HG 556.W5r"""""""i"-"'™^y llSriS^fuestion, 'Sim lork HuU ffloUcge of Agriculture 3Vt (forncll IniwErBttH atljata, ST. ?. Etbrarg Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013775378 THK SILVER QUESTION GEO. M. WESTON Entered according- to Act of Congress, in the year 1878, by Geo. M, Wesion, in the office of the Librarian of Congress, at Washington. NEW YORK: Published by I. S. HOMANS, 251 Broadway. 1878. TO HON JOHN P. JONES. Nobody has ever more completely grasped, or more perspicuously pointed out, the subtle and pervading influence of the volume of money, by "its effect ^y on prices, upon all the relations of civilized man, and you have shrunk from no sacrifice of time or ease, and have never been diverted by either attacks, ^Y or threats, or seductions, or sophistries, in your efforts to protect property, enterprise and industry from the insidious mischiefs of an unstable, and especi- ,^\ ally of an appreciating, measure of ■\'alues. r In presuming, however, to dedicate this volume to you, I have been less ^^ influenced, either by that admiration of your abilities which I feel in common with all your countrymen, or by the prestige of your success as the leader of l<>il the restoration of silver in the United States, after a controversy which has profoundly fixed the attention of the world, than by the undoubting conviction \{^3 that you have devoted yourself to the labor of financial questions for no per- \ sonal objects, and not even from that ambition which is the last infirmity of ^*^ noble minds, but from the generous ardor of your interest in the welfare of the masses of mankind. The Author. TABLE OF CONTENTS. PACE CHAPTER I. — Nature of the pending question of metallic standards. When it originated and European views in respect to it i CH.\PTER I J. — The new view that the single and s.ime standard in the commercial nations, will not affect the value of monuy. Its unsoundness 13 CHAPTER III. — Views urged in the United States in favor of the ab-, solute superiority of the gold standard, without regard to the ac- tion of Europe ig CHAPTER IV. — Unsoundness of the view, that the adoption of a gold standard by Europe compels its adoption by the United States. . 31 CHAPTER V. — Unsoundness of the view, that the adoption of a gold standard by Europe compels its adoptior^ by the United States, further considered 42 CH.VPTER VI. — History of the demonetization of silver in the United States 52 CHAPTER VII. — The urgent necessity of the free coinage of silver by the United States 61 CHAPTER VIII. — The urgent necessity of the free coinage of silver, further con.sidered 83 CHAPTER IX. — ^Importance of the free coinage of silver to the pro- ducers of exportable agricultural staples g4 CHAPTER X. — The European situation. The International Monetary Conference of August, 1878 .' g8 APPENDED PAPERS. PAPER I. — The legal-tender power of silver is established for ever by the Constitution of the United States. The national bonds may be paid in silver 105 PAPER II. — Disastrous effects of demonetizing silver. Views of French authorities. Views of Hamilton and Jefferson HO PAPER III. — The double standard tends efficiently to steady the rela- tive values of gold and silver I16 V VI fAPER IV. — Fluctuations in the relative value of gold and silver caused by legislation, and not by fluctuations in their relative pro- duction 121 PAPER V. — The increase of gold and silver does not keep pace with the increase of wealth and commerce 125 PAPER VI. — Different standards of money do not obstruct trade be- tween nations 138 PAPER VII. — Disastrous effects of diminishing money and of falling prices. The view of Jevons that silver can be maintained as money by Asia, if Western Europe and the United States reject it. The risk of relying upon, that ". 143 PAPER VIII.— Silver not depreciated 157 PAPER IX. — The house of Baring in favor of the double standard. . . . 160 PAPER X. — Albert Gallatin in favor of the double standard 163 PAPER XI. — Changes from gold to silver under the operation of the double standard 166 PAPER XII. — Of the three standards — of gold and silver combined, of silver alone, and of gold alone — the double standard is the most stable, and the gold standard is the most unstable 174 PAPER XIII. — The secret and fraudulent character of the silver de- monetization of 1873-4 iSi PAPER XIV. — The real object of the gold standard is to make money scarcer and dearer 190 PAPER XV. — It is not true that all European nations are, or ever can be, on the gold standard 196 PAPER XVI. — True nature of the double standard. Unsoundness of Cemuschi's bi-metallic theories 199 PAPER XVII. — The project of creating a silver greenback, by limiting the total coinage of silver dollars 207 PAPER XVIII. — The policy of the United States should be to cheapen gold, not silver 211 PAPER XIX. — The difficulty France will have to obtain gold to sub- stitute for its silver 213 PAPER XX. — Sectional aspects of the silver question 216 PAPAR XXI. — The right of the States to make foreign silver coins a legal tender 2ig TAPER XXII. — The question of a double or single standard a new one for the present generation in the United States. Real nature of a double standard. The concurrent circulation of the metals not important. The alleged necessity of conforming to the Lon- don standard. Making a heavier dollar 223 PAPER XXIII. — The gain to debtors from the restoration of silver, is not merely the difference in the values of gold and silver, but the far more important advantage of reducing the value of gold 236 PAPER XXIV. — The present rule under the double standard, giving to the debtor the option of the metal in which to pay, compared with the proposed, new rules, giving the option to the creditor, or obliging the debtor to pay both metals in some prescribed pro- portion 240 PAPER XXV. — No hope of relief for the industrial depression in this country, until there is silver enough coined to relax the strain put upon the European markets by the accumulation of gold in the United States Treasury 246 PAPER XXVI.— Some British opinions from 1864 to 1876 upon the gold and silver question. The London Economist, Lord Beacons- field, and Mr. Goschen 250 PAPER XXVII. — Steadiness and reliability of the flow of silver to Asia. English errors on that subject 260 INDEX 291 INTRODUCTION. It is an extraordinary fact in the history of the silver question in the United States that, although the further coinage of full legal-tender silver was prohibited, not in terms, but by the necessary effect of one of the sec- tions of the coinage act of Feb. 12, 1873, and, although all the old legal- tender silver coins in existence were reduced to tokens by the Revised Statutes of 1874 the general public were still profoundly ignorant until March, 1876, that silver had been demonetized, and that coin contracts were changed into gold contracts, because there was no longer any silver money wherewith to satisfy them. A distinguished editor in Ohio has stated that the political campaign in that State in the fall of 1875, was fought in every county and township exclusively upon financial issues, and without a. single speaker or writer being apparently aware that it was one of the facts of the situation, that the metallic standard of the United States was no longer coin, but gold. The ignorance of, or inattention to, that dominating fact were the same everywhere. It is not surprising, therefore, that the exposure of the legislation of 1873-4, and of its effect in enhancing the burden of public and private debts, made by the writer in a letter in the Boston Globe of March 2, 1876, (reprinted in this volume,) should have attracted immediate attention in all parts of the country. The subject was at once of capital importance, and to the masses of the people wholly new. The positions of the writer were, of course, approved, or disapproved, according to the different opinions of those who discussed them. On the 14th of March, the Chicago Times, having previously re-published the letter referred to, reviewed it at great length in opposition to the views that the national bonds should be paid in silver. On the i6th of March, the San Francisco Commercial Herald made a full and careful recapit- ulation of the points of the letter, and said of them all that the writer had "clearly made out of his case.'' On the 23d of March, the New York Public published a two-column hostile review of it,_ from the pen of Horace White, who said : — My attention has been drawn to an article, somewhat extensively circulated in the press, attributed to the pen of Mr. Geo. M. Weston, of Boston, on the subject of "Silver as Legal Tender." There is no cash value in Mr. Weston's discovery — not a dime. The supporters of the scheme of an exclusive gold standard were, of course, quick to manifest alarm. Thus the New York Evening Post, on the 1st o) April, said : — ix It would not be strange for the inflationists to attempt to restore the old silver dollar, which was a legal tender up to 1873, and then affirm that all the public debts contracted during the war, which call for " coin," can and should be discharged by the payment of the silver dollars. There are possi- bilities connected with this silver business calculated to excite alarm, as well as to provoke contempt. And again, on the 7th of April, the same paper said : What intelligent and sincere friends of specie payments have feared all along was, that the old silver dollar, which was demonetized by the act of 1873, but which was a full legal tender with gold up to that time, would be restored, and the claim made that every public debt contracted from the out- break of the war up to 1S73 should be paid in silver. These extracts from the Evening Post unmask two things. First, that the city press in the interest of the gold policy had understood all the while what had been effected by the legislation of 1873-4 1 and Second, that they were silent because they saw that the demonetization of silver had everything to fear from exposure and discussion. They knew too well that there were "possibilities connected with the silver hisiness calculated to excite alarm," and they had "feared all along that the old silver dollar would be restored." In fact, they knew very well that the best hope of escaping that conclusion was in the longest possible postponement of the discussion, because the difficulties of restoring the silver dollar multiplied!! with the lapse of time, and with the consequent increase of the number of contracts in respect to which it could be claimed that they had been entered into when there was legally no silver money. This is the explanation of the unbroken silence of what may be called the financial press of the country, in respect to the legislation of 1873-4, until it was forced to speak by the arraignment of that legislation. The writer's letter, printed in the Boston Globe of March 2d, had already been denied publication six days previously in another paper in the same city, on the ground that the editors " did not regard it as expedient to open the dis- cussion of that question." They were in the same category as the editors of the New York Post, who had "feared all along" that somebody would open it. The contest about silver, only temporarily lulled by the law of February 28, 1878, is already revived. The Secretary of the Treasury, who has practically manifested his undiminished enmity to it ever since it was enacted, by coining only the least amount of silver which the law permitted him to coin, threw off all disguise at Toledo on the 26th of August, by proclaiming his "utter hostility" to the whole scope of its provisions, and by demanding that it should be fundamentally changed by such a limit upon the ultimate aggregate of the coinage, as would keep the silver dollar at the same point of artificial and ruinous appreciation to which the gold dollar has been carried. Another member of the Cabinet, the Secretary of the Interior, followed up this attack, and in a spirit even bolder, at Boston on the 28th of October, by demanding that silver should be remanded to the condition of subsidiary money, to which it was reduced by the legislation of 1873-4. The pretext for these renewed attacks upon silver is the increased difference in the market values of the two precious metals, artfully characterized as a fall in silver, when it is clearly a ri^e in gold. The coinage of silver has been kept at the minimum with the effect, if not the intent, of diminishing its gold price, and it is one of the most potent causes of the rise in gold, that the impending resumption of January i, 1879, is to be a gold resumption, not because the laws require a gold resumption, but because there is in fact so little silver money wherewith to make payments. The events of the last nine months have satisfied the friends of the double standard, that the necessities which call for it are too urgent to admit of further delay, and especially of such a protracted delay as is being witnessed under the actual administration of the law of February 28. The commercial, industrial, and agricultural depression, or what is the same thing, the fall in prices, is being distinctly aggravated month by month. It is also now more apparent than it was nine months ago, that other measures of legislation which have been proposed as remedies, cannot be obtained without consider- able delay, and certainly not before the assembUng of Congress under a new President. It is more and more realized that under any legislation which can be antici- pated in respect to the general monetary circulation, existing contracts payable specifically in coin are so numerous, that the free coinage of silver must in all events be of the first importance. In no long time, unless the further execu- tion of the refunding act of 1870 is arrested by Congress, the entire bonded debt of the United States will be by express words payable in coin. But above all, the number is constantly enlarging of those who see that the pending struggle for gold in Europe, which produces the universal fall of prices throughout the commercial world, is caused very largely by the locking up of gold in the United States, in preparation for what is to be substantially a gold resumption, and that the speediest available remedy is to end this gold lock-up by throwing our mints open to silver. If this book shall be of any service in illustrating the urgent importance of the full restoration to silver of its proper power and functions, under the present most critical circumstances, the author will desire no other reward for the labor which he has bestowed upon it. GEO. M. WESTON'. New York, November, 1878. Postscript. — -While this volume has been in press, extraordinary occurrences have taken place, which do not merely revive the silver question but raise also another question, \iz: whether the constitutional power of Congress to fix the standard of metallic money, is to be taken away and usurped by the New York City banks. On the 8th instant, a committee of these banks had a conference at Washington with the Secretary of the Treasury, at which were present the Attorney-General and some minor officials. The result was a plan submitted to these banks on the 12th instant, and agreed to, only one bank representative (Mr. Colgate) objecting. The leading features of it are, first, that the banks will reject silver deposits, except as repayable only in kind ; second, that silver shall not be allowed as clearing-house money except for small fractional sums not exceeding $ 10 ; and third, that in respect to all pay- ments by Government drafts on the New York banks, or on the United States Assistant-Treasurer at New York, they shall be cleared at the clearing-house in New York, at. which a desk is to be assigned to a representative of the United States Treasury. At the bank meeting on the I2th Mr. Colgate ob- jected to the plan, that it " could only mean to fly in the face of Congress and declare the silver dollar, that had been declared a legal tender, to be worth- less." According to the report in the New York Times of the next day : — To this the reply was made that there was not the slightest disposition to depreciate the silver dollar, or to reflect upon the Government, and certainly if it had appeared that there was, the Secretary of the Treasury and the members of the Cabinet who approved of the plan would have detected it and sought to modify the policy to be adopted. Such a reply made by, and in the presence of, the committee of bankers present at the conference of the 8th at Washington, is decisive as to what occurred there. Even more decisive, as far as the Secretary of the Treasury is concerned, is his subsequent engagement, which makes a part of the bank proceedings on the I2th, that a Government representative shall take a seat in a clearing-house, in which silver is rejected as money, and where such a rep- resentative could not sit, except on the basis of a promise that Government drafts on New York, being the bulk of all its drafts, shall be paid in gold, or paper convertible into gold. To do all this, is to change the metallic stand- ard of this country from coin to gold. The New York Tribune said, exult- ingly, on the 13th, that "practically the banks of the City of New York repeal the silver bill." It is as much mistaken as when it said last v,'inter, that "the capital of the country is organized at last and Congress dare not fly in its face" by passing the silver bill. The banks of New York are strong, but they seem much stronger from the standpoint of New York, than from the standpoint of Washington, where they must confront the majesty of the States and people of ii great empire. The time has not yet come when they can re- peal a national law, with, or without, the co-operation of the Treasury Department. It will be for Congress to determine in what way the sove- reign rights of the country shall be vindicated, and what shall be the meas- ure of the punishment for those who have attempted to overthrow laws constitutionally enacted. It would be equally presumptuous and unnecessary to make any suggestions to a body, which, more than any Congress within a generation, has won public confidence by its purity, its high intelligence, and above all, by the unshaken courage with which it has confro:ited the grave and complicated difficulties of the political situation. The Author. November 14, 1878. THE SILVER QUESTION. CHAPTER I. Nature of the pending question of Metallic Standards. When it origitiated, and European views in respect to it. For any useful discussion of the question of metallic stand- ards, now agitating Europe and the United States, it is first of all essential to understand precisely what the question is. And it will aid us in understanding that, to consider the cir- cumstances under which the question was first raised. The " battle of the standards," in the form in which it is now waged, grew out of the California and Australian gold discoveries. It was never heard of before in monetary dis- cussions, and no light is thrown upon it by any writers an- terior to that period. No predicament of facts had existed in any other epoch of the world's history, likely to raise the question, or which did raise it. The almost simultaneous discovery of two such enormous deposits of the precious metals as those in California and Australia, and their imme- diate exploitation by the Engligji-speaking races and with the amplest command of capital, labor and machinery, made a case for which there had been no parallel. If the dis- covery of America, with its great and still unexhausted treasures of gold and silver, now seems to be in some de- gree a parallel fact, it is so only by reason of that illusion which compresses visual objects and past times into a smallness of space, proportioned to the distance we are from them. We think and speak of the outflow of gold and sil- ver from America during the first century after the voyages of Columbus, without reflecting that that century covered three generations of men, and that its duration was one- hundred times as long as the present year which seems, as it passes, to be a protracted period. The rise of prices in Europe, from the metallic discoveries in the New World is one of the great events of history, but it is much more notable in history, than it was sensible to the observation of mankind when it was occurring, because it occurred by slow degrees. Adam Smith says, that no rise of prices in Eng- land was observable until 1575, being eighty-three years after the Atlantic was first crossed and thirty years after the mines of Potosi were opened. America, in the sixteenth cen- tury, was vastly more remote from Europe than it is now, taking the improvements in navigation and the discovery of steam into account, and the population of Europe, from which the ranks of adventurers were to be recruited, was small compared with what it is now. The work of explor- ing for the precious metals proceeded necessarily at a slow rate, and the results, although large, were spread over a long period of time. The case of California and Australia was entirely different in its conditions. No mines of precious metals comparable to theirs in richness and export had been discovered, and the surrounding circumstances made it possible to develop them with a suddenness which produced an effect upon me- tallic prices throughout the world, which may fairly be called immediate and perceptible. Exactly how great the effect was, may not be agreed, but the accepted statement is that it was an augmentation of one-fifth in general prices during rather less than half the term of a generation. And even greater than the actual effect upon prices, was, in the first years of the newly-discovered mines, the apprehended effect, from the general expectation of a much larger out- flow of gold than was in fact realized. It was out of this sudden production of gold, actually unprecedented and enormous, and the anticipated propor- tions of which far exceeded what it actually attained, that the proposal arose to adopt, for the commercial nations, a standard of only one metal, and to be the same metal in all of them. Those who made and supported this proposal, did so upon the ground that, under the new state of facts, the monetary medium of the "Western world could in no other way be preserved from depreciation. The demonetization of one of the metals was therefore advocated, not as an ag- gressive measure, in the direction of contracting money and reducing prices, but as a conservative measure, aiming only to preserve the existing volume of money and the existing range of prices. And it cannot be fairly doubted, that in the early stages of the pending question, there was a good deal in the current facts and still more in the current probabilities and possibilities, to account for views of that kind, without imputing sinister motives to thoSe who main- tained them. Chevalier, whose papers on the subject, printed in 1854-5-6, were collected in the book called The Fall in Gold, which was translated into English by Mr. Cobden, was the earliest and most conspicuous advocate of these views, which he summed up as follows : Those two countries ( California and Australia ) must for yet a long series of years, produce gold in such quantities, and on such conditions, as to