the sense of purchasing power over goods, as we have seen in the case of gold. Silver on the other hand, contrary to popular belief, has been very steady in average purchasing power over goods. In fact, silver and goods stand towards one another in purchasing power just as they did before, while gold has moved away from both silver and goods in equal degree. I do not refer to English silver coins, which are mere representatives of gold. The shilling, for instance, contains only about sevenpence worth of silver, and represents a, twentieth part of the gold iu a sovereign. They say that silver^ being now very abundant and cheap, would be coined in such quantities under bimetallism that twenty shillings would be worth less than a sovereign. This fear is Reason for unreasonable. The slightest tendency of either metal to become cheaper than the legal rate of one sovereign for twenty shillings would be instantly corrected by an increased coinage demand for the more abundant metal, and by a corresponding neglect of the scarcer metal. This is the peculiar self-regulating prin- ciple of bimetallism, which throws an increased demand on whichever of the two metals happens, for the time being, to be most abundant and so causes them, coined or uncoined, to exchange for one another always at the same rate fixed by law. 8. This fixity of value between gold and silver being world- Fixity of wide, would be of enormous benefit in our trade with silver- lold^and^^^" using countries, which include half * the world's population, silver nnder . . ' . . bimetallism Ihey reckon in 'silver coin, we reckon in gold, and until we would abolish restore bimetallism or they adopt a gold standard we never can varying^ex-° be sure how many foreign silver coins will be equal in value to change in our our gold sovereign. Since bimetallism was abolished, in 1873, silver the rate has been constantly changing, sometimes one or two per cent, in a day, to the great embarrassment of our trade with those countries and of India's treasury payments. 9. For reasons hereafter explained, it is not proposed to Necessary to re-establish bimetallism unless a number of nations join therein. i^et^eu^Kold One important point in their agreement would be that all should and silver in T ° . all bimetallic adopt the same legal ratet .(ratio) between gold and silver, countries. because, if a gold coin could be exchanged for a heavier weight of silver coins in one country than in another, gold would be sent there to buy up the heavy silver coins. This very Neglect of mistake was made at the English Mint before the year 1698, so gayeTi^d'^ gold came from other countries to buy up the heavy English name to bi- silver coins and in spite of Sir Isaac Newton's teaching to the and favoured . — — the use of * Not reckoning India. gold alone. t The limits of this pamphlet leave no space for enquiring whether the pro- portion chosen by the Latin Union, viz., 15i of silver by weight to 1 of gold, should be adopted by a bimetallic union of nations. The British sovereign would, of course, be unaltered ; but silver coins might be slightly increased in weight, keeping of course exactly the same value us before, that is to say the sovereign would always be equal to 20 shillings. The particular ratio to be adopted is, however, a matter of detail, not affecting the principles of bimetallism. 8 contrary* people ignorantlyt supposed that tlie gold came of itself through greater suitability; consequently it was pro- nounced to be the fittest for coinage and was decreed^ in 1816, to be alone fit for unlimited coinage, silver being banished, except, as above stated, the small quantities occasionally coined for payments under forty shillings. Bimetallism till recent times existed in England and every civilized conntry. trhe Latin nnion of nations for bimetallism. 10. Most people will be surprised to hear that bimetallism was in force for many centuries, not only in England, but generally speaking throughout the world ; also that it suc- ceeded, just in so far as the different nations happened to adopt something like one and the same rate between gold and silver. They were ignorant of this necessary principle so clearly stated by Sir Isaac Newton. In America the United States had bimetallism till the Civil War, when they abandoned all coinage and adopted paper money, after which, in 1873, they returned to coin, making gold their standard and limiting the coinage and legal tender of silver, as England does. They have not yet returned to bimetallic free coinage, though they have greatly increased their silver coinage and have made it legal for all payments. In Europe^ as above stated, the group of nations forming the Latin Union, in 1865, agreed on strict, well- regulated bimetallism, which had been commenced by Prance about the year 1800, and they maintained it with the greatest benefit to themselves and the whole world till 1873. Their Mints were practically open to the world. When England, for instance, had superfluous silver, she got rid of it by sending it to Erance for coinage, and using those silver coins in France to buyj gold at the bimetallic rate. Similarly, when gold was abundant after the Australian discoveries, it was sent tO France for coinage, and silver being scarce relatively to gold, was'bought in France with the proceeds. * " The Silver Question and the Gold Question," by Robert Barclay, p. 169. (Effingham Wilson) . + In deciding upon a gold standard about the year 1816 the English authorities, especially Lord Liverpool, were ignorant of these facts, as Sir D. Barbour has shown, by recently discovered records— See " Silver and Gold," p. Ill, by Sir G. Molesworth. London, Effingham Wilson, 1891. t For the most part indirectly, through trade arrangements, 11. France and the other bimetallic nations, however, did not care to continue in this way the coinage of gold and silver, for the convenience of other nations too selfish to join her in the union, so they restricted the free coinage of silver in 1873. ^"- ^^^^ ^* _,, . . ceased to coin ihe immediate cause was the adoption of a gold coinage by silver freely. Germany and her rejection of silver, which was thus thrown upon the French Mint in immense quantity. Prom that day com- Conse- menced the fall of prices, and commercial depression in all lands of" discarding which, like England, have rejected silver. These consequences ^'i^^^"- were predicted at the time by Mr. Ernest Seyd, a far seeing political economist, in the following remarkable words : — ." It is a great mistake to suppose that the adoption of the " gold valuation by other States besides England will be " beneficial. It will only lead to the destruction of the " monetary equilibrium hitherto existing, and cause a fall in " the value of silver, from which England's trade and the " Indian silver valuation will sufEei* more than all other " interests, grievous as the general decline of prosperity all " over the world will be. The strong doctrinarianism existing " in England, as regards the gold valuation, is so blind that " when the time of depression sets in there will be this " special feature : The economical authorities of the country "' will refuse to listen to the cause here foreshadowed ; every " possible attempt will be made to prove that the decline " of commerce is due to all sorts of causes and irreconcilable " matters j the workman and his strikes will be the first " convenient target ; then speculating and over-trading will " have their turn .... many other allegations will be " made, totally irrelevant to the real issue, but satisfactory to " the moralising " tendency of , financial writers. The great " danger of the time will then be that, among all this " confusion and strife, England's supremacy in commerce and " manufactures may go backwards to an extent which cannot '' be redressed, when the real cause becomes recognised and the " natural remedy is applied." 12. As an instance of the prosperity which has always instance of resulted from an increase of metallic money, we may consider P''°^P^''' y A 3 10 oansed by fresh supply of metallio money. what followed the Australian gold discoveries*. I shall quote the historian Alison, who describes the previous distress and subsequent prosperity as follows : — " The annual supply of gold and silver for the use of the " globe was, by these discoveries, suddenly increased from an " average of £10,000,000 to one of £35,000,000 " The era of a contracted currency, and consequent low prices " and general misery, interrupted by passing gleams of " prosperity, was at an end. Prices rose rapidly, and rose " steadily ; wages advanced in a similar proportion ; exports " and imports enormously increased, while crime and misery " as rapidly diminished; emigration itself which had reached " (in 1852) 368,000 persons a year, sank to little more than " half that amount. Wheat rose from 40s. to 55s. and 60s. ; " but the wages of labour advanced in nearly as great a " proportion } they were found to be about 30 per cent. " higher on an average than they had been five years before. " In Ireland the change was still greater, and probably " unequalled in so short a time in the annals of history. " Wages of country labour rose from 4d. a day to Is. 6d. or " 2s. ; convicted crime sank nearly a half • and the increased " growth of cereal crops under the genial influences of these " advanced prices was for some years as rapid as its previous " decline since 1846 had been. At the same time, decisive " evidence was afforded that all this sudden burst of prosperity " was the result of the expanded currency, and by no " means of free trade, in the fact that it did not appear " till the gold discoveries came into operation ; and then it " was fully as great in the protected as in the free trade " States." Objections answered. 13. I shall now proceed to discuss separately, in the form of question and answer, the chief objections urged against bimetallism. Can the values of gold 14. Objection. — Gold and silver are merchandise, not differing essentially from any other two articles, and the value of each * The quantity already in the possession of mankind was prpbably not much above £500,000,000, and this sum was nearly doubled between 1851 and 187X. — Bastable, Encyclopaedia Britannica, article, " Money." 11 depends on the cost of productionj not on any possible law ; so it and silver be is impossible for Government to make the value of the gold in a faw7 ^ sovereign equal to that of the silver in twenty shillings. Supply and J -YTT 1 .-iiT 11. . 1 n demand fix A.nswer.