render a marked decline in its volume inevitable. It is absolutely certain that so vasl a production should be accompanied with a great reduction in value. Unless, then, we possess a very robust faith in the immo- bility of human affairs, we must regard the fall in the value of gold as an event for which we should prepare without loss of time. In 1857, the German States (then including Austria), where the double-standard system had previously prevailed, demon- etized gold. But it was ascertained, that it would be impossible to over- come the tenacious adherence of the English to the gold standard, and that if the object of placing Europe upon a single standard and of the same metal, could be accomplished at all, it must be aifected by demonetizing, not gold, but silver. This was a change, not in the object aimed at, but only in the method of reaching it. The danger which Chev- alier and his associates apprehended was a too great abund- ance and consequent depreciation of money. The demone- tization of either metal tended to prevent the mischief which they feared, and in about the same degree, inasmuch as the ex- existing values of the two metals were not materially different. The great excess of gold production as compared with silver production between 1850 and i860 was sensibly diminished after the opening of the Nevada silver mines in 1861-2-3, and it was about that time that Chevalier and his associates changed their demand for the demonetization of gold, into a demand for the demonetization of silver. Certainly as early as 1865 this latter demand had become the finally set- tled policy of those doctrinaires, as we find that in the con- vention of that year, of which the Latin Union was the result, Belgium, Switzerland and Italy insisted strenuously upon the gold standard, and only yielded to the inflexible resistance of France. Chevalier had not then been able, nor has he since been able, to shake the support of the double standard by his own countrymen. Chevalier's prediction, that the gold production of Cali- fornia and Australia would continue for "a long series of years" on the scale of 1854-5-6, was not realized by the event. On the .contrary, the gold production of these countries was at its maximum during the five years ending with 1856, and is now only half what Chevalier stated it to be. And fur- thermore, it was denied that the fall in the value of money and rise in prices, which had resulted from this gold pro- duction, had really been very great. It was argued that since the production of the mines had become stationary or declining while the increase of the needs for money was unchecked, the fall in the value of money would soon be recovered, and that the case called for no such extreme and hazardous remedy as the destruction of the money function of one of the money metals. It was also insisted upon, as a material part of the case, that since the new gold discov- eries important countries had suspended specie payments : — Russia in 1857, the United States in 1862, Italy in 1866 and Austria in 1868, while no important country had resumed specie payments. It was argued, that without the large quan- tities of the precious metals furnished to the rest of the world by these suspensions, no fall whatever in the value of metallic money and no rise whatever in the metallic prices of com- modities would have resulted from the new gold. It was argued also, that if any country in suspension, of the import- ance of the United States, should resume coin payments, and still more if the larger part of the countries in suspension should resume coin payments, the supply of the metals, even if neither of them should be demonetized, would be inade- quate to maintain prices unless new mines of extraordinary richness should be discovered. It is not my purpose to review the monetary discussions in Europe during the past twenty-five years, further than is necessary to show precisely what the subject of discussion was, and precisely the grounds upon which it was demanded, £rst, that gold should be demonetized, but finally, that sil- ver should be demonetized, by the commercial nations. The discussion grew out of the great supplies of new gold, and the points of dispute were, whether the monetary standard was threatened with undue enlargement and depreciation, and whether it was an appropriate and safe remedy to de- monetize one of the precious metals. In the arguments, as summed up in the official resume of the doings of the French Monetary Commission of 1869, it was urged in behalf of the gold standard • — There' has been a striking coincidence between the rise of prices and the production of the new mines of gold and silver. The annual production of the two metals, which was only % 80,000,000 in 1847, exceeds now % 200,000,000. It has nearly tripled, and it is easy to see that the real value of the metals has diminished. It is difficult to estimate exactly what the diminution is ; but whatever it may be, it demands the attention of governments, because it affects unfavorably all that portion of the population whose income, remaining nominally the same, undergoes a yearly diminution of pur- chasing power. As governments control the weight and standard of money, they ought, so far as possible, to assure its value. And as it is admitted that the tendency of the metals is to depreciate, this tendency should be arrested by demonetizing one of them. In behalf of the double standard, it was replied as follows : Many economists argue that the precious metals, having become very abundant, have lost ten or fifteen per cent, of their value, and that the situation must be redressed by making money scarcer by demonetizing silver. The new mass of gold, spreading over the whole world, has found employment in stimulating all forms of business, and, as a consequence, the value of gold has fallen very lit- tle. According to Mr. Newmarch, the mass of gold and silver has augmented three per cent, per annum, while the mass of exchanges has augmented more than three per cent, per annum, so that the equilibrium has been maintained. And the present is an especially inopportune time to de- monetize silver, because the annual production of gold has been falling off for several years. It was $ 200,000,000 in 1853, and it is now not more than $140,000,000. What will happen to the civilized world if silver is demonetized and if gold shall then fail ? The Dutch Monetary Commission of 1873, reported in favor of the general adoption of the gold standard, upon the two grounds, first, that there had been a fall i;i the value of the precious metals since 1848, and second, that the production of gold still continued on so great a scale, that if it was forced into greater use by being made the exclus- ive standard, it would not be raised in value, but merely be kept steady. Their language was — In consequence of the very great production of gold, it is not probable, even if gold is more employed as money tlian heretofore, that we shall see the fall in the value of the precious metals, which we have witnessed for twenty-five years, followed as to gold by any permanent rise. Even as late as the end of the year 1875, when the falling of prices was already distinctly perceptible, we find Victor Bonnet, an active Frencli supporter of the views of Cheva- lier, writing in the Journal dcs Economistes for December. 1875, as follows : What we have to fear, is not the scarcity of gold, but a general fall in the value of money ( V abaiseinent getieral de valear du signs tnonetaire ), if we keep both the precious metals as such. England, having been on the single gold standard, legally since 1816 and in fact since 1821, was only an observe^-, but by no means an inattentive or indifferent observer, of these European discussions. England had determined for itself in i8i6, upon considerations essentially local, in favor of a single standard and of gold ; but the question now pre- sented, of a single standard and of the same metal for all commercial nations, was wholly new, and British opinion was divided upon it. Among Englishmen of the money capital and income classes, the line of division was probably very much as it has been observed to be elsewhere ; much the larger portion favoring by instinct and with but little reflection any appreciation of the value of money which gave them a direct and immediate gain, while a smaller and more thoughtful portion deprecated a revolutionary measure, with consequences wide-reaching and impossible to be ac- curately foreseen, and not improbably jeopardizing the se- curity of what they already possessed. An article printed in the Banker s Magazine, in which I collected some of tlie British views adverse to the new scheme, is reprinted in this volume. I will only add to that, the following extract from the Westminster Review of January, 1876, in which its readers are energetically admonished, that the general demonetiza- tion of silver may force a universal repudiation, ruinous to England as a creditor nation : — One of the things involved, we hold to be the probable appreciation of gold ; in other words, an increase of its pur- chasing power ; and that, consequently, unless fresh discov- eries are made, prices have seen their highest for many a long day, and, that debts contracted in gold, will, by reason of this movement, tend to press more heavily on the bor- rowers, and that it will be well if this pressure do not become so intolerable as to suggest^ by way of solution, something like uni- versal repudiation. It is well known that the controlling interest in the Bank of France, including its Governor, M. Rouland, has steadily resisted the scheme of demonetizing silver, from its incep- tion, and has been supported in this by the French Baron Rothschild. We have the authority of Ernest Seyd (Address before the British Society of Arts, April 3, 1878) for saying 8 that the Presidents of the Bank of the Netherlands ( M. Mees) and of the Imperial Bank of Germany, both entertain that view. That was certainly true of M. Mees in 1867, when he declared as a member of the Paris International Confer- ence, that he favored the adoption by each nation of a single standard, but was opposed to the adoption of the same stand- ard by all the nations of Europe, because that would throw one of the metals out of use, whereas in his opinion the monetary wants of Europe required the use of both. In England, and doubtless in France and Germany, the major portion of the money capital and income classes, and of the persons under the control of those classes, have looked more to their immediate gains, than to their possible eventual losses, from the project of silver demonetization. The prevailing English views are expressed in the following opinions of Jacob Behren, a member of the Associated Cham- bers of Commerce, who was examined before the British Royal Commission of 1868 on International Coinage. The general introduction of gold all over the world has been one of the greatest possible blessings to England. Gold would otherwise have been very much reduced in value, and we should have all the gold poured into Eng- land. All the debts owing to us would have been paid in the depreciated currency ; and, therefore, I believe that Eng- land ought to have taken the lead in the introduction of a gol(i currency abroad. We ought to give every facility to its circulation. Later on, and when the question of the metallic standard became a practical one for the United States, British opin- ion in favor of the gold standard for the commercial nations became more decided, and the expression of it much more energetic. England was a large holder of American gov- ernment bonds, and the question of the metallic standard in the United States, involved the question of the metal in which those bonds might be paid. They were authorized by law and on their face expressed to be payable in coin, and might therefore be paid in silver, if the United States should see fit to coin silver. It was mainly this question of the American government bonds, whicli excited the recent angry interest of the English in the question of the monetary me- tallic standard of this country. Great Britain, France and Germany are all creditor coun- tries as respects their financial relations with the rest of the world. Exclusive of the sums due to them secured upon foreign railway and similar works, and exclusive of their holdings of foreign municipal debts, they are computed by Ernest Seyd, in the address referred to above, to be owners of the national debts of other nations to the extent of $ 7,500,000,000, divided as follows : Great Britain, | Si^S©,- 000,000; France, 12,250,000,000; Germany 1 2,000,000,000. Belgium, Holland, Switzerland and Denmark, are also known to be the owners of considerable amounts of such indebtedness, computed by Seyd at $500,000,000 more. It is for the interest of each of these countries, from the national, or aggregate point of view, and looking merely at its interest as a creditor, that the value or purchasing power of money should be maintained, and that it should be in- creased, but not to a degree endangering the solvency of its debtors. The case is different, if we look individually at the persons who make up the population of these countries. In all of them, not excepting the most opulent, there are more debtors than creditors, and the number is still greater of those who, without being either creditors, or debtors, would suffer injury from that stagnation of enterprise and industry which always accompanies a shrinking volume of money. But from the political and social constitution of these countries, their creditor and income classes enjoy a supremacy, different in degree, comparing one country with another, but sufficiently well assured in all of them. They have, therefore, not hesitated to avow, what in this country- it has been thought more prudent to conceal, that the ob- ject of seeking the adoption by all commercial nations of a single standard, and of the same metal, was to prevent the effects apprehended from a too great yield of the gold and silver mines, and to preserve the value of money, pre- vent a rise in prices and wages, and keep intact an existing condition of things satisfactory to themselves. The cffen- siveness of such an avowal consists in this, that it is made by classes who have never interfered to preserve the stability of the value of money, when it has been enhanced by a de- ficient production of the precious metals. This is accepting the chances of mining when in their favor, but asking to have them overruled by legislation when they are adverse. But the creditor and income classes of Europe have never ventured to, avow as the intended object of their recent pol- icy, what has proved to be its actual effect, the diminution of the volume of money relatively to other things, and a consequent fall in prices and wages. They probably con- templated no such results in the first instance, but were misled by exaggerated apprehensions of the probable yield of the California and Australian mines. And furthermore, until the world had had an experience of it, it is not strange that nobody was able to foresee what an enormous new ca- pacity to absorb money in the stimulated activities of com- merce and industry would result from the enormous supplies of it from those new sources. But after this new capacity was abundantly demonstrated, and after the stationary or declining yield of the mines Vv^as plainly seen to be inade- quate to sustain prices, even with the aid of suspensions of specie payments over half of the commercial world, it be- comes very difficult to find apologies for a persistence in the plan of striking down the use of one of the money metals. In fact, it has become so plainly impossible to sustain that plan, on the ground on which it was originated and on which alone it was supported for twenty years, that while the plan itself is adhered to, the old argument in favor of it is substantially abandoned in Europe, and an entirely new view, the exact contrary of the old view, is presented. The school of Chevalier, who advocated the demonetization of si.lver as a measure necessary to prevent the depreciation of metallic money, are forced to be silent by the fact that metallic money instead of being depreciated by the new gold, is appreciating in spite of it. The case calls for a new defense, and the new defenders are found in the school of Jevons, who do not allege that there is any such actual or threatened fact to be dealt with as the depreciation of metallic money, or any need of a remedy which shall act in the direction of appreciating it. They take the altogether different ground, that the demonetization of silver by all the commercial nations, provided it is not pushed too rapidly, will not affect the value of metallic money at all. How tenable this new position of the Jevons school may be, I shall discuss hereafter. It is, at any rate, an absolute aban- donment of the entire theory of the Chevalier school, and as such, is a striking proof of the completeness of the over- throw of that theory by the facts of experience. Summing up what has been so far said, it appears — That the proposition of a single metallic standard and of the same metal in all the commercial nations, or as it is sometimes expressed, in the Western world, was made for the first time in 1854-5-6, and was then something wholly new in the monetary discussions of mankind. That this new proposition grew out of the extraordinary , gold yield of California and Australia, and out of apprehen- sions that that extraordinary yield would be long maintained at the figures attained in 1854-5-6, or probably increased even beyond those figures, and that a fatal depreciation of me- tallic money would result from it. That the measure of the demonetization of one of the metals and of the same metal by all the commercial nations, being a direct and effective measure to appreciate money, was proposed as the appropriate and only possible remedy for this anticipated depreciating effect of the new gold discoveries upon money, supplemented as they were by new silver discoveries soon after i860. That the facts of experience during the twenty years since 1854-5-6, entirely contrary to the predictions of the school of Chevalier, have been, that the aggregate yield of both gold and silver mines has become stationary or declining while the progress of population, of commerce and industry, has so far continued unchecked ; that prices since about 1865 have tended to fall, and during the last half of the period since 1865 have fallen in a marked degree ; and that this fall has taken place while half the Western World has abandoned the use of the metals by suspending specie payments, thus making it certain that a greater fall must take place when- ever any suspending country or countries shall resume such payments. That, in fine, the case to be dealt with by mankind is not that of a tendency in metallic money to depreciate, for which the remedy of demonetization, or any other remedy, need be sought ; but is the entirely contrary case of so marked a tendency of metallic money to appreciate as to have already caused suspensions of specie payment in many and great countries, and as now to threaten, unless extraor- dinary new mines shall be discovered, to bring on a general discussion of the necessity of abandoning the monetary use of gold and silver, and of devising, if that is possible, some suitable substitute for them. That the adoption of a single standard and of the same metal by all commercial nations is no longer advocated in Europe as a measure necessary to counteract a tendency, now admitted not to exist, of metallic money to depreciate. That the adoption of such a standard, is not at present advocated in Europe upon any known or intelligible ground whatever, and that its supporters there now only claim that it will not affect the value of money in either direction, which, if true, is merely a defensive suggestion, tending in no degree to recommend the measure, but at the most only tending to remove an objection to it. The discussion in this country of the question of the me- tallic monetary standard, was not commenced until the be- ginning of 1876, and has, for various reasons, differed ma- terially from the discussion in Europe. There, the whole question was debated, as a new and original one, still to be decided, of the expediency of a single standard of gold for the commercial nations. Here, the supporters of a gold standard for the United States, have assumed that that ques- tion was already settled affirmatively, and that whether set- tled wisely, or otherwise, nothing remained for the United 13 States to consider, except what was best to be done in view of the actual position of Europe. But this was not the only difiEerence between the discussions here and there. American advocates of a gold standard have not been re- strained from reviving arguments in favor of it, which had been exploded and long obsolete in Europe, or could not very well be used there for other reasons. To all of which it may be added, that the American advocates of a gold standard have maintained many views of finance, which all European schools and authorities concur in repudiating as fallacious and chimerical. . It will therefore be most convenient and expedient, to give a separate and distinct account of the American dis- cussions. CHAPTER II. The new view that the single and same standard in the commercial nations, will not affect the value of money. Its unsoundness. The view, upon which I propose now to comment, if not first taken, was certainly most clearly and ably expressed, in the work on Money, published by Jevons in 1875. It is in brief that silver will not go out of monetary use, merely because the Western world may discard it ; that the vast population of Asia will still employ it for a period indefi- nitely long ; and that the joint effect of gold and silver upon the prices of the world is just the same, whether they are everywhere employed under the regime of the double standard, or whether gold is used exclusively by some na- tions, and silver exclusively by others. This view, in Jevons' own language, will be found in an article which I published in the American Exchange and Review in August, 1876, and which is herewith reprinted. , I then thought it suificient to say, that inasmuch as Jevons admitted that the universal demonetization of silver would be disastrous, it would be difficult to persuade mankind that it was wise and prudent to demonetize it in the West- ern world, on any mere reliance, however apparently well H founded, that it would be sustained in its monetary posi- tion by the Asiatic populations, and that the matter at stfilte was too vitally important to be subjected to any un- necessary risk, however small. In particular, I endeavored to point out that the United States, beyond question the first commercial power in presenti and prospectively on the globe, and able beyond a peradventure to sustain the mone- tary use of silver by its own resolution to adhere to it, would never place itself at the mercy of the obscure and doubtful policies of Oriental nations. Some of the propositions advanced by Jevons are sound, but that only makes the errors of fact and reasoning with- which they are inextricably intermixed, more