— \\e have partially discussed tins point already the values of (see § 7). Neither cost of production nor anything else can affect fi^^J^^ the value of gold or silver without altering the supply of these How gold and metals or the demand for them * We have therefore to enquire foom'orchnary whether supply and demand are more under the control of S°°'^^- Government in the case of gold and silver than of other articles. Governments Demand is certainly controllable by Grovernment, as we have enormously partially explained (see § 7), and supply is, by the nature of 'j^g^^^^^f^r things, very slowly changeable if we reckon existing stocks goldand silver together with yearly production. closing^the °' First let us consider demand. Government can influence the ^™*" demand enormously, by declaring that gold or silver, or both of them, shall be material for money. So great is this coinage demand, that it far exceeds all industrial demands, and if it were stopped gold and silver might not have a quarter of their present value. Now if we had bimetallism, that is free coinage of both Under bi- luetals, with liberty to the debtor of paying in either metal, he tendency of would use whichever of the two metals had a tendency to be the to*become'°^^ cheapest means of paying the debt ; for instance, if uncoined cheaper than silver, enough to coin a little more than twenty shillings, could instantly be bought for a sovereign, so much would be bought for coinage increased ^ that this demand would instantly raise the value of silver to the coinage demand for level fixed by law, answering to twenty shillings for a sovereign, that metal. While silver would be thus rising in value, gold would be, as it were, coming down to meet it half-way, because the increased coinage of silver would to some extent diminish the demand Also by for gold, and the value of gold. In this way the demand ^em'and for for gold and silver can be regulated bv Government throusrh *lic other f . a J o ^jgjg^] so that a bimetallic law. For the purpose of clear explanation, I neither metal have used language implying that one metal might be a c^elper^ cheaper means of paying a debt than the other metal. In means of ... . . • paymg debt reality this did not occur in any bimetallic country, nor, as than the ■ other. * " Cost of production Tvould have no effect upon value, if it could have none on supply." — J. S. Mill, " Pol. Economy," Vol. II., cap. 9. Some mines can turn out gold and silver at less than half the market price, still no one sells below the mai-ket price, which is fixed by the world's demand, competing for the world's supply. 12 we have shown, could it occur. The slightest tendency in either metal to become less valuable than the other would be shown simply by increased abundance of one metal, and this abundance would be immediately checked by the coinage demand falling more heavily, as we have explained, on the more abundant metal. Further After demand we must now consider supply, which is the bifweTn''^ only other immediate cause of value, and we shall find that precious thouffh Government can influence the demand for gold and metals and ° ■ n tx ii, 1 other goods, silver by coinage laws, it cannot practically alter tne supply. The supply rpj^g supplv of these metals, including existing stocks, remains by of gold and ^'^ •> ° n • i. j j silver, inciud- nature SO steady that Government is able, by altering the demand. 8tocks!isc"oni- alone, to alter the values as explained. The steadiness of supply ItllT'^^^ comes about in the following way. Ordinary goods are consumed Ordinary within a year or two of their production, but gold and silver being ronsumedT"" Very indestructible, have accumulated* to an extent, probably fuvtr^being ^^^J ^^^^ greater than the annual production; consequently more per- annual supplies have very little effect on existing stocks, which we manent, aoou- ^'^ .it ». mulate. may call existing supplies. Annual supplies, moreover, cannot Gold and usually be increased rapidly and at the same time profitably. silver are Bel- i- •> jj-i.- dom produced Some mines fail while new ones are discovered, and it is iT^'e^qulntity generally difficult to work a mine rapidly. It is thus evident that at a profit, the peculiar circumstances^ of gold and silver render it possible ment ran in"' for Government to regulate their values, by acting on demand in directly re- presence of enormous existing supplies, which cannot be rapidly gulate values ^ o j. i i j • of gold and diminished by consumption, or increased by annual production. This explanation of the principles of bimetallism shows its possibility, but the best and highest proof is the actual success- Power cf f*^! practice of the system which continued in England with Government g^^g intermission for centuries, till 1816, and on the Continents to regulate values of gold of Europe and America till about 1873. Some persons have said proved by ac- that even under bimetallism, during the Latin Union^ the tuaiexpe- values of gold and silver were not steady to one another. This mistaken idea refers to the slight variations of value between coined and uncoined metal, such as continually occur * The quantity of gold doing duty as money in the world may be estimated at about £960,000,000, and of silver at about £"510,000,000. The annual supply of gold is about £27,000,000, and of silver about the same. In these estimates silver is taken at its present market rate, thirty-eight pence an ounce. Under bimetallism the legal rate was about sixty pence. rience. 13 even nowadays in London, because bars of gold are generally more convenient than coined gold for export. Under bimetallism, as in France from 1803 till 1873, there never was any difference of value between a sum of money in gold coin and the same in silver coin. The Royal Commission of 1886 unanimously sup- ported* this, the main contention of the bimetallists, in the following terms : — " Notwithstanding the changes in the produc- Regulating " tion and use of the precious metals, it (bimetallism) kept the Gb'^ernmenfc " market price of silver approximately steady at the ratio fixed unanimously ff 1, 1 1 , affirmed by bylaw between them, namely 15| to 1. We think that in the Royal " any conditions fairly to be contemplated in the future, so far of°i8™8!^'°'^ " as we can forecast from the experience of the past, a stable " ratio might be maintained if the nations we have alluded to " were to accept, and strictly adhere to, bimetallism at the " suggested ratio. Apprehensions have been expressed that " if a bimetallic system were adopted gold would gradually " disappear from circulation. If, however, the arrangement in- " eluded all the principal commercial nations, we do not think " there would be any serious danger of such a result." Few who have studied the subject share that doubt. The ratio has been maintained by the Latin Union in times of extreme trial, when silver was produced to threefold the value of gold, and afterwards gold to threefold the value of silver. At present the values produced are about equal, being considerably under £30j000,000t per annum for each metal at market rates. Even if it were impossible to maintain the ratio, there would be no insuperable difficulty in abandoning bimetallism and returning to a single metal. Almost the whole of Europe and the United States have actually made this change from bimetallism to a gold standard and have found less trouble in the act of changing than in the scarcity of money under the system to which they have changed. 15. Objection. — The rise of prices under bimetallism might be great and troublesome through the increase of silver money. a very great Ansioer. — Bimetallism could not raise prices to anything near ^^^^ °* prices * Two out of the twelve Commissioners added the note, " We donht whether any given ratio could be permanently maintained." t Probably £26,000,000 or £27,000,000. A large part of this is used in the arts. 14 impossible the level of ]873j under present circumstances. The level of m^etaiiism that year was 50 per cent, higher than present rates; that is to worinoes" ^^J> ^^6 '^^^^ ^°^ buy on the average goods which cost £100 not possess in 1873. The impossibility of raising prices again to that point metallic . ■ i tcr, i. money may be seen if we consider that to raise prices by 50 per cent. thiTpnrpo^se. S^^^ ^^^g Countries would have to increase metallic money by 50 per cent.j and the quantity required would be £1-80^000^000,* howeTCT^'bf ' ^ ^^^ ^°* obtainable in silver from silver using countries, for it some rise due exceeds the total of their silver money, estimated to be no more coming from than about £400,000,000 on the old high valuation of silver. countrSs!"^"^ Some of this silver would no doubt come, because through bimetalHsm it would have a higher value than before, and thus an unusual profit could be made by exporting goods to silver- money countries for payment in silver. This extraordinary movement would, of course, cease as soon as prices in those countries were sufficiently reduced by the departure of their silver. America has ]6. Objection. — America is pressing for bimetallism merely spare and so to get rid of her surplus stock of cheap silver, with which we Whenus by ^O'^ld be flooded. sending much Answer. — America has no surplus stock of silver. She has a great quantity of silver,t but it is all used, either in circulation or to secure notes which are in circulation. She cannot, however, go on at the present rate increasing her silver coinage,J other- wise there may be no use for gold, which is leaving her. A bimetallic union of nations would enable her to keep both gold and silver, as we have seen ; but, if a union cannot be arranged, she must soon either cease to coin silver and join in the disastrous scramble for gold, or else abandon gold and rely on a * This is 50 per cent, of £960,000,000 the gold money now in gold using countries. t The United States money system differs from bimetallism, in limiting the monetary use of silver. The quantity permitted is, however, very large — about 54,000,000 ounces a year being bought by Government — and both silver and gold are legal tender for all payments. In these two particulars the system differs from that of England, where silver is coined in small quantities, and is legal tender up to forty shillings only. J She has now (June, 1893) circulating or iu deposit nearly as much gold as silver money, viz., about Jei50,000,000 of each, if silver be valued at 38 pence an ounce, the market rate. As coin the silver amounts to £220,000,000. 15 silver currency, as India does. In no case would America's stocks of silver leave her, for she needs all slie has. Under bimetallism neither gold nor silver could flood any country, in the sense of going there without being wanted, for the one metal would be just as serviceable as the other, and practically a nation could have whichever of the two it might choose for ordinary use. (See §§ 10 and 20.) As regards the motives of America in this matter, her chief wish is for Motives of steady prices under a bimetallic union of nations ; and the dMirkr<^ ^" fact that this would raise the value of silver is of comparatively bimetallism, small moment to so rich* a country where even the hay crop is many times more valuable than the output of silver. The strength of the bimetallic movement in America comes not from the influence of silver miners or speculators, but from a general public belief that the legislation of recent years has unjustly given to the owners of money in all gold using countries an artificially increased command over other people's labour and goods, without increasing those people's ability to labour or to produce goods. This, in fact, is seen to be the meaning of low prices, when they are caused, not by a prosperous increase of goods, but by the tyrannous power given to money through laws which have made it scarce. 