dangerous. If all the nations using money, were at any given time using both metals, it would undoubtedly be true, with one qualification, that the stability of prices would not be af- fected, if one class of nations should change to a policy of using only gold and another class of nations should change to a policy of using only silver. Nor would there be any considerable disturbance attending such a change, as the class of nations requiring more gold and having silver to dispose of, would find in the other class of nations a ready market in which to buy gold and sell silver. The qualification required to render such an operation facile and harmless, is, that the same proportion which existed be- tween the total value of gold money and the total value of silver money in the world, should exist between the money- absorbing power of the nations adopting a gold standard, and the money-absorbing power of the nations adopting a silver standard. On any other condition, and to the precise extent of the divergence from that condition, one class of nations would experience an increase in the quantity of their money, while the other class would experience a de- crease. If, for example, the total values of gold and silver are assumed to be equal, a class of nations actually possess- ing three-fourths of the total aggregate of both kinds of money, and entitled to possess three-fourths by the laws which govern the international distribution of money, would 15 find, if they went to a gold standard, that they must en- counter a shrinkage of one-third from their fofmer quantity of it. If a world could be found with all the nations in it using both metals, and if anybody possessed the power and intel- ligence to divide them in the proper proportion into gold- using and silver-using nations, the problem proposed by Jevons could be successfully worked out. In the world which we actually inhabit, neither of these conditions existed when the school of Chevalier undertook to induce all the commercial nations to adopt the gold standard. There was no authority capable of dictating and enforcing a scientific ■division of it into two parts, one to use gold and the other to use silver, nor was it true as a matter of fact that all the nations in it were then using both metals. The actual case in the last-named particular was entirely different, and it is by overlooking that difference that Jevons has fallen into a fatal error. It is a sufficiently exact statement of the predicament to say that Asia was using only silver, while Europe and the United States were on the double standard. That was liter- ally true of the greater part of Europe, and substantially true of it as an aggregate. The fact that Great Britain was on the gold standard, was offset by the fact that Germany and Holland were on the silver standard, and the situation was the same as respects the point under discussion, as if those three nations had all been on the double standard. On the one side was Europe and the United States on the double standard, and unable to part with their silver without a shrinkage of money and consequent fall in wages and prices, unless gold could be drawn from some other quarter to take the place of their silver. On the other side was Asia using only silver money and having no gold to dispose of. It is in vain for Jevons to dilate upon the silver-absorbing capacity of Asia. Doubtless it is indefinitely great, since it only requires successive^ augmentations of Asiatic prices to absorb any conceivable amount of silver. The difficulty does not lie at that point. What concerned Europe and the iC United States, was not to know where to find a market for their silver, lAit where to find gold to take its place. Asia could buy the silver with its commodities, but could give no gold in exchange for it. All the aids possible to be afforded by the Asiatic popu- lations were the two following : — First. The negative aid of not going to the gold standard themselves, or in other words, while unable to help the case, they could refrain from making it worse. Second. That although using very little gold as money, they possessed and were in the habit of buying for other uses certain quantities of gold, and that under the pressure of an advance in the value of gold relatively to silver, they would be likely to give up some of the gold in their pos- session, and at any rate to reduce somewhat their current purchases of it. When Great Britain went to the gold standard in 182 1, the operation was practicable, although disturbing, because the double-standard circulations of continental Europe and the United States were reservoirs from which gold could be drawn by the attraction of a sufficient premium. But view- ing Europe and the United States as an aggregate, the school of Chevalier proposed the scheme, ruinous if possi- ble, of going to a gold standard, with no double-standard circulations elsewhere from which to draw the needed metal. Jevons supposes that he has solved the difficulty, by point- ing out that Asia can absorb all the silver Europe and the United States have to spare, and can absorb it at a good valuation, if the sale of it is not forced too abruptly. He has not touched the real difficulty at all, and apparently fails to see where it is. Europe and the United States can buy merchandise, but not gold, with their silver, and so far as they dispose of their silver money it must be at the cost of a contraction of their monetary circulation, and of all the mischiefs which follow contraction, the prostration of enterprise, wages and prices, the ruin of debtors, and the unjust aggrandizement of the income and money-capital classes. Of what avail is it, that France can be made to 17 see, that its $400,000,000 of legal -tender five- franc pieces can be exchanged at a fair rate with the East for tea, raw- silk, jute, cotton and hides? They are all valuable com- modities, and the 'quantities which France would be glad to obtain, in addition to what it now obtains in exchange for its own products, are indefinitely large. But France can get along with its present importationu of tea, raw silk, jute, cotton and hides, far better than with a reduction of two- fifths of its metallic money, which would be the result of selling its silver to Asia, which has no gold to supply its place. At the Paris Conference of 1867, the President of the Bank of the Netherlands ( M. Mees ) advised that each Euro- pean nation should go to a single standard, but not of the same metal, and he pointed out that in that way both gold and silver would be retained in European use, which he re- garded as essential. The advice which he gave, involved no fallacies as respects the effect of the course proposed in preserving the stability of the volume of money and of prices in the various countries of Europe. What he recom- mended as a general policy for Europe, was in fact a then existing policy as to one important part of Europe, that is to say, England, which was on the gold standard, and Germany and Holland, which were on the silver standard. But while it is true as to double-standard countries that a part of them may go to the gold standard, and a part of them to the silver standard, without affecting the status of the money volume and of prices, it is not true of the whole world, one part of it being on the double standard, and the other part on the silver standard. Chevalier made no mistake in supposing that the change of all the commercial nations from the double standard fo one of gold, was a measure in the direction of contracting the volume of their metallic money. His mistake was, in supposing that any measure in that direction was called for. The mistake of Jevons is in supposing that the measure will not contract the volume of the metallic money of the com- mercial nations. The mistake of Chevalier was in the first i8 instance largely one of exaggerated anticipations as to the yield of the California and Australian gold mines, and so far as it was so, time was needed to correct it. The mistake of Jevons is a compound one, partly in logic, and partly in inattention to the fact that while Europe and the United States are invited to go to a gold standard, the rest of the world has no gold to assist them in going to it. No time is needed to correct the mistake of Jevons. No doubt the disaster to the world would be less, from a movement of only Europe and the United States to a gold standard, than from a similar movement on the part of all nations. The movement, in the form in which it is now proposed and has actually made progress, benefits Asia by additions to its money and the stimulation of its industries, and to the commercial nations it is less injurious, than if Asia was a competitor with them for gold. But the observ- ations are pertinent, that it is neither practically nor meta- physically possible to aggravate a mischief which is abso- lutely fatal, and that it is of no consequence what additions are made, or not made, to a burden after it has reached the crushing point. It is the idlest of abstractions to say, that the gold policy would have been more ruinous, if Asia had embarked in it as well as Europe and the United States. It is so ruinous, when confined to the commercial nations alone, that they neither will nor can endure it. For America this question has one aspect, which does not affect Europe. Silver mining, although an insignificant in- terest in comparison with the paramount interest of an ade- quate and stable money, is still a great interest. Since the discovery of this continent, it has been almost exclusively an American interest and it is wholly at the expense of America that Asia will gain in the sale of its products for silver, if that metal is excluded from the monetar)- use of the, "Western World, and thereby permanently cheapened. One of the great features of the world's commerce for three centuries, has been the exchange of American silver for the commodities, useful or luxurious, which the East furnishes. So long as America retains its monopoly of the silver pro- 19 duction, which still seems as well assured as it ever was, so long must it sustain the whole pressure of any loss of its purchasing power. It is not extraordinary that America has decidedly declined to be a party to a policy of silver de- monetization, of which such a loss is one of the plainest fruits, although by no means the worst one. CHAPTER III. Views urged in the United States in favor of the absolute superi- ority of the gold standard, without regard to the action of Europe. The, opponents of the remonetization of silver in the United States, which was effected by the act of Congress, passed over the President's veto on the 28th of February, 1878, may be divided in a general way into two classes : — 1. The first and apparently the smaller class, consisted of those who maintained that silver was unfit for anything ex- cept token, or subsidiary money, and who were in avowed sympathy with the European movement for the establish- ment of a single gold standard by all the commercial na- tions. The representative of this class in the United States Monetary Commission of 1876, was Professor Bowen, of Harvard College. 2. The second class consisted, partly of persons who took no distinct ground in respect to the question of what was the best metallic standard in the abstract, and partly of per- sons who professed a decided preference for the double standard both in the United States and in Europe. But all of the persons of this second class agreed that the United States ought not to return to the double standard, without a greater degree of European co-operation than was as yet assured. The representative of this class on the United States Monetary Commission of 1876, was Governor Bout- well who, as Secretary of the Treasury, had, in December, 1872, advised the demonetization of silver. What is proposed in the present chapter, is a summary of the views of the first class of persons described above^ with such observations upon them as they seem to call for. As already noticed, the political, social and financial con- ditions in Europe, permitted the advocacy there of a sin- gle standard and of gold in all commercial nations, to be made distinctly on the ground of its real object and effect,, as a measure tending to contract the metallic currency, which, it was claimed, was threatened with an undue ex- pansion. The political, social and financial conditions in the United States, were such as to render that method of advocating a gold standard ineffective and in all aspects in- judicious in this country. \^See Note.\ And not only was that method not resorted to here, but the fact was as far as possible concealed, that the gold policy in Europe originated from a desire to diminish the amount of money. Every motive but the right one was assigned for what had been done in Europe, as for exam- ple, that Germany demonetized silver because it was depre- ciated, when the known fact was that silver did not depre- ciate until after the German demonetization, but was at that date fully up to the French legal valuation, which is three per cent, higher than ours. But whatever might have been the objects of the Euro- pean promoters of a gold standard, its promoters here en- deavored strenuously to maintain the two following prop- ositions : — I. That where a currency consists of the metals, and of paper based upon and convertible into the metals, the ag- NoTE. The first public avowal in this country, of any importance, that an improved value for moneyed securities was one of the objects of a gold standard, was made in the followmg language of a report adopted January 9, 1878, against the pending silver bill by a convention of twenty-four New York City banks: — * The proposed law would at once reduce the standard one-tenth, and strike that amount from the value of all outstanding debts and commercial obligations. On the 7th of February, 1878, the New York Chamber of Commerce, following the lead of the banks, as merchants always do, resolved unanimously as follows: — It is wrong to inflict on our National banks, our savings institutions, and our life, fire and trust companies, as well as our marine insurance compatiies, a loss of ten per cent. It is plain that the remonetization of silver could only reduce the standard, precisely to the extent that the demonetizati >n of silver had raised it. On the question of right, there- fore, the advantage was with tl^ose who sought to bring the country back to the original and constitutional status of the double standard. gregate volume of such a currency is not reduced, by taking away from it half, or any other proportion, of the metals. 2. That prices are not controlled by the volume of money and are very little, if at all, affected by it. Both these propositions originated in the United States, and have never made progress elsewhere. Either of them, if tenable, answers satisfactorily the principal objections to the demonetization of silver or of gold. So also, it takes away all the motive which ever really existed for such demoneti- -zation. If Chevalier in 1854-5-6 could have conceived the possibil- ity of the soundness of these propositions, or of either of them, he would not have apprehended an increase of prices, injurious to the money-capital and income classes, from any supposable amount of California and Australian gold. If at any time since 1854-5-6, he had been able to conceive such a possibility, he would have relaxed his exertions to demon- etize, first gold and next silver. So far as it is possible to apprehend the first proposition, it is this, that the use of metallic money is so much econo- mized by the issue of notes convertible into such money, and by checks, clearing houses and other devices of bank- ing, and that the proportion of metallic money to the whole aggregate of the actual currency is by these economizing processes made so small, that the amount of the metallic money ceases to be of any importance. It is not necessary to deny that the power of metallic money is increased by such economizing processes as are described, or by other similar processes, but it is surely plain that the proportion between two sums, or quantities of metallic money, or of anything else, is in no way affected by doubling, or quadrupling them, or by any percentage of increase or diminution, if it is the same in respect to both sums. Whatever might be the proportion of prices with a milliard of metallic money, to prices in the same country and at the same time with two milliards of metallic money, the proportion of prices would be the same if the effect of the one milliard and of the two milliards was by some con- trivance reduced, or increased, by the same percentage. No matter how much actual currency may be constructed on a metallic basis of $10,000, the volume of the actual currency will diminish one-half if the metallic basis is reduced to $5,000. To suppose otherwise is to suppose, to borrow an illustration of Senator Jones, that because in a weighing apparatus a marking weight of one pound placed at a cer- tain point will balance one ton, it is of no consequence how heavy the marking weight is. Whoever tries it, how- ever, will find that a marking weight of two pounds at the same point will balance two tons. , It is no doubt true that the possible proportion of conver- tible currency to its metallic basis differs at different times and in different countries, but there is only one possible proportion , at the same time and place, and therefore the volume of convertible currency at the same time and place must vary as the metallic basis varies. In support of the proposition that prices are not affected by the volume of money, it is said that they really depend upon the ebbs and flows of credit, and cases are cited in which prices have temporarily increased with a volume of money stationary, or declining, or have temporarily de- creased with a volume of money stationary, or expanding. But the most which is established by these cases is, that the volume of money is not the sole influence acting upon prices. The effect of its expansion to expand prices, and of its contraction to contract prices, may be uniform and constant, but may be checked or overcome at particular times by some counter force. In money, as in other things, the fact that varying effects result from the play of various forces against each other, does not show that there is any irregularity either in direction or power of each force con- sidered by itself, but only that one force predominates at certain times and another force at other times. It would seem to be inaccurate to say that price is merely the ex- pression of the relation between the volume of money and the volume of other things, but that that relation acts con- stantly and uniformly upon price, is not disproved by the 23 fact that other forces may also affect price, sometimes coun- teracting and sometimes adding to the effect of clianges in that relation. Money cannot escape the general law that value depends upon both supply and demand, and it cannot be the less true that variations in supply always affect it, because variations in demand also affect it. Just so long as two milliards are twice one milliard, just so long will two milliards of money double the prices resulting from one mil- liard, at the same time and under the same circumstances tending to enlarge or diminish the effect of money upon prices. We know historically that as the abundant metallic money , of the Roman Empire dwindled away during the Dark Ages prices fell pari passu, and were only restored by the mines of the New World. In our own times, we have seen the impulse given to prices by the discoveries in California and Australia, and the prostration of prices following and caused first by the fact that the aggregate production of both met- als became stationary or declining about ten years ago, and next by the discarding of the monetary use of one of the metals in important countries. It cannot have escaped the rftost careless observation, that the persons in this country who maintain in respect to the demonetization of silver, that the volume of money does not affect prices, are the same persons who deprecate an in- crease of the volume of greenbacks as tending to inflate them. Both of these positions cannot be sound, as there cannot be one rule for metallic money and a different rule for paper money. The European supporters of a single standard for the Western world, were for a single standard, pure and sim- ple, with apparently no very decided choice as to the metal which might be selected. Their real and avowed object was a contraction of the volume of metallic money, which they alleged to be dangerously expanding. As it had happened that the metal which they first proposed as the standard was silver, and that the metal which they first proposed to discard was gold, it was not easy for them to claim that 24 gold had any intrinsic superiority as a standard over silver. Germany, for example, could not make that claim, when it demonetized silver in 1871, inasmuch as in 1857, only four- teen years previously, it had demonetized gold and estab- lished silver as its exclusive pioney. The thing to which those who controlled public affairs in Germany were really opposed, was not either silver or gold, but the use of both of them as money, and their recent previous action re- strained them from placing the demonetization of silver in 1 87 1 upon the ground of any special objection to it. They could not object to it as being heavy, or cumbersome, as it could not have acquired any new characteristics of that kind since 1857, when they decided to have no 'other kind of money. They could not say that it was depreciated rela- tively to gold, since its value was as great as it was in 1857, and there was no symptom in 1871 of any impending depreciation, and the production of gold was still largely in excess of that of silver. The case was different in this country, where nobody was restrained by recent past commitments from saying any- thing in derogation of silver and in favor of the other metal, which commended itself to their own judgment, or which might possibly commend itself to the judgment of others. It was said here that silver was, of the two metals, the most fluctuating in value, which is quite contrary to the long and well-settled judgment of mankind. As respects, steadiness of demand and that steadiness of value which re- sults from the magnitude of accumulated stocks, the two metals are substantially equal. The great superiority which silver formerly had, in the particular last mentioned, was lost after the discovery of the California and Australian mines. As respects steadiness of supply, silver has always had an enormous advantage, and from the methods of ob- taining the two metals is likely to retain this advantage for an indefinite period. As in Job's time, there is a dust of gold and a vein for silver. Nearly all the gold in the pos- session of mankind was found pure and was obtained by 25 washing, whereas silver is the product of regular mining and the reduction of ores, which require capital, machinery and organized industry. Gold fields are soon exhausted, while silver mines are permanent. No such sudden and great augmentation of production was ever known or will ever be possible in silver, as was witnessfed in gold in Cali- fornia and Australia, or in Brazil near the end of the seventeenth century, or at many other periods in the "world's history. That the value of silver is steadier than that of gold, aside from the effect of arbitrary government interferences with the value of either, is just as certain and just as well established as the fact that lead has a greater specific gravity than iron. That a monetary standard com- posed of both gold and silver, is steadier than a standard consisting of either alone, is equally true, but not so uni- versally recognized, because depending upon facts and rea- sonings less simple in their character. In respect to the weight and cumbersomeness of silver, insisted upon here as an objection to its use as money, it is curious to note that after thousands of years of its employ- ment as such, this objection is now for the first time sug- gested in conditions of society in which whatever force there ever was or could be in it has quite disappeared, and in which the greater weight and bulk in proportion to value, of silver as compared with gold, has become a positive and undeniable advantage. Of course, in the very small transac- tions of life, if either of the metals is actually employed, it must be silver, as it is even in Great Britain, where the great mass of the people never touch a gold coin and rarely see one except through the windows of brokers' shops. In the larger transactions, in which gold might be used, the tend- ency is already thoroughly developed, and is constantly in- creasing, to dispense with the actual handling of either metal, by the substitution of paper representatives of them. In such forms as the certificates of gold and silver deposited in the Treasury of the United States, where the deposited metal is actually retained for the redemption of the certifi- cates, they are truly and in all senses the representatives of 26 such metal. It is in that or similar forms, that the bulk of the transfers of gold are made in this country, and that the bulk of the transfers of silver will be made, and nothing else can be required to show that the objection to the weight and cumbersomeness of silver has quite lost whatever force it might once have had. In the conditions of modern civilization, public and private reserves, the accumulation of which is necessarily known, exist upon such a scale, that the greater security of silver as compared with gold, against abstraction by faithless cus- todians, and against enterprises on a still larger scale, which might easily suggest themselves to minds criminally inclined, at periods of political disturbance, is attracting some atten- tion and deserves a good deal more than it receives. It has been long known that carrying companies, by sea or land, exact as the price of the carriage of treasure the same per centage of its value, whether it is gold or silver. The greater risk of carrying gold is regarded as an offset to its superior lightness and less bulk in proportion to value. But there is the same greater risk in keeping gold in deposits that there is in transporting it. It is much more easily carried away after a theft or robbery, and somewhat more easily hidden after it is carried away. The superior safety of silver is constantly receiving illustrations in current events. In the summer of 1877, according to newspaper reports, a train on the Union Pacific Railroad, temporarily in the possession of robbers, was carrying government treasure in silver to the amount of $250,000, which the robbers let alone, from the impossibility of moving and secreting it. More recently, in August, 1878, a band of adventurers who had succeeded in getting possession, at mid-day, of the vault of a bank at Se- dalia, Missouri, took all the money they found except the silver, of which there was $3,000. Under the necessity of an unincumbered flight from a pursuit which was certain to be immediate, they left that untouched. We have to-day piled up in the vaults, and principally in a few vaults of the Treasury of the United States, the vast sum of two hundred millions of dollars in coin, nearly all 27 of it gold. Of much the larger part of this treasure the government is the owner, and of the remainder it is the custodian, and with more or less responsibility for its safe custody, although the degree and limit of this responsibility are not so exactly defined, as it would be necessary to de- fine them in the case of a loss. It cannot fairly be disputed that the security of this treasure would be sensibly greater, if it consisted principally of silver, instead of consisting principally of gold. In silver, the compression of large value into a small space and a small weight is such a distinguishing feature of it, that it seems well entitled to the rank always assigned to it by mankind, as one of the two noble or precious metals. This compression, not so extreme as that in the case of gold, and still less extreme than that in the case of the dia- mond, stops at a point, where preciousness and conditions favorable to security of possession are combined in a meas- ure eminently satisfactory. Lord Liverpool's letter of 1805, to the king, on the coin- age, touched none of the questions agitated in Europe since 1854-5-6. It touched only the local question, and that from purely local points of view, of the best metallic standard for Great Britain. Lord Liverpool advised a change from the then existing double standard to a single standard of gold, and his views were adopted in 1816, in contemplation of the impending resumption of specie payments by the Bank of England. For that- advice, he assigned only the two following reasons : — First. That as nations increase in wealth, the material of their money should be made more valuable, and that Great Britain in 1805 had reached that height of opulence which required the single gold standard. Second. That the changes in the metal in actual use in a country under the regime of the double standard, a liability to which changes was always and is now admitted by the supporters of that regime, are attended with a loss, or as he expressed it, are 'V; detriment to the public." Neither of these views of Lord Liverpool has ever been 28 regarded in Europe as entitled to consideration, or has ever been insisted upon in any of the discussions there. His first view has been wholly disregarded in Earopean practice. When Holland adopted the silver standard in 1847 and Ger- many adopted the silver standard in 1857, they were richer countries, and especially Holland, than Great Britain was in 1805, or even in 1816. Although treated in Europe as quite undeserving of atten- tion, these views of Lord Liverpool have been raked out of the rubbish heap in which they had been reposing for seventy years, and presented to the American public as notable dis- coveries in financial science. The first view of Lord Liverpool appealed to the English on their weak side, which is their pride, and within one year after that pride had received its finishing touch in the overthrow of the first Napoleon at Waterloo, they decreed the gold standard. No money, indeed, seemed too good for them in those happy days when all England, from the Gram- pian Hills to Land's End, was carousing to the toast : — "Britannia rules the waves." History repeats itself, and in our own time we have seen the Germans decreeing the gold standard, in the year after the third Napoleon surrendered his sword to the Emperor William, and while "the intoxication of Sedan" was still in its joyous stage. Viewing the subject from the sober point of view of those who have had no Waterloo and no Sedan, it does not ap- pear that there is any known and uniform connection be- tween the aggregate wealth of a nation, and the rates of wages, or prices . Reasons for any- thing are as plenty in the market as blackberries, in these days of venal orators and venal writers. Bankers buy edu- cated talent, as a business operation, and with as little scru- ple as they hire messengers, clerks, or cashiers. The most favorable condition is that of not being obliged to give any reasons at all. That ' avoids the risk of giving incongruous and contradictory ones. The ancient Caesars enjoyed that happy prerogative, Stet pro ratione voluntas. It is enjoyed also by the modern Caesars at Berlin, who have, in the same generation, demonetized, first gold, and then silver. It is not enjoyed by anybody in America, and hence, with a necessity for assigning reasons, there is here a certainty that very illogical ones will be offered when real ones cannot be avowed. The men who, in 1873, discon- tinued the coinage of the silver dollar because, as they said, it was worth 103 cents in the market, and would not, in fact, circulate, now resist its coinage because, as they say, it is depreciated, and would so entirely monopolize the cir- culation as to exclude gold. These reasons are contradic- tory, and they are both pretexts. The premium of 1873 on silver was no justification for forbidding its coinage by laWc 195 It was simply a fact likely, so long as it continued, to pre- vent individiials from bringing much of it to the mints for the purpose of coinage. The same thing happened to gold from 1821 to 1834, but nobody then thought of prohibiting the coinage of gold. In two years after 1873 the premium on silver had disappeared, and that metal would have been brought to the mints in abundance as soon as the obstruc- tion of paper money should be removed. The depreciation of silver, which followed, and was wholly caused by its demonetization, instead of justifying that measure, condemns it. The depreciation of silver is as poor a pretext for con- tinuing its demonetization as the premium on silver in 1873 was for originating it. It is not with pretexts, but with real motives, that we prefer to deal. What has actually been done is to substitute for the standard of gold and silver the standard of a single metal, and the true object of the contrivers of this policy was to make money scarcer and obligations for money more valuable. That the object of demonetizing silver is to reduce the mass of money and keep prices of commodities low is bold- ly avowed by many of the advocates of the gold standard. Thus Victor Bonnet i^ Journal des Economistes, December, 1875) says : — The world is now saturated with the precious metals, and if there is any danger against which it is necessary to guard, it is that this saturation should become greater and bring on the same economical mischiefs which resulted from the abundance of silver mines in Mexico after the discovery of America. If the annual production of gold is now reduced to five hundred millions of francs, let us thank heaven for it, and let us wish that it may not be too rapidly increased, whereby we should be embarrassed. It is the too great abundance, and not the scarcity of metallic money, which is to be apprehended. It is not, by any means, intended to be said that all per- sons owning money or having money due to them, have been concerned in or approve of these recent and existing efforts to narrow the standard of values. Some of the greatest moneyed capitalists of the world take a more enlarged and sounder view of their own interests. This is conspicuously 196 true of the present head of the house of Rothschild, in Paris. It was true also of the late Alexander Baring, of London, who stoutly and constantly insisted upon the restoration of the monetary function of silver in England. Men of that stamp, and of that wide extension of interests, are likely to take broad views. Their selfishness is, at any rate, enlight- ened, and they will not undertake to grasp more than they can hold. They know that there is a limit to the paying power of debtors, whether nations or individuals, and that to double the value of money would bring on a general bankruptcy, and leave creditors, as a whole, poorer instead of richer. PAPER NUMBER FIFTEEN. [ First published October, 1876, as a letter to Editors of*Fomey's Wiishington Chronicle?^ It is not true that all European nations are, or ever can be, on the gold standard. Chevalier — the French writer and orator, who attracted the attention of Europe twenty years ago by the vigor of his advocacy of the demonetization of gold, and who now demands the demonetization of silver with equal zeal — triumphantly asks France, in the April number of Revue des Deux Mondes : — Is it wise, is it politic, is it practicable, to isolate our- selves from the movement of the greatest countries of Europe, and of the United States ? It has been, in fact, the leading point for the past three years of the gold partisans in Europe that the United States had discarded .silver, and that it was neither "politic" nor "practicable " to sustain a currency which the prospectively greatest commercial power in the world had repudiated. On this side of the Atlantic the same partisans insist that even if a double standard is better for our special interests and in our special position, fronting Europe on the one side and Asia on the other, we must perforce adopt a gold standard, because " all the commercial nations " have adopted it. To do that, we are constantly told, would be to "isolate ourselves " from the rest of mankind, and to shut ourselves up in a sort of Chinese seclusion. 197 France must give up silver because we have done so, and Tve must give up silver because France has done so, or is sure to do so soon, or, as is sometimes said, has practically done so already by a limitation of the silver coinage. On this view freedom of action, or even of discussion, is allowed to neither of two of the greatest nations in the world, but they are to be dragooned, each by the other, into a policy opposed to all their traditions and past opinions. The human mind can conceive of a party acting and a party acted upon ; but how can it conceive of two parties, both coercing and both coerced by each other? A mesh like this must be so finely woven that it can be easily broken away. We have only to rise to a proper sense of our own strength and position to see that we are, in all events, the masters of our own destinies, and, also, that if we adhere firmly to the double standard it cannot be shaken among the nations. It is simply untrue that " all commercial tountries " have already adopted the gold standard, and it is absolutely certain that they will never do it, unless we assist in coercing them into it. Clearly, France will adhere to the double standard if we do. All reliable French authorities assure us of that, and why should it not be so ? Since the disasters of the German war it is the most heavily in- debted of all nations. Why should it aggravate a burden already nearly intolerable ? Including the French, there are 160,000,000 of the population of Europe who have neither silver nor gold in circulation, but are like ourselves, em- ploying only paper money made current by law. The French finances seem to be sound, and a specie resump- tion possible, but it is far otherwise with Italy, Austria, and Russia. Of Italy, of which we know the most, the situation is so bad that resumption is hardly hoped. The Govern- ment cannot retire the floating paper except by issuing more interest -bearing loans, and the existing drain of interest exhausts all its -resources. A gold currency for these three countries is a simple impossibility, and it will be long years before they can reach the more easily attainable one of silver, or of gold and silver combined. That we must adopt 198 gold because Europe has adopted it, or is likely to adopt it, is assuming that to be a fact which is" not a fact, and cannot be a fact until all existing conditions of the supply of the metals and of the indebtedness of nations are com- pletely changed. In 1839 a Russian imperial decree established silver "as the legal and unalterable metallic unit of the money cur7-ent in tlie Empire." Since the days of the Medes and Persians all laws may be assumed to be subject to change, but who believes that Russia, which is an Asiatic as well as a European power, and which is heavily weighted with debt and with a depre- ciated paper currency, will gratuitously aggravate all its difficulties by adopting a gold standard ? Austria, like Russia, recognizes only silver, but uses nothing but paper, and will do better for her creditors than she has been in the habit of doing during the past hundred years if she ever redeems her paper, even in silver. Italy is bound to • the double standard by a convention with France, which continues until 1881, and is then renew- able. There is no evidence of any Italian favor toward the scheme of the gold theorists. It may be of some interest to Americans to know the opinions of the eminent Italian statesman and savant, M. le Cbmte Frederic Sclopis, who presided over the umpirage in the case of the Alabama claims, and who has been described by Caleb Gushing as " the impersonation of the intellect and culture of Continental Europe." In a letter written in 1868 to M. Wolo^ski, the well-known advocate of the double standard, he says ; — What you have written is short, clear, and conclusive. Your memoir is irresistible in favor of the association of the two metals in the performance of the monetary function. That conclusion seems to me established {chose Juge). There may or may not be good reasons for such a change of the Constitution of the United States as would admit of the establishment of a gold standard in this country. But there is no such existing fact as the general adoption of that standard in Europe to compel us to that conclusion. 199 Indeed, we have every reason to suppose that a settlement of the question here in favor of the double standard would stay the spread of the gold delusion, and keep it within its present very narrow limits. PAPER NUMBER SIXTEEN. [First published August, 1877, as a communication in N. Y. Banker^ s Magazine^ True nature of the double standard. Unsoundness of Cernuschi's bi-metallic theories. It is always easy in discussions to overthrow antagonists by ascribing doctrines to them which they do not advocate, or constantly disclaim. It is by this method that the triumphs of the gold party are principally achieved. They assume that the theory of the double standard is, either that the relative value of the metals is not variable, or that any country can by law put an end to the variations, and abso- lutely insure their concurrent circulation. There is clearly no difficulty in overthrowing such a theory as that, by facts on every side, and the pleasure of the gold advocates in overthrowing it seems never to lose its zest. Unfortunately, the double standard rests upon no such theory! Its advo- cates admit the fluctuation in the relative market value of the metals, although they regard that fluctuation as of very little importance, either in itself, or in comparison with the vastly greater fluctuation in the value of both metals rela- tively to commodities. Without doubt, they believe that by a better concert than has heretofore been obtained among double-standard countries, the power of law to steady the relation of the metals may be greatly increased, but they do not fail to see and admit that success in reaching such better concert, however probable it may be, is after all sub- ject to the contingencies and uncertainties of the future. And so far as the concurrent circulation of the metals is concerned, although they know that it has been practically accomplished to a far greater extent than is admitted, they have never claimed that it could be secured by law under all circumstances, nor do they believe it to be of much moment that it should ever be secured. The standard they propose is the optional standard, which will consist of the two metals concurrently when there is no divergence or only an inconsiderable divergence between their legal and market values, and of the most available of the two metals when such a divergence becomes marked. Such a standard they believe to be best in itself, because fluctuations in the pro- duction of the two metals so compensate each other that the two together make a steadier measure of value than either alone. They believe, also, that, even if not best in itself, it is so interwoven with the transactions of mankind and with the multiplied relations of debts and credits, that, its abandonment for the narrower standard of either metal is impossible, and would be intolerable if it were possible. It is upon these impregnable grounds that the double stand- ard rests. Nowhere was this subject more thoroughly discussed than in France, during the thirteen years from Mirabeau's report of 1790' in favor of a single standard, to the definitive adop-. tion of the double standard in 1803. During no part of that, discussion was it claimed that the relative value of the metals, was invariable, or could be made so by law. On the con- trary, the advocates of the double standard admitted always that changes in their relative market value might from time to time necessitate changes in their relative legal value. In the first draft of the French law, as it was propssed by Na- poleon's Minister of Finance, Gaudet, the manner in which such possible future changes should be made was distinctly provided for in the following words : — If imperious circumstances compel a change of this pro- portion (15 1-2 to I ), it is the gold coins alone which shall be reminted. This pre-eminence of silver is secured in the French law, as finally adopted in 1803, by the following words : — Five grammes of silver, of the standard of nine-tenths fine, shall constitute the money unit, which shall be called one franc. This pre-eminence of silver is secured in our own mint law of 1792, which declares that "the money of the United States shall be expressed in dollars or units,'' and that the dollar "shall be of the value of a Spanish milled dollar as the same is now current," and contain 371 1-4 grains of pure silver. The French people have always understood the double standard to be what Gaudet and his associates of 1803 an- nounced it to be, not as based on any theory of an abso- lutely steady market relation of the metals, nor as guaran- teeing that their use would always be conrurrent, but as an optional standard, which might sometimes consist of only one of the metals. Understanding it in that way, the French were perfectly satisfied when their actual money consisted almost exclu- sively of silver, as it did before the California discoveries, and equally satisfied when the major part of it became gold after those discoveries. The American people never under- stood it in any other way. From 1821 to 1834, under a special demand from England, gold disappeared absolutely from our circulation. After 1850, silver disappeared, not ab- solutely, but in a large measure. In neither case did the measure of giving up the double standard receive any coun- tenance worthy of mention. The remedy for the disappear- ance of silver from the smaller channels of circulation was easily found in the Act of 1853, authorizing under-weighted subsidiary coins. FALLACIES OF BI-METALLISM. The peculiar theories of M. Cernuschi, which have become known as Bi-metallism, have scarcely any features in com- mon with the policy of the double standard, as it has been practically maintained heretofore, and as it must