17. Objection. — Bimetallism would unfairly allow payment in silver of a debt promised in gold. Answer. — Under bimetallism anybody could make bargains Under bi. in gold just as at present, but no one would gain thereby, people could because under bimetallism twenty silver shillings would always ^^^1%'^?'^ be the equivalent of a sovereign, as they are now. chose. 18. Ohjection.^^The prospect of bimetallism would frighten The prospect people. They would then call in debts and hoard gold, for fear Hgm™ u^' of being paid in silver. excite no _ _ dangerous Answer. — In America and on the Continent of Europe people fears. are accustomed to the unlimited use of silver, and the prospect Supplies of of bimetallism would allow them safely to use more of it instead ^° ^^°^^ * It is not generally known that the United States produce more than any- other country, not only of silver, but also gold, ^ iron, copper, wheat, timber, cotton, &o. 16 to meet all of gold, SO that gold could be sent to England in sufficient bTset^ree. quantity to meet all fears. I do not even tMnk that suoh fears Probably would be widespread. Bimetallism would be introduced only- there wonld -IP! 1 m ■ J. beUttlepublio after long notice, and by the wish ot the people, a sumcient a'^etfare de- number of whom would understand, as all Lancashire already manded by a does, that the result would be only a moderate and general rise public ' ^ , . „ majority. of prices, bringing a revival of trade. In such expectation* The expected people certainly do not hoard money. They do just the opposite. ns6 or pnc6s --in -t -<-* would expand They invest it in business to meet the revival of trade. Debts Btimidate ^^ s^^ch times are called in for the purpose of more profitable inyeatment re-investment, and no debt is called in if the creditor comes to rather than hoarding. terms with the debtor for a higher rate of interest. All this is Bimetallism jjq^ ^ calamity, as obieotors seem to think. It is the usual m operation •' ' ■' must neces- preparation for active trade. Thus far I have discussed what prosperity.' "w^e may expect on the announcement of bimetallism before its actual introduction. Afterwards there would be steadier prices and more settled prosperity. 19. Objection. — Gold cannot be scarce now, when money can be borrowed from the Bank of England at a low rate of interest. Money is now Answer. — Money can now be borrowed at a very low rate of cheap to interest, because there is not much profitable employment for it, borrow, but ' r i. j ' has high pnr- since industry and trade have been crippled by the scarcity of over goods, gold causing a fall of prices. There is, in fact, more money than can be profitably employed on loan, and at the same time there is less than the quantity needed to keep up prices. This apparent contradiction of facts is a common occurrence, well understood by political economists. Objection. — Average prices have fallen since 1873, not because gold is scarcer, but because goods are more plentiful through improved manufacture and transport. Prices are low, Answer. — Improved manufacture failed to lower average improved prices between 1850 and 1873, though there were more improve- mannfactnre, ments then than since 1873. There was actually a great rise of scarcity of prices between 1850 and 1873. No one doubts that 1,he rise was caused by the enormously increased gold supply from Australia (see § 14), and there is reason in such a belief. Average prices are more controlled by the quantity of money than by improved * " An expected rise of prices causes expansion of credit." — J. S.Mill, "Political Economy," Vol. II., p. 53. 17 manufacture of goods^ because money affects all prices^ and improvements only a few at a time. We must conclude that The great im, just as abundance of money raised average prices, in spite of manXctures improved manufacture before 1873, so relative scarcity of money bff"''® '^'^^ _ ' •' J did not pre- smce 1873, with fewer improvements, has lowered prices. vent a rise of If the fall of prices were caused by improved manufacture increasing our goods, we would now have prosperity and not depression through this abundance. It is thus easy to see that the fall of prices has come from no general improvement or abundance of anything, but from a scarcity of money. No doubt part of the fall in some cases, such as wheat and cattle, may be due to increased abundance of these articles, but the whole cannot be so explained. 20. Objection. — Silver is too bulky and heavy for general use. Answer. — Under bimetallism gold with notes and small silver Silver wonld would be used for the pocket, just as they are now, and silver as handled well as gold would be kept as a reserve in the great national ^°^^^ l'^" banks. Outside these banks no alteration in the money system than it is now. would be visible under bimetallism. India and America, with immense territories, find no such difficulty in the use of silver ; nor did the Latin Union. Much less would England with her short distances and many railways. Eailways and shippers charge freight on gold and silver by valne, not by weight, so for transport there can be little room to choose between the metals. 