be practi- cally maintained hereafter, if it is maintained at all. The bi-metallic theory attaches a pre-eminent and an almost exclusive importance to the international use of money, and apparently to this use in trade with Europe. One of its conclusions therefore is, that it is only in con- cert with the nations of Europe, or at least with the major part of them, that any desirable employment for silver can be found. This theory ignores all considerations connected with the use of money in the internal business of nations, such as the necessity of preventing a contraction in its volume, which would prevert the equity of contracts. It ignores the greater steadiness of the two metals as a meas- ure of value, than of either separately, which results from the fact that the vicissitudes of the production of gold and silver have, with only one known exception in more than two thousand years, balanced and compensated each other. Thus viewing the international use of money as all impor- tant, and the internal use of it as of no importance — which is precisely reversing the true and proper order of things — the bi-metallists would regard silver coins remonetized in the United States, independently of European movements in the same direction, as a mere substitute for the greenbacks, with no change in real character, except that the material of the new money would be silver instead of paper, and with nothing about it to compensate the disadvantage that the new money would be costly to purchase and maintain, whereas the greenback costs comparatively nothing. The bi-metallic theory is, of course, the favorite one with the men who have fastened the gold standard upon this country, and who have the profoundest political and pecu- niary interests in maintaining it. They are perfectly assured that England, Germany, and their monetary allies will at present give up gold under no pressure short of that of bankruptcy, and if it comes to he an accepted doctrine that silver is to remain demonetized until those countries co-op- erate in remonetizing it, their work is finished. Nothing was more natural, therefore, than that after M. Cernuschi had been long enough in this country to enable them to understand his peculiar theories, they should have simulta- neously hailed him as their champion, and should have ranged themselves with enthtiteiasm under the bi-metallic banner, for a grand march to an international conference with England and Germany. No road led so straight away from silver, and they knew by an infallible instinct that it was a safe road for them to travel in. Public bodies, inclu- ding Chambers of Commerce of great cities, fresh from de- nunciations of silver as a robbery of creditors, warmed up with a safe zeal to remonetize it in concert with Euro- 203 pean nations, which were only too well known to be op- posed to it. There is no reason to suppose that M. Cernuschi sympa- thized with, or even understood, the motives of the gold party in the United States. The hopefulness and enthusiasm of his disposition had led him into a fatal error in respect to the possibility of converting to bi-metallism the men who really control England and Germany, and he was too sincere himself to suspect the sincerity of persons in the United States, whose antecedents and commitments to gold were of course unknown to him, and who were giving him daily assurances of their vehement desire to restore silver by means of international conferences and commissions. In a report made last winter. Gov. Boutwell, as one of the minority of the United States Monetary Commission, misled by the enthusiasm of M. Cernuschi, says : — The evidence taken before the committee tends to show that there is a larger public sentiment in Europe in favor of the remonetization of silver than has heretofore existed, and that a proposition from the. Government of the United States looking to a convention, will be accepted by the Governments of Europe, and that the result of the delibera- tions of such a plan will be favorable to the plan suggested. Commenting upon this report of Gov. Boutwell, the Lon- don Economist, of March 31, said : — Not having seen the evidence, we cannot, of course, say what excuse the minority have for this view ; but it is manifestly most unsound. While there might be little ob- jection perhaps to an international conference to consider generally the subject of establishing an international money — though the feeling in England would be certainly against a conference with a roving commission, even for such a purpose — we can safely say that there is one country in Europe at least, and that the most important, which would not take part in a conference to inquire into the expediency of establishing a fixed relation generally between silver and gold. Public opinion would be so firmly against any such encouragement to bi-metallists, that we shall certainly be curious to see the evidence on which the committee have arrived at an opposite conclusion. We should doubt, also, if there is any evidence of willingness to enter into such a convention in Germany, where the government has only 204 so recently established a gold standard. The best econo- mists in France, so far as we can judge, would also be against such a convention. Professor Francis Bowen, of Harvard College, who was on the Silver Commission with Gov. Boutwell, but who did not attend the sittings at Washington, and did not hear the statements of M. Cernuschi, arrived at a very different conclusion from that of Gov. Boutwell, in respect to Euro- pean probabilties. In his minority report ( concurred in by Mr. Gibson, of Louisiana,) Professor Bowen says : — No one expects that England, Germany, Denmark, Sweden, and Norway will soon reverse what is now their established policy, by again bringing silver into circulation as money. Moreover, the facts already mentioned make it high- ly probable that France, Holland, and Belgium may soon adopt entirely the monetary policy of Germany, as they have already adopted it to some extent. The memorial of the Boston Board of Trade, in favor of advancing towards the restoration of silver, by marching di- rectly away from it into an international conference with England and Germany, is a proof that Professor Bowen states correctly what the ideas of Boston are as to the future action of those countries. The probabilities that Germany will abandon its gold pol- icy diminish as its sales of silver progress, and these have been on a much increasing scale during the last year. The more loss Germany has submitted to in selling silver at a discount of its own making, the more humiliating will a re- versal of its policy be, and the less likely will it be to be entertained. If it is essential to the successful working of the double standard, that the circulation should be " Bi-metallic" in the sense of M. Cernuschi, or in other words, should include both the metals in actual concurrence, it must be admitted that double-standard countries have not heretofore had such a concurrent circulation of the metals, either always or for even the larger part of the time. Or if it would be injurious to have either one of the metals disappear temporarily from the circulation, it must be admitted that the United States 20S would take the risk of such an injury by adopting the double standard, except that silver can always be retained in the minor channels of circulation by the expedient of a token coinage, slightly below weight or standTard. As already noticed, this disappearance, totally or partially, of one of the metals from our circulation, has already happened twice under the double standard in the history of this country. If it shall happen again, and even if the metal which may temporarily disappear, shall be gold, the supporters of the double standard perceive no harm in that. They are not able to see that gold has any other superiority in value to silver, except precisely that which is indicated by its pro- portionate market price, pound for pound, or in other words, they are not able to see that a gold dollar is any better than a silver dollar. If it is essential to the interests of the United States to have a common money with Europe, it is an object impos- sible of attainment, as the larger portion of Europe have no money except inconvertible paper of various descriptions, and the use of such paper is much more likely to increase than diminish on that continent The fact that England and Germany have the single gold standard, instead of being a reason for its adoption by the United States, is a decisive reason against it. Those two nations own the great bulk of our securities which are held "abroad. The more gold we insist upon using in our cur- rency, the less they can have, and the lower their prices will be, and the more corn, pork, cotton, petroleum, and tobacco will be required to pay the debts we owe them. The theories of M. Cernuschi are modern altogether, and wholly unknown to the men who established the double standard in France and in the United States. So far as they involve the idea that the international use of money is the dominating one, or even an important one, .they have never been practically recognized by the statesmen of any country, nor is there any foundation for them in sound reasoning. England in 1816 adopted a single standard of gold, then wholly peculiar to itself, upon domestic consid- 2o6 erations entirely, but well knowing that it was of no con- sequence to its foreign trade, whether it was gold or silver, or both, or paper, as it had been since 1797. No nation has ever consulted with another as to what its money should be, any more than as to what its government or religion should be. Germany consulted with nobody, either when it adopted silver in 1857, or gold in 1871. Undoubtedly it has been accepted as an argument for the adoption of the pre- cious metals, that they had a readily recognized value every- where, but this idea had reference to their value as commo- dities, not as money, and it is also true that this value is not taken away anywhere from ' either gold or silver, by demonetizing it. The idea of an international coinage was formulated for the first time by the Paris Conference of 1867. No single government has paid the least attention to the idle recommendations of that assemblage of theorists, and it is as certain as anything can be, that no government ever will. Germany gave the coup de grace to that Confer- ence, by adopting in 187 1 a totally new coinage of gold, different from that of either France, England or the United States. In Alexander Hamilton's report of 1791 upon the mint, the decisive consideration, wholly domestic, which he urges in favor of the double standard, is the following : — To annul the use of either of the metals as money, is to abridge the quantity of circulating medium, and is liable to all the objections which arise from a comparison of the ben- efits of a full, with the evils of a scanty, circulation. So far in the history of the world, no nation has ever gone into an international conference to determine what its money should be. The treaty of 1865 between the States of the Latin Union is not a case of the kind. Those States al- ready had the same standard, the double standard, and the same relation of the metals, 15.5 to i, and the main object of the treaty was to regulate certain details of coinage, and especially of the subsidiary coinage. Nor is the Convention of 1873 between Denmark and Sweden a case of the kind. Those countries had determined upon a gold standard, and 207 saw fit, from the relations of propinquity and commerce, to regulate their steps towards it, and especially to provide for a common use of their subsidiary silver coinage, by treaty. The men in this country, who demonetized silver in 1873-4, called for no international conference before they consum- mated that act. It was only when the remonetization of silver was proposed, that they perceived the necessity of such a conference, and especially of a conference with nations whose opposition to silver is assured. PAPER NUMBER SEVENTEEN. [First published November, 1877, i.s a communication in N. Y. Banker's Magazine^ The project of creating a s'Jver greenback, by limiting the total coinage of silver dollars. The Secretary of the Treasury adheres to the project of ■silver greenbacks which he embodied in a bill presented to the U. S. Senate last winter. In brief, this project is to ■coin the old silver dollars of 371 1-2 grains of pure silver for the sole account of the Government, and exchange them with such holders of the present paper greenbacks as are willing to make such an exchange, to an amount not ex- ceeding 300 million dollars. The proposed silver greenback is to have the same capacity of legal tender and government receivability as the present paper greenback, that is to say, It is to be a tender for all private debts, and to be receiv- able for all taxes except customs duties. It is plain enough that such a dollar would be, to all practical interests and purposes, only a greenback. It would, of course, possess the intrinsic value of the bullion in it, but its value as money would be regulated by the same limitation of quantity which regulates the money value of the paper greenback, the legal functions of both being the same. Silver, as a metal, would remain demonet- ized as it is now, and debtors would be denied the privilege of using it in payment as they now are. Nothing would be monetized except the particular silver dollars which the 208 Government might choose to manufacture and might also succeed in exchanging for the paper greenbacks now in use. Three liundred million dollars in paper greenbacks cost, . substantially, nothing, and the Government gains the annual per centage of them which is lost or destroyed by various casualties. Three hundred million dollars in silver green- backs would cost the price of the bullion in them. The interest on this cost would be a heavy annual charge. Casual losses of them would be the same to the individual, as casual losses of paper greenbacks, but without any cor- responding gain to the Government. An entirely fatal objection to the silver greenback as pro- posed by Mr. Sherman, is their exportability. It is certain that they would drift out of the country from time to time with the varying currents of commerce, and once gone, the probabilities are that few of them would ever return. Most of them would go to the East, from which there is never any reflux of silver. Others would be received at European mints, and would be demonetized the moment they lost the form of the American dollar. Nothing is more probable than that, at particular junc- tures, stock speculators in the great cities, interested in pro- ducing a tight money market for the time being, would possess themselves of the floating parcels of these silver greenbacks and make a market for them in Asia or else- where. It is said that, from time to time, there is a lock-up of the paper greenbacks for this same purpose. In addition to the fact that there is the same opportunity for locking up the silver geenback, the latter can be exported and its bullion value be thereby immediately realized. The loss of such an operation to the parties concerned might be far less than their gains. To give the country silver greenbacks, limited originally to a specific sum, is to create a money liable and certain to be exported, how rapidly nobody can foresee, and thus leav- ing the country exposed to a great diminution or even total loss of its metallic circulating medium. No remedy can be devised for this fatal defect of the silver greenback project of 209 Mr. Sherman, pxcept the remedy, such as it would be, of in- vesting the Secretary of the Treasury, or some other official, with the power to declare, authoritatively, how many silver greenbacks had left the country and to supply their place with an equal number of new ones. This would substan- tially invest the Secretary of the Treasury, or some other official, with the power to refuse to issue new ones, or to fix the amount of the new coins at his will and pleasure. It would always be a matter of mere guess-work, based on probabilities more or less plausible, how many silver green- backs had disappeared by exportation. A Secretary of the Treasury can guess what he pleases, or if he goes through the form of instituting a commission of subordinates to guess for him, or to relieve him from the responsibility of guess- ing, it is only the form of the thing which is changed and not the substance, as the selection of the guessers lie§ with him, and their tenure of office is only his caprice from day to day. The same observations apply to the constant but unknown loss by casualty of the silver greenbacks. Unless this loss is made good, the money of the country must steadily dwin- dle in amount, and if the Secretary of the Treasury is au- thorized to make the amount good, he must first decide what the loss amounts to. Within wide limits he can determine the amo'unt of this loss at his pleasure, and within the same limits can issue new silver greenbacks at his pleasure, and he is thus made, to a large extent, the master of the fortunes of every man who is either a debtor or a creditor. Within five years after $300,000,000 of the proposed silver greenr backs were issued, there would be the widest divergences of opinion as to how many remained in existence and in the country. An illustration of that is found in the recent case of Germany, where the amount of silver in circulation has been debated ever since the policy of demonetizing it was adopted, and where it is still undecided. Another form of silver greenbacks has been proposed in Ohio, differing from the scheme of the Treasury Depart- ment in the principle by which the amount of issue is to 14 be regulated. Instead of making it exactly^ equal to the amount of paper greenbacks taken in and canceled, the Ohio project is to leave the issue discretionary with the Government, with a view to the issue of only such a quan- tity of silver greenbacks as will keep them equal always in market value with gold coin. Doubtless, within certain lim- its of quantity to be ascertained by trial, silver greenbacks, if made a tender for private debts and Government dues of all kinds equally with gold coins, might be kept on a par in the market with such coins. But if the money of the country, or any portion of it, is to depend for its value merely upon Government limitation of its quantity, it is a manifest folly to manufacture it out of such a costly material as silver, when paper will answer the purpose quite as well. The Ohio project, like that of the Treasury, leaves the metal, silver, demonetized as it is now. Debtors would have no more recourse upon it for the discharge of their obligations than they have now. No abundance in its pro- duction could be of any advantage to them. Of these two silver greenback shemes, that of Mr. Sher- man is the worst. The supposition most favorable to his intelligence is, that he resorted to it in despair of being able to induce Congress to authorize the cancellation of the paper greenbacks by funding. The next thing to that would be the substitution of silver greenbacks, which would be cer- tain to drift out of the country sooner or later. As the metal for the manufacture of silver greenbacks must be purchased by selling bonds, the final, and not very remote, result of the operation would be precisely the same as if the paper green- backs were funded directly and without circumlocution. The Ohio scheme, although not open to all the objections to which that of Mr. Sherman is subject, promises no relief for existing evils. Indeed, no action in respect to silver promises any relief, except its free and unlimited coinage, and making it a tender for all dues to the Government and for all debts, public and private. If it is excluded from receiv- ability at the custom houses, or from being paid to the public creditor, it is stigmatized, degraded, and hopelessly depreciated in advance, and such an issue would only be a repetition of the similar folly of 1862 in respect to the legal- tender Treasury notes. If its coinage is to be under Gov- ernment control it is only a silver greenback, and with no point of advantage over a paper greenback, and there is no compensation for the great cost of purchasing the material for the manufacture of it. It is far better that the remone- tization of silver should be indefinitely postponed than to accept it upon such terms of compromise, or upon any terms of compromise whatever. PAPER NUMBER EIGHTEEN. [First publislied November, 1877, as a communication in N. Y. Banker's Magazine^ The policy of the United States should be to cheapen gold, not silver. Since the discovery of America the movement of silver has been uninterrupted from the Western World to Eastern Asia, which always has a merchandise balance in its favor. The general effect upon the Western World of demonetizing silver, is to force a larger exportation of it to Eastern Asia, and thereby reduce its purchasing power there and increase the prices of Oriental products which are measured in silver. This loss which results to the Western World from the policy of demonetizing silver falls upon Europe to the ex- tent only of the disposable stock of that metal which it pos- sessed when the policy was entered upon. The larger and permanent loss falls upon those parts of the Western World which produce the metal, and notably upon the United States which is the great producer, and probably will be so for an indefinite number of years to come. The same demonetization of silver which cheapens that metal in the Western World enhances the value of gold. And from that enhancement there results to the United States, from the peculiarity of its position as an indebted country, an amount of loss far exceeding the gain it can make as a producer of gold. The annual interest on the foreign debt of the United States is computed at not less than f 100,000,000, or two and a half times its annual gold production. This annual interest is to be paid to the gold- standard countries of Europe, either in gold or in agricul- tural and other products at gold prices, which is the same thing in effect. The wise policy for the United States is to enhance the purchasing power of silver, which is the principal instrument wherewith it acquires the products of the East, and to cheapen gold, in which its large foreign debts must be paid, or which, at any rate, fixes the price at which its products must be used to pay those debts. The policy actually pur- sued, under the legislation of 1873-74, tends to cheapen silver and to make gold dearer. This is not an American policy, but is a British and German policy, and is supported by British and German writers without number, great and small, on political economy. Very naturally they assign every species of reason except the real reason, which is that they are writing in the interest of their respective nations, whose object is to increase the value of the debts due to them. If the tons of gold now piled up uselessly in the Treasury of the United States, which need not keep a single pound of that metal, as it has no occasion to spend any, and owes no debt payable in it, was sent to Europe and its place sup- plied by silver ; and if the United States should at the same time suspend the process of making further drafts upon Europe for gold, prices on that continent would immediately advance, not gradually, but with a leap and bound. As we sell in Europe vastly more than we buy, the resulting an- nual enrichment of this country would be measured in tens of millions. Cotton, wheat, and all our great staples would feel the impulse instantaneously. Every additional ton of gold in the Government vaults is a subtraction from their prices, and every ton liberated would be so much added to their prices. 213 PAPER NUMBER NINETEEN. T First published November, 1877, as a communication in N. Y. Banker's Magazine^ The difficulty France will have to obtain gold to substitute for its silver. Pretermitting for the present the questions— whether silver from Europe would be any more damaging to this country than the same metal from. our own mines, and whether there could be any damage at all in voluntary exchanges by our citizens of their agricultural products and manufactures for the silver of Europe, or of any other part of the world, at such prices as may be current in the market from time to time — it will allay a good many alarms to consider what nations in Europe have any silver to dispose of, and the obstacles they must overcome before they can be in a con- dition to part with what they possess. Briefly, all the disposable silver in Europe consists of the unsold remnant of the German stock, and what is in use as currency in Holland, Belgium and France, all of these being double-standard countries, and the principal amount being held in France. The common estimate of the total metallic stock of France is i,ooo million dollars, two-fifths silver and three-fifths gold. Of the assumed 400 million dollars of silver in France it is supposed that 100 millions would be needed for subsidiary coinage, and 300 millions be disposable in the event of its adopting the single gold standard. [ See note.] The quan- tity of silver disposable by Holland and Belgium together, if they should adopt the single gold standard, would be short of 100 millions. The only important case to be considered is, therefore, that of France. Note.— The most recent estimates put the coined silver in France higher than $400,000,000. A great deal is known to have flowed in within two years from the other states of the Latin Union. On the asth of July, 1878, the silver in the Bank of France amounted to 982,000,000 francs, or $184,616,000. At the Internationa! Monetary Confer- ence, August, 1878, M. Leon Saj", the French Minister of Finance, estimated the coined silver in France at two and a half milliards of francs, or $469,000,000. 214 At first sight it would seem as if disposing of silver was a very simple operation, and as if nothing was needed but customers enough and prices sufficiently satisfactory. The world is large, and without doubt 300 millions of silver could be exchanged by France on fair terms for merchandise, if that country should decide to make such an exchange and did not press the operation too rapidly. But this 300 millions is a part of the currency of France, and that country cannot part with it without a prostration of its prices not to be thought of, unless it can obtain gold in exchange so as to keep up its stock of metallic money. It is obtaining gold in exchange for its silver, which is for France as impossible a part of the operation as it is an indispensable part of it. It is only as gold is obtained in exchange that France will or can give up its silver, and no such amount of gold is possibly obtainable. Undoubtedly it is practicable, although it would be diffi- cult, for either Belgium or Holland, and possibly for both of them, to abandon their present double standard and adopt the gold standard. They are small countries a.nd their metallic demands are not large. But the question of France is an altogether different affair. There are no disposable stocks of gold anywhere, and nearly the entire visible stock is in Great Britain, France and Germany. In France, as already stated, the authorities seem to agree that it is 600 million dollars. In Great Brit- ain, the mean of the estimates is 500 millions. Germany, to August 18, 1877, had struck of the new gold coinage, and it has no other gold coinage, 1,507,644,765 marks, or $376,911,191. The -uniform account of this coinage in its earlier stages was that it was exported about as fast as it was struck. The total metallic stock (May 31, 1877) of the Imperial Bank of Germany was f 133,898,800, of which the larger half was believed to consist of the silver thaler, which is still a full legal tender in that empire. Germany is known to have 100 million dollars in subsidiary silver, and is believed to have more than that in full-tender silver. An estimate of 200 millions in gold is quite as high as the prob- abilities justify. Great Britain will give up no part of its 500 millions, and Germany, instead ol giving up any gold that it now possesses, is constantly exchanging silver for more gold. Where is the 300 millions of gold, without which France cannot abandon the double standard, to come from ? It certainly cannot come from the current mining supply, now down to loi million dollars, and of which, accord- ing to the estimate of the London Economist, three-fourths are needed to maintain the gold coinages and consmmption in the arts, in the countries which coin gold, leaving only one-fourth for the supply of the rest of the world, and that increase of gold needed for the advancing wants of man- kind. England alone requires four millions sterling annually. France, besides its silver coins, has a gold coinage com- puted to exceed that of Great Britain by one-fifth, and must in all ways, in the arts and keeping up its gold coinage, consume at least as much. Large amounts of gold are used in those parts of the world in which it is not employed as money. In the forty years ending in 1875 India absorbed it to the amount of 500 million dollars, or at the rate of twelve and one-half millions per annum. The visible stock in coins and bars, in all quarters, does not exceed the one- half of the 3,215 million dollars mined since the California . discoveries. A sum equal to the other half and all that was in existence before 1848, has disappeared in consump- tion. It is the most childish folly to suppose that without some miraculous new discovery, France can replace 300 mil- lion dollars of silver with gold, and especially while Ger- many is straining every nerve to obtain gold. Without a final abandonment of specie pa^-ments, the only change in the condition of things which could make it possible for France to give up 300 millions of silver, is a change which, from the nature of it, can only take place gradually and in a long period of time. The French have, so far, resorted far less than the English, to the various expedients by which the use of money is economized. The ordinary practice of their trading classes has bepn, and 2l6 is even now, to a great extent, to keep their money in their own possession instead of depositing it in banks. The tendency of their habits, in this respect, is in the direction of approximating to those of their British neighbors, and the time may come when they will employ, relatively, no greater an amount of money, metallic or of any kind. In that case, they could part with 300 millions of silver with- out replacing it with gold, but such changes in national habits are slow, and especially With the French, who seem to be Vivacious and versatile only in politics while in trade and finance they stick to old fashions with a conservative tenacity quite equal to that of the phlegmatic Dutch. Whatever silver France parts with by a change in its habits, will flow in a very gentle stream, and does not threaten an inundation of the United States, or of any part of the world. PAPER NUMBER TWENTY. [ First published as an editorial in the Washington National Republican of Jan. 22, 1878.] Sectional aspects of the silver question. Pending financial questions cannot be properly discussed without a reference to the sectional aspects of the policy of such a fundamental change in the standard of values in this country, as is involved in the demonetization of silver. It is an essential part of the case that while the relation of debtor and creditor exists internally among the citizens of each State, it exists also in a marked degree between the different sections of the country. It is not more true that the United States as a whole are the debtors of Europe, than that certain divisions of the United States, embracing the larger part of its area, and all the more newly-occupied portions of it, are indebted tp a vast amount in the aggre- gate to a smaller division of the United States, where realized capital has had time to accumulate under favoring circumstances of commercial, manufacturing, and banking concentration. The line which separates these two divisions may not be so exactly definite as that which formerly 217 separated the slave and free States, but it is sufficiently distinct for popular and political comprehension. Of the line between the free and slave States, now hap- pily existing no longer, Mr. Jefferson said in 1820 : — A geographical line, coinciding with a marked principle, moral and political, once conceived and held up to the angry passions of men, will never be obliterated, and every new irritation will mark it deeper and deeper. A geographical line coinciding with a diversity of material condition, so marked as that which separates debtors and creditors, is quite as dangerously susceptible of being con- ceived and held up to the angry passions of men, and is quite as certain to be marked deeper and deeper with every new irritation, as is a geographical line coinciding with a diversity of moral and political principle. Ordinarily, in- deed, diversities of mere tlieory and sentiment are much less powerful irritants than those questions which directly affect the personal fortunes of men. Railroads and other public works, and a very considerable proportion of individual real estate at the West, and in a less degree at the South, are loaded by mortgages held by the capitalists of the North-East, who are also the principal owners of the State, county, and municipal bonds issued in all parts of the country. Of the national bonds held in the United States, nearly the whole are held in the North-East, and in whatever excess they are held there relatively to the amount held in other parts of the country, they really make the North-East a creditor of the other portions of the country. Of that large part of the national domain granted to rail- roads, it may be said that it does now exist, or eventually will exist, in the form of equities of redemption, the owner- ship of the incumbrances being in the East. Mr. Eaton, one of the United States Senators from Connecticut, and a resi- dent of Hartford, said, recently : — ' In the little city of Hartford, with a population of fifty thousand people, we have permanently loaned in the West $ 200,000,000. Agencies for investment in Western mortgages are regu- 2l8 larly advertised in all the Eastern cities. The interest on these various forms of indebtedness, in no case low, is a heavy burden even in periods of average prosperity, and leaves at the most but a small margin for accumulation to the South and West. A duplication, or an approximation to a duplication, of these debts, by a contraction of the standard of values, would assume too nearly the proportions of a general confiscation. Undoubtedly, the West and South have great natural re- sources, but not greater than those of Egypt, where millions of people are reduced to the condition of receiving nothing from their government except the bastinado which extorts its taxes ; while the fruits of all their toil and privation, added to the fertility of the Nile, barely suffice for the semi- annual demands of the London and Parisian holders of Egyptian bonds. That the demonetization of silver tends decisively in the direction of appreciating the standard of values, so as to render the position of creditors more advantageous and to augment the burden of debts, is clearly the judgment of both the parties to be affected by it.. Silence in respect to the sectional character of the votes in Congress upon this measure will not keep it from the observation of the country, or prevent the deduction from it of the inferences which are unavoidable. Sectional animosi- ties, the most alarming of all, are to be allayed, not b" silence, but by frankness and by justice. ■^ Nothing has yet happened to entirely extinguish the hope that the North-East will finally decide that it is not discreet to struggle further to hold on to the advantages of the de- monetization of silver obtained in 1873-4. That advantage was gained certainly by surprise, to use no harsher term. To attempt to retain it in the face of the plain will of the nation, manifested by overwhelming majorities in two suc- cessive Congresses, by means of the royal prerogative of the veto by a President elected to his office upon no such issue, is certain to excite dangerous exasperations. The good sense of the North-East may yet be brought to see that 219 it is not expedient to take the risks of the possible conse- quences. The powers of the States over the remedies for the collection of debts, including the foreclosure of mort- gages, are quite undefined, but certainly very large. And it is equally certain that they will be strained to. their ut- most limit to stave off the collection of debts, doubled in their real weight and burden by the abrogation of the an- cient and constitutional standard of the country. Nor can it be disguised that the present value of no inconsiderable part of the national debt rests upon quiet acquiescence in acts of a very questionable character, such as the ( so-called ) credit- strengthening act of 1869, which gratuitously changed the medium of payment of the principal of the five-twenty bonds from currency to coin. It may well be hoped that the good sense of the North-East will at last recoil from the second step of changing coin into gold. That step may prove fatal. The violence with which an injury is repelled should be proportioned to the injury, but exactness of pro- portion is not to be expected. Human passions are to be taken into the account. The reprisals of men smarting under an injustice are not weighed out in the scales of an apothecary. But the moderation and patriotism of the North-East, as well as its prudence and discretion, may be invoked to arrest the dangers which menace the nation. There is known to exist in that portion of the country no inconsid- erable body of thoughtful men who profoundly deprecate the introduction into our politics of this new and por- tentous element of sectional discords and hatreds. PAPER NUMBER TWENTY- ONE. [First published, -February, 1878, as a letter to editors of Washington Republican. ] The right of the States to make foreign silver coins a legal tender. The recent publication of the annual January proclamation by the Secretary of the Treasury, of the value of certain foreign coins, furnishes a fit occasion for calling public at- tention to one of the practicable ways out of the difficulty caused by the neglect of the Federal Government to perform its constitutional duty in respect to coining silver money. The prohibition imposed upon the States to make anything a tender in the payment of debts except gold and silver coins, settles beyond peradventure the question of their power to make such coins a tender. The words used do not limit their power to such coins struck at the American mints. The framers of the United States Constitution contemplated that foreign coins would continue to circulate here as they always had circulated since the first settlement of the coun- try. They provided for it by authorizing Congress to regu- late the value of foreign coins, and to prescribe punishments for the counterfeiting of them. Such coins, and especially foreign silver coins, always circulated largely in this country, as a matter of fact, until 1862, when the metals disappeared altogether. No better coins than the Mexican dollar and the French five-franc piece were ever struck at our mints, or at any mint, and they were always favorite and accepted money in this country until paper expelled both gold and silver. The law of the case is in a nutshell. The power of Con- gress to regulate the value of foreign coins is not an ex- clusive power in its own nature. It is not made exclusive by any prohibition of it to the States. It results that the States may exercise it if the Federal Government shall fail to do so. This doctrine, which is sustained by all the authorities, is laid down in the following language of Chan- cellor Kent's Commentaries, volume i, page 387 : — The mere grant of a power to Congress does not imply a prohibition on the States to exercise the same power. Thus Congress is authorized to establish uniform laws on the sub- ject of bankruptcy, but the States may pass bankrupt laws, providing there be no acts of Congress in force establishing a uniform law on that subject. The States may legislate in the absence of Congressional regulation. It is not the mere existence of the power, but its exercise which is incompati- ble with the exercise of the same power by the States. Down to February 21, 1857, the value of foreign coins in the most common use had been regulated bv various acts of Congress, declaring the value in dollars and cents of each specific coin and changing this declared value, from time to time, as circumstances required. On the 21st of February, 1857, all the then existing acts were repealed, and the following enactment was substituted : — It shall be the duty of the director of the mint to cause assays to be made, from time to time, of such foreign coins as may be known to our commerce, to determine their average weight, fineness, and value, and to embrace in his annual report a statement thereof. Subsequently, on the 3d of March, 1873, the following enactment was made, and now constitutes section 3564 of the Revised Statutes of 1874: — The value of foreign coin as expressed in the money of account of the United States shall be that of the pure metal of such coin of standard value ; and the values of the stand- ard coins in circulation of the various nations of the world shall be established annually by the Director of the Mint, and be proclaimed on the first day of January by the Secre- tary of the Treasury. The proclamation of the first instant, issued under the foregoing section by the present Secretary of the Treasury, fixes the values of the Mexican silver dollar at 99.8 cents ; of the French silver five-franc piece at 96.5 cents ; of the East Indian silver rupee at 43.6 cents, &c., &c. It seems very clear that section 3564 of the Revised Stat- utes, when made effective by a Treasury proclamation issued in pursuamce of it, amounts to an exercise, as to the coins embraced in such proclamation, of the constitutional power of Congress to regulate the value of foreign coins. If, how- ever, this view is not the sound one, then the power of Con- gress in this regard is not exercised at all, in which case the rights of the States to regulate the value of foreign coins may be resumed. The States may, therefore, if they choose to do so, declare that any of the silver coins named in the Treasury procla- mation shall be a tender in the payment of debts at the rates specifisd in the proclamation. In any view, the validity of such State laws would be sustained. They would be valid as adopting and conforming to a regulation by Congress of the value of foreign coins, if section 3564 of the Revised Statutes is such a regulation. And they would be valid if section 3564 is held not to be such a regulation, as in that case the power of Congress would not be exercised, and the original powers of the States in the premises would be revived. The persons, whoever they were, who manipulated the coinage title of the Revised Statutes, have inserted words declaring that no foreign gold or silver coins shall be a legal tender in payment of debts. No such law has ever been passed by Congress, and those words are fraudulent interpolations. They are, however, without legal effect, as Congress has Tio constitutional power in respect to foreign coins, beyond regulating their value, and providing penalties for counter- feiting them. There can be no question of the right of the States to make the subsidiary silver coins, struck at the United States mint, a tender without limit in the payment of debts ; but the quantity of such coins is too small to afford any sensi- ble relief. On the other hand, the relief which is possible from foreign silver coins is unlimited. Not only would the entire current coinage of the Mexican silver dollar be diverted to this country, but great amounts of that coin, now scattered in various parts of the world, would also be .attracted to the United States, until its value here as money was reduced to its bullion value elsewhere. At present, we should attract no silver five-franc pieces from France, be- cause they are now kept at a parity with gold by the French double standard and the closure of the French mints to silver ; but French laws, like other laws, may be changed. The mints at Calcutta and Bombay are, however, open to silver and are likely to remain so. They are British mints and every whit as trustworthy as the mints of Philadelphia and San Francisco. The head of Queen Victoria would be as pleasing, or as little distasteful, which- ever form of expression luay be the most acceptable, in sil- 223 ver on an Indian rupee as in gold on an English sovereign. Undoubtedly, the American coat of arms would be most agreeable to American eyes ; but if we are to be deprived of American silver coins, it is consoling to know that foreign silver coins are within the reach of the States. PAPER NUMBER TWENTY- TWO. X First published February, 1878, as a communication in the N. Y. Banker's Magazine^ The question of a double, or single standard, a new one for the present generation in the United States. Real nature of a double standard. The concurrent circulation of the metals not important. The alleged necessity of conforming to the London standard.. Making a heavier dollar. That particular phase of the currency problem which is involved in the choice between a double standard of the two precious metals and a single standard of one of them, has not been popularly discussed by the present generation in the United States until within two years. Indeed, it was never much discussed in this country, except in and about 1830, when a marked divergence between the market and legal relations of the metals, which had continued for sev- eral years, attracted attention to the subject. When our first National coinage law was passed in 1792, the concurrence in favor of the double standard, of the two great intellects in General Washington's cabinet, which reached opposite con- clusions on so many other subjects, took this particular question out of the field of controversy. When Mr. Hamil- ton and Mr. Jefferson agreed nobody else was likely to dis- agree. From 1 82 1 to 1830, the premium on gold had ranged as high as from five to eight per cent., and had for that