21. Objection. — Most nations owe debts payable to England in gold money and she gains by the growing scarcity of gold, which practically increases the amount of the debt, as the sovereign buys more goods than it did under the old bimetallic laws. Answer. — It is dishonest to continue the modern monetary Dishonesty of law, with the knowledge that it is every year artificiallv in- gj^" ^ from creasing the . value of the coin in which the debt is counted, free coinage. Besides, the oppressed debtor may become insolvent and pay nothing at all, as some nations and many people have done, so that the system is in the end a losing one. Take, for example, the question of money lent on the security of land and houses. 18 England's opposition prevents a bimetallic union of nations. Public 'de- claration of this would bring pressure upon England. Those loans are in growing discredit throughout all gold money countries of the world. Even in the City of London there has been a heavy fall of house property. Look at the national debts of the world. They cannot be easily borne much longer if the burthen is still further increased by the artificial scarcity and higher value of money. Spain^ Italy and Mexico may soon give their creditors practical warning of this. 22. Objection. — The nations recently (.1892) represented in conference at Brussels have not agreed on bimetallism. Answer. — The opponents of bimetallism ignore the fact that all civilized nations would accept bimetallism if England would do so, and not otherwise, because these nations think it un- desirable to form a bimetallic union of less strength. This has been publicly stated by Sir Guilford Molesworth, who is one of England's delegates in the Brussels Conference. It was unfor- tunate that the assembled Powers did not present to England a joint proposal to adopt bimetallism on condition of her joining therein. Her refusal of the offer would be a formal proclama- tion that she alone stands in the way of reform. Observance of treaties for bimetallism, ments, and the like. Prices steadier under bi- metallism. 23. Objection. — The united nations might not faithfully keep a treaty for bimetallism. Answer. — They keep treaties of commerce, postal agree- Moreover, no one has ever shown what a nation could gain by leaving a bimetallic union. What it would lose is evident. England has actually .acknowledged the possibility and advantage of treaties about coinage, by proposing at the International Conference to conclude such treaties, though not for pure bimetallism. 24. Objection. — Bj freely using both gold and silver as coin we would have the prices of goods subject to the changes of two metals instead of one. Answer. — The changes would be more in number, but, on the average less in amount, for the changes of gold in one direction would commonly balance those of silver in another, just like the changes in a man's wealth if he invests it in two different undertakings instead of one. All systems of insurance depend on this principle. At present England has, so to speak, all 19 Her eggs in one basket^ by depending on the supply of gold alone. Besides thisj the united volume of gold and silver under bimetallism would form a reserve so vast as to be little affected by changes of supply or use. 25. Objection. — England should continue independent of other nations in her money system and is strong enough to do so. Answer. — She is not independent in money matters^ nor is Financial her financial position so strong as is commonly believed.* dependOToe The prices of all goodSj for instance, in this country are depen- °^ England. dent on the supply of gold money and this is largely controlled by the United States and by Continental G-overnments, which can create an increased scarcity of gold at will. The President of the United States, for example, has legal power to issue a gold loan at any time, and he may do so, with the result perhaps of ruinous panic in this country and a run upon the banks. In such a crisis, as Mr. Goschent says, "Bank notes are of no " sufficient avail. "What you want is cash — gold which will pay " your liabilities in foreign countries ; and the printing press at a " moment of this kind is a danger, not a resource." Where then is the gold to be had ? Certainly not in England. Her banks keep nearly all their gold at the Bank of England — a total of less than 30 millions ; so inadequate in the face of liabilities payable on demand to the amount of 900 millions, that the greatest anxiety is now felt, and proposals are actually on foot for keeping reserves independent of the Bank of England. That Bank of Eng- bank stands, as regards coin, only fifth among European banks, ^^j^ among havinar no more than about 26 millions of gold, while the Bank European ° ... . . banks m of France has 68 millions of gold in addition to 51 millions of reserve silver, not to mention its lower and steadier rate for loans. People may say our credit will pull us through, as it has done in past time. In past time, up to 1873, we should remember the Con- England cau- tinent had bimetallism, giving us the practical right of getting gold to meet either silver or gold at short notice. We have no such right ^j^^beforr''^ now, and our credit will not create gold, which does not exist in 18?3. * gee a remarkable pamphlet by Mr. J. M. Douglas. (Effingbam Wilson & Co., Royal Exchange, London, 1892.) t January, 1891. 