space of time completely expelled gold from the actual cir- culation. This induced the then Secretary of the Treasury, Mr. Ingham, to recommend, not very strenuously, but still distinctly, a single standard, and by a very decided prefer- ence, that of silver. This recommendation, however, found little favor. Albert Gallatin opposed it with his accustomed vigor, apparently unabated by his advanced age, and it was 224 speedily crushed and put at rest by an adverse report made to the United States Senate by Mr. Sandford of New York. With the exception of a letter in favor of the gold standard, written by Abbott Lawrence, when he was Minister to Eng- land, and which would naturally be ascribed to the well- known disposition of Boston to adopt and copy everything British, nothing was heard here of a single standard until 1852, when the market and legal relations of the metals had again diverged — but this time by a premium on silver. And it was not then heard of in the sense that anybody proposed it, but because it was discussed in a report of the Finance Committee of the United States Senate, as a calamity " dis- astrous to the human race," and in respect to the best means to avoid it. The measure proposed by that committee, and which was passed through all the stages of legislation early in 1853, was to diminish the weight of the smaller silver coins and thereby keep them in circulation, notwithstanding a temporary premium on that metal. This expedient, not in contravention of the double standard, but for the express and avowed purpose of preserving it, is familiar in the prac- tice of France and other double-standard countries in Europe These discussions of 1830 and 1852 in the United States had been forgotten, and there was very little on the subject in the modern English writers upon political economy, hardly anything in fact beyond a few characteristically shal- low and dreary platitudes by John Stuart Mill. Indeed there was nothing in the English language covering the modern facts of the situation, except Cobden's translation of Chevalier's Fall of Gold. That book, brilliant and inter- esting twenty years ago when it was written, had, by reason of the failure in the then anticipated production of gold passed as completely into the limbo of things lost on earth, as the somewhat earlier and quite as brilliant brochure of De Quincy, demonstrating that gold was soon to become abso- lutely valueless, or as Dr. Lardner's demonstration of forty years ago, that the coals necessary to propel steamships across the Atlantic would exhaust their carrying capacity, and disable them from carrying anything else. 225 But if the American people have entered so recently upon this discussion, and with so few aids in the way of already collected facts and reasonings, they have shown great apti- tude in grappling with it, and in arriving at sound results. A summary of the leading points of this discussion may be useful. REAL NATURE OF A DOUBLE STANDARD. It is objected to the double standard, that it involves an attempt by governments to fix the market values of gold and silver, and that it is clearly impossible for governments to fix the market value of anything. In various forms of language, it is said that if law fixes the relation of the metals at fifteen to one, fifteen and one-half to one, or six- teen to one, the facts of the market will fix it at other fig- ures from time to time, without regard. to the will of legis- lators. Undoubtedly this is true, but the law of the double standard does not undertake to do any such absurd thing as fixing the values of gold and silver, either in relation to other things, or in relation to each other. The American law of the double standard, when it was abrogated in 1873-4, did not require the owner of sixteen pounds of sil- ver to exchange them for one pound of gold or vice versa, nor did it require those who offered any species of property in the market, to accept indifferently silver or gold in that proportion. The owner of either metal was left free to put his own value on it, and the owner of any commodity who offered it for one pound of gold, might demand for it twenty pounds, or any other weight, of silver. The Ameri- can law neither declared that sixteen to one was the market relation of the metals, nor did it undertake to guar- antee that such a relation, if it happened at any time to exist, should continue permanent. It did nothing of that sort. It simply prescribed that in the payment of debts, sixteen pounds of coined silver should be the equivalqnt of one pound of coined gold and that the choice of the medium of payment should belong to the paying party. Such a law may be wise or unwise, but it clearly involves nothing impossible to be regulated by law. From the set- 's 226 tlement of America down to 1873-4, we never had any other law, and the execution of it never proved to be impracti- cable. But while the law of the double standard undertakes to establish the equivalency of the metals only in the one single particular of their employment in the payment of debts, and attempts no such absurdity as declaring or prescribing their market equivalency, it has, nevertheless, been shown by a long experience, that there is a strong and constant tendency toward an approximation of the market and debt-paying equivalencies. This has been most remarkably shown in the history of this country, under the extreme and violent alter- ation of the legal equivalency from fifteen to one, as fixed in 1792, to sixteen to one as fixed by the acts of 1834-7. Neither ratio conformed when made, or during its continu- ance, to the current market relation of the world, but not- withstanding this, the legal relation so influenced the market relation in this country, that gold and silver circulated con- currently the larger part of the time. Mr. John Sherman constantly affirms that gold was at once expelled from our active currency by being underrated in the coinage act of 1792, and did not circulate at all until 1834. He gives no authority for these statements, and they are complete errors. Mr. Ingham, in the report of 1830, before referred to, states that the premium on gold in our markets did not manifest itself until 1821, when the Bank of England made a demand for it wherewith to resume payments. Mr. Ingham must have known what the fact was when he said : — Prior to the year 182 1, gold and silver generally bore the same relation in the market of the United States, which they did in the mint regulation. Appended to Mr. Ingham's report is a paper from Dr. Samuel Moore, the then Director of the Mint, who states that after a diligent search of tables of exchanges, he could find "«^ trace" of any premium on gold before 1821. Mr. Ingham ascribes any diminished use of gold prior to 1821, not to a divergence between the market and legal re- lation of the metals, but to an increasing use of bank notes, 227 •which tended to expel coins of both kinds, and especially gold. The writer of this article is old enough to have learned personally from the men of that day, that gold was common in the circulation certainly of the Eastern States, in the early part of thie century. THE CONCURRENT CIRCULATION OF THE METALS NOT IM- PORTANT. It is objected to the double standard, that if the market relation of the metals varies sensibly from their legal rela- tion, they will not be maintained in actual concurrent cir- culation, and that the money in practical use will consist of only one metal. Obviously this is true, and it may also be admitted that the market and legal relations of the metals have often varied in times past in double-standard countries. But suppose it to be true, that under the double standard the two metals cannot be kept in actual concurrent circulation more than one-third, or even one- fourth of the time ; how can that be complained of by the advocates of the single standard, which does not allow the two metals to circulate concurrently any part of the time? And why should it be complained of by anybody ? It is as undesirable as it is impossible to have two metals circulate concurrently, when one is sensibly dearer in the market than the other. The desirable thing, and the obviously sen- sible thing, to do in such a case, is to exchange the dearer for the cheaper, which will perform the same monetary functions, and realize the profit on the exchange. Such a change in the metal preponderation in the circulation of France, has occurred in recent times, and we have the authority of the present French Baron Rothschild for say- ing, that nobody in that country suffered inconvenience from it. Such a change occurred here after 182 1, when all the gold left the country, of which case we have the fol- lowing account in a letter of Samuel White, cashier of the Baltimore branch of the United States Bank, printed with the report (1830) of Mr. Ingham, already referred to: — If any evil, or real inconvenience, has been experienced, I must confess my inability to perceive it. The matter ap- pears to resolve itself into the simple calculation, virhether or not we have sustained pecuniary loss by the conversion of the gold portion of our specie into silver coin, at the rate of five per cent, premium, which was obtained. The proposition, which is true, that under the double standard, the cheaper metal drives out the dearer, is changed into a proposition which is not true, by the verbal thimble- rigging of saying that in that case, the bad money drives out the good. The invincible advantage of the double stand- ard is, that it keeps the best metal in circulation, because the cheapest is the best in almost all cases. It is so, because, in almost all cases, the cheapest more nearly preserves the existing status of prices, and prevents an unjust enhance- ment of the burden of debts and a perversion of the equity of contracts. Albert Gallatin, in his answer made in 1829 to the complaint that the double standard compelled credit- ors to accept always the cheaper metal, considered that it was sufficient to say that a divergence of the market relation between the metals was as likely to be caused by a rise in one of them, as by a fall in the other, and that as the choice of the medium of payment must necessarily be given to one or the other party to money contracts, it would be no more just, and less expedient, to give it to the creditor. Beyond question, that was a sufiicient answer. It rests upon the impregnable principle of the Code Napoleon, that every evenly balanced case shall be resolved in favor of the debtor. But it is by no means so strong an answer as is warranted by the facts of experience since 1829. So far, divergencies in the relative market relation of the metals have arisen in- variably from a rise in one of them. That is true of the divergence since 1872-3. Silver will purchase more labor, more real estate, and more of the general average of com- modities, in every country on the face of the globe, than it would five years ago. To-day it is gold which is the bad money. It is bad in every sense and aspect in which money can possibly be bad. It depresses prices, cripples, industry, aggravates the burden of debts, and unjustly enriches one set of men at the general expense of the community. The 229 watchword of the advocates of the gold standard is " hetter money," by which they mean more valuable money. But it is plain that money can only rise in value, as other things fall in price, and that the money which is "better" for those who receive it as creditors, must be worse for those who have to pay it as debtors. Alexander Hamilton was not in search of "better money" in the gold-standard sense of that phrase, when he framed the coinage act of 1792. His object was, so far as he could fairly reach it, an abundant money, the language of his report on the mint being : — To annul the use of either of the metals as money, is to abridge the quantity of circulating medium, and is liable to all the objections which arise from a comparison of the benefits of a full, with the evils of a scanty, circulation. That the actual concurrent circulation of the two metals is an essentially important feature of the double standard, is a fancy peculiar to M. Cernuschi, and has never received the slightest countenance from the supporters of the double standard, either in France or in the United States, in any period of their history. When the French circulation was substantially an exclusively silver one, as it was before the California discoveries, nobody in France proposed on that account, or on any other account, to abrogate the double standard. And although since gold has become predomi- nant in the French circulation, the abrogation of the double standard has been advocated, the reasons given have been of an altogether different character. The principal reason gjven, and doubtless the only^real one, has been the appre- hension that the increased production of the metals threat- ened a fall in the value of money, and a rise in wages and property, unless one of the metals was demonetized. In this country, gold entirely disappeared between 1821 and 1834, and silver largely disappeared between 1850 and 1862, but during the first of those periods, the abandonment of the double standard was only feebly proposed, and during the second period, it was not proposed at all. When the single standard was adopted in 1873-4, both of the metals were out of circulation. These illustrations from our own history, and from that of France, prove decisively that it is a 230 modern notion altogether, that the advantages of the double standard are lost by the temporary preponderance, or even by a long continued preponderance, of one of the metals in the active circulation. It is sufficient that the double standard secures, either the actual concurrent circulation of the two metals, or the cir- culation of that one of the two which best preserves the stability of prices at the time. And, furthermore, even when only one metal is in actual circulation, the other metal is potentially money, is always within reach, and will always flow in when it is wanted. As either metal will dis- charge legal obligations, the debt-paying power of all com- modities is thus the highest price which they will command in either metal in any country, since commerce reaches everywhere. There can be no such thing as a corner on one of the metals when both are legally available. And while the alternation from the use of the one to the use of the other can never involve any inconvenience, it. cannot possibly take place except when it is induced and attended by a profit. THE ALLEGED NECESSITY OF CONFORMING TO THE LONDON STANDARD. One of the most singular episodes in the silver discussion in this country, is the novel theory, that because gold is the English standard, and because London is the centre of finan- cial and commercial exchanges, all other nations must adopt the same standard. But England has had the gold standard since 1821, or more than half*a century before this theory was heard of in this country, and the pre-eminence of Lon- don, in the particulars mentioned, was an existing fact during all that time. Indeed this pre-eminence was rather greater fifty years ago than it is now. This theory has not been heard of in Europe to this day. In none of the discussions there, has it ever been alleged that similarity of standards facilitated international trade in general, or that dissimilarity in standards obstructed such trade in general, nor has it ever been alleged that the position of England was so com- manding that a conformity to the English standard was 231 necessary, or in any degree advantageous. No European' nation has ever been influenced, apparently, by a desire for conformity in its standard to that of neighbors, near or re- mote. With the exception of Portugal, which is commer- cially an English dependency, no European nation adopted the standard established in England in 1821, until Germany did it in 187 1, and that Germany did not then do it from any. desire to have a standard like that of England, is proved beyond all controversy, by the fact that in 1857 it demone- tized gold. It is entirely well known that Europe, and es- pecially Germany, has made progress toward financial and commercial independence of London during the fourteen years following 1857. Undoubtedly, the governing classes in Germany having decided that the general demonetization of one of the metals would promote their interests, demone- tized in 187 1 the same metal which England had already demonetized, as the only means of effecting the object of driving one of the metals out of the European circulation, and thus enhancing the value of all European credits. But this view does not at all involve the theory that a conform- ity to the London standard was advantageous in any way to the trade of Germany. Not only was the gold standard not adopted in Europe because England had that standard, but the two countries on the continent of Europe most distinctly commercial, Holland and Belgium, abandoned the double standard ( Hol- land in 1847, and Belgium in 1850) and adopted the single silver standard ( maintained by Belgium until 1861, and by Holland until 1785) without apparently a suspicion that a conformity to the standard of London was in any way important. The persons in Holland, Belgium and France, who now insist upon following the example of Germany in demonet- izing silver, do not take the ground, either that an iden- tity of money standards among European nations is in itself desirable, or that a conformity to that of England is desirable. Their ground is the altogether different one, that the demonetization of silver by Germany, added to 232 the prior demonetization of it by England, will cause a depreciation of that metal, not preventable by other nations, and incompatible with its usefulness as money. This view has nothing in common either with the view that an identity of standards is internationally useful, or with the view that a conformity to the London standard is necessary, or even advantageous. That European opinion upon both these last questions is the other way is shown by European practice. M. Mees, President of the Bank of the Netherlands, was one of the two delegates from Holland in the Paris Con- ference of 1867. In the Proces-Verbaux of the third sitting: — M. Mees declared himself, for each State by itself, a sup- porter of a single standard, but he saw serious inconveni- ences in the adoption by all the countries of Europe of the same standard, because that would exclude one of the metals completely from the European circulation, whereas he considered it useful to preserve them both. He would agree neither to a standard of silver exclusively nor to a standard of gold exclusively, {ni Vetalon d^ argent exclusif, ni I'etalon d'or exclusif!) It is apparent that the President of the Bank of the Netherlands, as late as 1867, did not suspect and had never heard that a diversity of money standards among the nations of Europe was objectionable. He knew from the experience of silver-using Holland, separated only by a narrow chan- nel from gold-using England, that there was no disadvan- tage in it. What he saw inconvenience in, and serious inconvenience, was in expelling either metal from the Euro- pean circulation where both were needed. From this brief historical review of monetary opinions here and in Europe, it is apparent that both the suggestions that commercial nations should have an identity of stand- ards, and that all of them must conform to that of London, from the financial pre-eminence of that city, are mere after- thoughts. It is certain that nobody made either suggestion for fifty years after London adopted gold. And it is not doubtful that neither suggestion would have been made for another fifty years, if certain interests had not determined to demonetize silver for the altogether different real objects of diminishing the mass of money reducing the prices of property and labor, and aggrandizing the position of the creditor and income classes of nations. The absurdity of both these suggestions is as plain as is the fact that they are both afterthoughts. Money, in its proper sense of legal tender, is something essentially and necessarily local. Legal-tender laws have no more operation extra-territorially than other laws, and it is only by formal treaties that money could be made international. As be- tween nations coins pass only as commodities and at the market value of the bullion in them. The legal-tender laws of the country receiving them may ailect this market value somewhat, but after all it is the market value, as settled by all the influences which control it, which governs the rate at which they are accepted. One hundred pounds avoirdu- pois of silver from the United States, where it is not a legal tender, will command the same price in London as one hundred pounds advoirdupois of silver from Mexico' where it is a legal tender. Nor has the market value of silver in London, since that metal was demonetized by English law, €ver varied appreciably from its market value in those parts of Europe in which it could be coined into money, nor can it ever so vary hereafter so long as commerce is free. Mr. A. A. Low called the attention of the United States Mone- tary Commission to the fact that our silver sent to China would command the same price there whether we demonet- ized it at home or not, but his own attention seems never to have been called to another fact, equally obvious, that any gold we might possess, whether obtained by commerce or from our mines, would sell in London at a price entirely unaffected by the state of our own circulation, whether it consisted of gold, or silver, or paper. International trade is an exchange of market values, and this is as true of the precious metals as of anything else, and for the purpose of reckoning and of accounts, there is no greater difficulty in translating the money of one country into that of another than there is in translating the weights and measures of one country into those of another. Sensible people will 234 take the world as they find it and make the best of it. A uniform money for all nations is as idle a dream as a uniform language and is of far less practical importance. As noticed in the report of the United States Monetary Com- mission, different moneys are used even in the same empire without inconvenience, as in the case of England which uses gold while India uses silver, and in the case of the Atlantic States of this Union which use greenbacks while the Pacific States use gbld. MAKING A HEAVIER DOLLAR. The silver discussion has been fruitful in suggestions. One of them is to remonetize silver on the basis that gold at its present artificially augmented value, is the true measure, and to add enough silver to the silver dollar to make it equal to the gold dollar, at the present relative market valuations of the two metals. This proposition is, in hriei, to add, say, nine per cent, to the weight of the silver dollar. This extraordinary proposition has not yet been made in Congress, and it is doubtful if it ever will be. Members of Congress have a wholesome fear of a call for the yeas and nays, and will avoid, if they can, the responsibility of a recorded vote to add one hundred and fifty-three millions to the bonded debt of the nation, and