20 Serious re- sults for England if the United States adopt silver cur- rency. A selfish monetary policy may cause other nations to quarrel with large available sums outside the great European State banks and treasuries. Germany and Russia practically refuse to lend large sums in gold, and tlie Bank of France has power to pay either in silver or gold at choice, both being legal tender to any amount. It was only as a matter of special grace that we obtained from that bank and from Russia 4^ millions during the Baring failure and thus English bankers and their customers escaped, as Mr. Goschen told them, "by tte skin of their teeth," from a catastrophe which might have transferred ''the business of this " country to other European centres." When Englishmen say, " we can always get gold if we want it," thej- forget the rate of interest, which in times of pressure is ruinous. In another way the delusion that England's money system is independent of other nations' action may before long be exposed, if the United States, in company with certain other nations, adopt a silver standard with free coinage of that metal, securing thereby a steady basis of exchange with one another and partially shutting out gold money countries from their com- merce. As an immediate consequence Canada would have to do the same thing,* because of her close commercial contact with the United States, whose coinage she at present uses, though sove* reigns are legal tender, together with gold dollars of the States. Our loss would be enormous, for a great part of our exports already go to silver-using countries. It is thus evident that every nation is dependent on the laws made by other nations in regard to money. This important fact, however, has not been generally understood till quite lately, and so its effect on international politics is only beginning to attract attention. It is easy to see that, if the policy of England in refusing to join a bimetallic union of nations be regarded by them as selfish and injurious, they may act accord- ingly towards her, and opportunities for effective Unfriendliness multiply every year both in peace and War. If, for instance, the United States assume control of the projected Nicaragua Oanal, very serious disputes may arise. 28. Objection. — -There are remedies better than bimetallism for present evils. * For a similar reason if the United States adopt, as is pi'obablo, the highly desirable metric system of weights and measures, Canada must follow. 21 Answer. — In considering a remedyj we must first ask whether Proposed it will meet all or any of our present difiiculties, whioli are chiefly ^"^ '^' ' (1) artificially depressed prices^ (2) increased burthen o£ debts and fixed charges^ (3) uncertainty as to the future course of prices and (4) the dislocation of money exchanges between countries using gold and those using silver. It h,as been proposed to do on a small scale what the United States are doings that is to coin more silver to a limited extent. Such devices stay the fall of prices a little, but the uncertainty both of prices and of exchange with other countries continues. The United States may cease to coin silver and, if so, they may require gold in addition to the large supply of their own mines. We shall certainly get no more gold from that quarter unless silver is coined there in place of gold. The result will be an increased struggle for gold in Europe with a further fall of prices for all goods j in fact, an aggravation of the depression which now prevails. Since the first proof sheets of this pamphlet wore sent to press England has decided to stop the free coinage of rupees in India so that they may, through scarcity, rise in value above the silver contained in them till they are worth each the fifteenth part of a sovereign. The gold sovereign will thus become the Eesult of the standard coin of India and the rupee a mere token or repre- ^'^°?''* ^ ^ decision to sentative of gold. There will then no longer be uncertainty in place India the exchange of money between India and gold using countries, standard. moreover, the payments duo from the Indian Government to England can now be made with a smaller number of rupees at the new artificial value and interest on the public debt can be reduced. These are three great advantages of the gold standard for India, but with them must come also the evils now felt in gold countries, and these evils will come in an aggravated degree so far as India joins in the scramble for gold.* The Indian Government desired a union of nations for bimetallism but England refused, so the gold standard was chosen for India as the least injurious alternative. 29. I shall conclude with a few words on public opinion and Public opinion literature in relation to bimetallism. A Royal Commission of turning ^ * See reprint of a lecture delivered at St. James's Hall, London, by Mr. A. Cotterell Tupp, 1893. 22 towards bimetallism. Banters, money- lenders and the London Press, are the chief opponents of bimetallism. The London Press. Literature. twelve eminent persons reported unanimously, in 1888, that it was possible to maintain a fixed value between gold and silver through bimetallism, though six of them considered the system needless, objectionable or premature, and two of the six doubted whether the fixity between gold and silver would be permanent. One of the six, Mr. Leonard Courtney, has quite lately withdrawn his objections and now advocates bimetallism. The cause has been eagerly taken up by Lan- cashire, the agricultural classes, and the general body of wage earners, under the guidance of distinguished men, in- cluding members of every political party and ex-governors of the Bank of England. It is supported also by the University professors of political economy, so that final success is assured, notwithstanding occasional obstruction through the supposed necessities of party politics ; for instance, a large number of bimetallists in the House of Commons, on the 28th February last, felt themselves obliged for the moment to withhold support from a resolution favouring a reassembly of the Brussels Monetary Conference. Australia also has taken up the cause of bi- metallism, and Canada will doubtless soon follow. 30. The chief active opponents of bimetallism are the money- lending classes, including many bankers. They lose in the end by the ruin of manufactures, labour and commerce, but are not yet themselves in distress, and there are gains to be made in the present struggle by clever financiers at the public expense. Mr. Goschen has done good service by appealing to the self- interest of these classes, and warning them of great national disaster, unless our monetary system be reformed, and he has mentioned bimetallism as one means of effectual reform.* The London Press is opposed to bimetallism, as might have been expected. Pew journalists know much of the question, and all of them are largely dependent on the money-lending classes and bankers for information about such matters. 31. The reader who wishes to pursue the subject further, should procure Sir Guilford Molesworth's excellent essay, also a pamphlet by Archbishop Walsh on " The Currency Question and the Irish Land Question," and Mr. Robert Barclay's book * Speech at Leeds in 1881. 23 on " The Silver Question and the G-old Question." The proceedings of the Currency Oommission of 1886 have been conveniently summarised hy Mr. George Howell, M.P., and there are many valuable papers on the question by Mr. Henry Hucks Gribbs, formerly Governor of the Bank of England, by Professor Foxwell, of Cambridge, and Professor Nicholson, of Edinburgh. A great deal of literature is to be found at the offices of the Bimetallic League, 27, Great George Street, Westminster, London, and in Manchester. The "Journal of the Society of Arts" for February, 1893 contains an extremely valuable paper by Mr. J. Barr Robertson, whose experience in different countries should carry great weight. Most of the bimetallic literature is published by Messrs. Effingham Wilson & Co., Royal Exchange, London. 32. The case against bimetallism consists mainly of the Case against- objections which I have already discussed, but monometallists ^™ seldom defend their objections by argument. Their silence has perhaps been explained by Mr. Goschen, Chancellor of the Exchequer, who said, in a reply to a deputation (May 30th, 1889) : — " I am aware that most of the monometallists hold " their views so strongly that many of them, like the most " Orthodox religious people, are unable to give an account of " their belief." Such arguments as the monometallists have, are to be found in Mr. George Howell's abstract of the Currency Commission's Report, and in a collection of essays by Dr. Giffen,* who directs the Board of Trade's statistical work. He propounds the Dr. Giffen'a strange theory that the quantity of money in use does not money." influence prices, but that prices influence the quantity. This view, so far as I know, is contradicted by the highest authority,t and even by Dr. Giffen himself, in a valuable paperj on prices which he has judiciously omitted from the collection in question. In that paper he shows that the scarcity of gold has been the main cause of low prices, * " The Case against Bimetallism," London, 1892. t For instance, J. Stuart Mill (" Pol. Boouomy," Book III., cap. 8, § 4) says, " That an increase of the quantity of money raises prices and a diminution lowers " them, is the most elementary proposition in the theory of currency, and without " it we should have no guide to any of the others." J Bead before the Royal Statistical Society, 1888. THE MONETARY QUESTION Publications on the Bimetallic Question. Barclay's Silver Question and the Gold Question. Third Edition Price 5s. Douglas (William) on the Currency of India, with a Letter oi| Bimetallism. Piice Is. Douglas (John M.) Gold and Silver Honey ; -with Tables of Averaga Prices of Commodities and Silver from 1846 till 1892. Price 6d. Gibbs' and Grenfell's Bimetallic Controversy. A Collection of Pam-I phlots, Papers, &c. By Henry H. Gibbs and Henet E. GrenfkllJ formerly Governors of the Bank of England, Price 5s. DIolesworth (Sir Guildford L.) Silver and Gold ; the Money of thel World. A Prize Essay, Price 6d. Bicardo's Exchange Kemedy. A Proposal to regulate the Indianl Currency with the Aid of the Silver Clause of the Bank Act.l Price Gel. Schmidt's Silver duestion in its Social Aspect. An Enquiry intol the Existing Depression of Trade and the present position of tliel Bimetallic Controversy, By Hermann Schmidt. Price 3s. Schmidt's Indian Currency Danger, A Criticism of the Proposed! Alterations in the Indian Standard. Seyd's Bimetallism in 1886 ; and the Further Fall in Silver, Byl Ernest J. F. Seyd. Price Is, Smith's Bimetallic Question. By S. Smith, Esq., M.P, Price 2s. 6rf. Sowerby's The Indian Bupee Question, and How to Solve It.| Price 6f/. The Silver Currency for South America. Price Is. Van Den Berg's Enquiry into the Influence of Falling Exchanges | on the Prosperity of a Nation. Price Is. What is the Bimetallic Question ? A Plain Explanation. Price 3rf.l A Colloquy on Currency. By H. HucKS Gibbs, formerly Governor of J the Bank of England, London : EFFINGHAM WILSON & Co., Royal Exchange. Vacher & Sons, Printers, 'Westminster. -V. m-^c-^:^ \ A" > A^, ^ 'U '^- %^M m ■»*« Y 1'!W t 'mm -V' ^ --^^1 /^/^ K. 1. •!"