in the same proportion to debts of all other descriptions. The gold minority of the Senate Finance Committee were ingenious enough and persistent enough in proposing every amendment to the House Silver Bill which had any appear- ance of plausibility, but they did not venture upon tliis one of making a heavier dollar, in plain violation of the sanc- tity of contracts. Everybody knows that silver is now quite as valuable, in relation to anything but gold, as it was when it was demonetized in 1873-4, and that to remon- etize it with an added weight sufficient to carry it up to the present rating of gold, would be simply to confirm and perpetuate the injustice of the demonetizing policy. And nobody really doubts that silver, remonetized at its old weight, with free coinage, would in no long time recover its old relation to the other metal. ^35 What makes this suggestion especially objectionable in this country, is the known and admitted fact that from 1834 down to 1873-4, there was too much silver in our silver coins, as conipared with the amount of gold in our gold coins. The silver dollar was worth 103 cents in gold in 1873. The legal relation in the European countries having the double standard, has been during this century fifteen and a half to one, and it was this European relation which gov- erned the general markets. When we made the relation about sixteen to one, as was done by the coinage act of 1834, slightly modified by the act of 1837, we created this difference of three per cent, between our silver coins and our gold coins. That our silver dollar in 1873 was worth 103 cents in our gold dollar, was an expression in that form of the fact that the world's market relation of gold and sil- ver was fifteen and a half to one, whereas our legal relation was sixteen to one. To add now to the weight of the silver dollar, instead of rectifying a former mistake, would aggra- vate it and render it hopeless. To add to the weight of the silver dollar nine per cent., is to establish a legal relation of about seventeen and a half to one, which would make it certain for all time that no silver could ever circulate in the United States. The thing really to be feared is, that silver, if remonetized at the former relation of sixteen to one, will before long reach such a premium above gold, as to again impede its circulation. It is absurd to pretend that the mar- ket relation of the metals, when one of them is relatively depressed by being deprived of the money function, and vAien the other is both relatively and positively aggrandized by being exclusively invested with the money function, is any criterion of what their relative market value would be if both were equally money. But it is precisely that absurdity which is involved in the proposition to add nine per cent. to the weight of the remonetized silver dollar, because de- monetized silver is nine per cent, less valuable than gold. 236 PAPER NUMBER TWENTY- THREE. [First published May 14, 1878, as a communication in tiie N. Y. Stockholder \ The gain to debtors from the restoration of silver, is not merely the difference in the values of gold and silver, but the. far more important advantage of reducing the value of gold. The gain to the debtor on coin contracts, and the corre- sponding loss to the creditor on such contracts, from the remonetization of silver in the United States, are frequently described as consisting of and measured by the difference in value between a silver dollar and a gold dollar. That view of the case is expressed in various forms of language, such as the following from the London Economist of April 20, 1878:— The difference in cost to the people of the United States between resumption on an exclusively gold and an exclu- sively silver basis, can obviously be no greater than the difference in prime cost between the value of the metals employed. In truth nothing can be clearer than that debtors in the United States on coin contracts, including the government, gain by the remonetization of silver, not merely the differ- ence in value between gold and silver dollars, which may be greater or less, and at times may disappear altogether, but also that reduction in the value of gold which results from the abandonment by the United States of a single gold standard and its adoption of the double standard. This last gain, which the London Economist wholly overlooks, is be- yond comparison the most material and important of the two, and it is the only one of the two which may be relied upon at all times. Our experience has been that, while at certain periods there has been a divergence between the market and legal valuations of the two metal moneys, at other periods this difference wholly disappears or becomes inappreciable. Whenever this last condition shall again occur, debtors on coin contracts will no longer gain any- 237 thing from a difference in values of gold and silver dollars. But they will never cease to profit from that far greater reduction in the value of gold, which must forever result from the substitution of silver for gold in the metallic money in use in the country. What the precise percentage of this production may be, cannot be fixed, but on a general view of the facts in the case, it must be very great. An approximate estimate of the gold money ( coin and bars ) in the Western World, which is the only part of the world using such money is — France $ 600,000,000 Great Britain 500,000,000 Germany 250,000,000 United States 200,000,000 Elsewhere 150,000,000 f 1,700,000,000 Whatever the stock of gold money may be, nobody sup- poses it is increasing, or that it will increase, unless there is a material augmentation of the current supply, which has been substantially stationary for several years at $ 100,000,000 per annum. That this is no more than suffi- cient to keep the stock good, against absorption in jewelry and the arts, and against the waste and loss of coinages, is maintained by most if not all authorities on the subject. That it was at any rate not more than sufficient to increase the gold stock in proportion to the increase of population and commerce in the countries using gold money, is showit by the fact that the advance of gold prices was distinctly checked in 1865, and that these were already sensibly declin- ing when the German policy of December, 187 1, precipi- tated and aggravated their fall. The London Economist has constantly insisted that the new drain of gold by Germany, could be in no part met by the current annual supply, but must be, to the full extent of it, a depletion and reduction of the existing stock of gold, and with all the inevitable effects upon prices and commerce of such a depletion and reduction. 238 With the experience we have had of the pressure on the gold markets, rise in the value of gold and fall of gold prices, resulting from the German gold movement, we can be sure that the difference to the gold markets must be very great ^between a continued accumulation and retention of gold in the United States, and that giving up of gold by the United States to Europe, which is rendered possible by, and is certain to result from, the silver legislation of Feb- ruary 28, 1878. To resume coin payments on an exclusively gold standard and to maintain such resumption, cannot be supposed to require much less, than ^300,000,000 in gold, in the reserves of banks and public treasury and in the hands of the people. That is only three-fifths as much gold as Great Britain and Ireland use, with three-fourths of our population, and although their employment of money of both kinds, paper and metallic, is and must be much less per capita than in this country, with its greater area and less complete banking facilities. Undoubtedly, the United States can get along with a less proportion of coin to paper money than Great Britain, as we are accustomed to the use of much lower denominations of paper -money notes, but it seems rash to assume, taking all circumstances into the account, that we can get along with less than three-fifths of as much coin as is required in Great Britain. Whatever amount of gold would have been required to commence and maintain gold payments in this country, a large part of it, and possibly the whole of it, may be made available for export to Europe, by the substitution of silver under the law of February 28, 1878. This substitution will be gradual, but that only postpones, and in no wise changes the character of the final result. There is no limit to the amount of silver which must and will be coined under that law, although the monthly rate of coinage is restricted. This restriction itself arises only from the circumstance that the President is opposed to the use of silver at all as full money, and that in order to obtain the two-thirds vote needed to pass any silver law over his veto, it was neces- sary to admit this restriction into the law. But the Presi- 239 dent may change his mind, and at any rate, his term of office will expire in less than three years. The existing restrictions in the silver coinage is thus only an accidental and temporary fact, and will disappear in no long time. But the utmost effect of the restriction, is to make the substitution of silver for gold more gradual than it would otherwise be. The substitution will steadily go on, unless the market relation of the metals in this country becomes the same, or nearly the same, as the legal relation, which will require an advance of about ten per cent, in the silver market. Such an advance is not to be looked for, if our present restriction upon silver is persisted in, until time enough has elapsed to make our coinage considerable even under that restriction. In certain contingencies, such as the further progress of silver demonetization in Europe, any such advance as ten per cent, in the silver market may be postponed for years. Until that advance is fully reached, gold will flow out of the country, just in proportion as the coinage of silver provides a substitute, and in the end, if that advance is never reached, all the gold that is now in the country, as well as the current production, will flow out. At all events, a very large substitution of silver for gold must take place, because there is no other existing cause for a rise in silver except its absorption in our coinage. To say that the gain to the government and other debtors upon coin contracts in this country, from the remonetization of silver, is. limited to the present difference of ten per cent, between the two metals, is to ignore the enormous appreci-. ation of the value and purchasing power of gold which would result from our use of it as the sole standard. Escape from that appreciation is a far greater relief to debtors on coin contracts, than the mere difference of. ten per cent, between the two metals. The margin between a ninety-cent dollar and a dollar with one hundred cents in it, would never have provoked the fierceness of passion which marked the struggle attending the passage of the law of February 28, 1878. The silver dollar, when its coinage has had time 240 to make good progress, instead of being a ninety-cent dollar, will not contain at the outside more than seventy-five cents, or one-hundredth parts, of such a dollar as we should have had, if silver had not been remonetized. The gain to debt- ors on coin contracts, instead of being ten per cent., is at least twenty-five per cent. Whatever the gain may be, it impairs no right of creditors, who lose nothing except a profit to which they were not entitled. We have in this country an immense mass of debts, nota- bly railroad bonds, but also many municipal bonds, in which the thing especially promised is gold. On the theory of the London Economist, the debtors in such cases gain nothing by the remonetization of silver. Undoubtedly they do not gain, as debtors on coin contracts do, the difference between the two metals, but they participate equally in the much larger gain of the reduction in the value of gold which results from its being no longer in demand as the sole lawful me- tallic money of the United States. If to this reduction in the value of gold, which is certain to occur, there be added that reduction which may result from the check which will probably be given to the progress of European silver demonetization, by the overwhelming and decisive repudiation of that policy in the United States, the importance of the legislation of February 28, 1878, can hardly be overstated. PAPER NUMBER TWENTY- FOUR. [First published June 4, 1878, as a communication in the N. Y. StgckholderP^ The present rule under the double standard, giving to the debtor the option of the metal in which to pay, compared with the pro- posed new rules, giving the option to the creditor, or obliging the debtor to pay both metals in some prescribed proportions. It is objected to the double standard of gold and silver, that it is as absurd to have two measures of value, or two mediums in which contracts to pay money may be dis- charged, as it would be to have two clocks to measure time, two yard-sticks to measure cloth, or two bushels to measure .grain. 241 Inasmuch as clocks vary, from the unavoidable imper- fection of machinery, it is quite plain that a standard time could not be fixed by two clocks, unless there was some prescribed rule by which the governing time should be de- duced from them. But that purpose could be effectually accomplished by either one of the three following rules : — That the governing time should be that indicated by the fastest clock ; That the governing time should be that indicated by the slowest clock ; That the governing time should be the mean of the two clocks. The last-named method of determining time is actually adopted at sea, on board many ships and steamers, by having two or even more chronometers, and taking the mean of the time which they indicate. Such a mean is undoubtedly more accurate than the time indicated by any one chronometer singly. In like manner the public^ authority, in any country, might prescribe two bushels, and two yard-sticks, one of wood and one of metal, having in view the different shrinkages and expansions of those substances from cold and heat, and de- clare that the bushel and yard-stick, according to which contracts should be performed, should be the larger, or the smaller for the time being, or the mean of the two. In the supposed cases, there would never be at any one time more thnn one standard bushel, or more than one standard yard- stick, according to which contracts to deliver quantities of grain or clo'th could be performed. There would of course be at all times two bushels and two yard-sticks, and they might be of different capacities, or lengths, but there would be a plain legal rule to determine which bushel, or yard- stick, must be used at any given moment. So far in the history of the double standard of metallic money, the rule has always been to make the money of payment at any given moment, that one of the two moneys which the debtor chooses to pay, and of course he always chooses and pays the cheaper, whenever there is any sensi- i6 242 ble difference of market value between the two. In that way, the cheaper money becomes the sole money in use, > and the dearer ceases, for the time being, to be anything but a commodity, and is bought and sold as such, at vary- ing rates of premium. But there is never any confusion, or uncertainty, as to what is the money of payment for the time being, whether it consists of the two metals indiffer- ently, by reason of their relative legal and market valua- tions being substantially alike, or of one metal only, by reason of a sensible divergence in those valuations. The money standard in use is always single, definite and incapa- ble of being misunderstood. There are never any two different moneys under the double standard, but only one money, consisting sometimes of one metal, sometimes of the other, and only of both when their value is the same. In the case of both the metals being legally money, it would be quite practicable to secure a single standard money at any given moment, in two other modes, than the mode heretofore always adopted. Instead of giving to the debtor the option of the metal in which to pay, the option might be given to the creditor of determining the metal in which he alone would receive payment, and in that case, the money in actual use would be always the dearer metal. Or, the rule of law might be that payments should be made in both metals in some prescribed proportion, as, for instance, in one-half of each. Either of these two rules would as completely and effect- ually accomplish the object of securing a fixed, certain and definite money of payment at any given moment, as does the rule, always heretofore adopted in double-standard coun- tries, of giving to the debtor the choice of the metal in which to pay. But this last rule, which has approved it- self in practice to the general judgment of mankind, will be found to be the best possible one, on the most rigid scrunity and criticism to which it can be subjected. Where the function of money is given to each of two metals, the effect of giving to the debtor the option between 243 them in making payments, is, of course, to cause the cheaper one to be most commonly used, and the dearer one to pass, more or less, out of circulation. If the difference of value is decidedly marked, the cheaper drives the dearer entirely out of use. The double standard, with the right of option in the debtor, operates therefore directly upon the relative demand for and supply of the two metals, and it operates in a manner tending constantly to equalize their value. It causes increased demand for the cheaper metal, and at the same time extinguishes the demand for the dearer metal as money, and supplies the latter as bullion to the home and foreign markets. It is said that the relative market valuation of gold and silver, or of any other two commo- dities, cannot be fixed by law, but must be controlled solely by supply and demand. There is just enough truth in that to make it plausible. Those who talk and write in that way, forget that in this case, as in many others, law can act upon both supply and demand, and can thereby influence prices, although it may not be able absolutely to control them. Law cannot make the market ratio of gold to silver 15 1-2 or 16 to i, by establishing either of those ratios at the mints; but, by making the money in use always the cheaper metal, the law can establish a constant tendency in the market ratio to approach the mint ratio. It does this by creating an increased demand for the metal which is the cheaper for the time being, and by creating a new supply of the dearer metal by relieving it from use as money. The relative commercial value between gold and silver is fixed in the markets of the world. No one country can control it, although every country, which uses metal money, influences it to some degree, depending upon its relative commercial importance. It is historically true that France was able under the law of 1803, establishing the double standard w'ith free coinage at the ratio of 15 1-2 to i, to maintain that as the substantially unfluctuating market ratio of metals in Europe for seventy-one years, and until the law was changed in a vital particular, by a limitation imposed upon the silver coinage. 244 The double standard, with the option in payments given to the debtor, is a force always at work, reducing the di- vergence between the metals to a minimum, and under fa- vorable circumstances preventing any degree of divergence. But to give the option to the creditor, and thus throw the demand, principally or solely, upon the dearer metal, would tend to cause it to rise still higher in relative value, and make the divergences of the metals wider and more per- manent. The proposed rule, that the money of payment should consist of both metals, in some prescribed proportion, is not open to the objection that it would aggravate any divergence of the metals which might manifest itself in the market. In that respect it would not be so mischievous as a rule giving to creditors the option of the metal to be used in payment. But on the other hand, it has no tendency to- mitigate or correct a divergence of the metals, and in that respect would work far less beneficially than the old and tried rule of giving to the debtor the option of the metals in making payments. The practical inconveniences of a rule requiring payments to be made in the two metals, in some prescribed propor- tion, would be considerable. It would rarely happen that that exact proportion would be found to exist in the re- ceipts of money by any person, and legal tenders of pay- ment could not be made without exchanges of the metals, which would be troublesome and subject to a brokerage under all circumstances, and might be very difficult in remote localities, where brokers and money changers are not to be found. A suggested expedient to avoid that class of inconveniences, is the intermixing of the two metals in the required proportion in one coin, for which the name of goloid has been proposed. Such a method of coinage would somewhat impair the bullion value of both the metals for either the melting pot or export, and would be objected to by those who regard the bullion value of coins as a thing important to be preserved. Whether the cheaper or aearer metal, or a mixture of 245 both metals, is made the money of payment, justice between creditors and debtors may be equally preserved. In the actual case as it exists, the creditor, who receives always the cheaper metal, is not entitled to anything more. If he becomes a creditor by loaning money, it was the cheapest, and never the dearest, which he loaned. If he becomes a creditor by selling property, he always sold property at prices increased by being rated and reckoned in the money actually current at the time of sale ; and when there is more than one lawful money, the one actually current and meas- uring prices is the cheapest one. So, too, the debtor would have no reason to complain of being obliged to pay in the dearer metal, under a rule of law which made the dearer metal the standard actual money when the debt was incurred. Nor could he complain of being obliged to pay in a mixture of both metals, under a rule of law which made the same mixture the standard and actual money when the debt was incurred. There is no question of justice involved in the determin- ing the rule of payments under the double standard, al- though when the rule is once fixed, it cannot be changed without an injustice to one side or the other. On no point of expediency is the old and tried rule of paying at the debtor's option, or in other words paying in the cheaper metal, at any disadvantage as compared with either of the other two suggested rules, and which are the only other two possible rules. The rule of making the cheaper metal the money of payment, has the crowning and decisive merit, that it tends constantly and powerfully to mitigate, diminish, or correct the divergence of the metals. The rule of making a mixture of the metals the money of payment is entirely destitute of that merit, jvhile the other rule, of making the dearer metal the money of payment, has the absolute demerit of perpetuating and aggravating the divergence of the metals. 246 PAPER NUMBER TWENTY- FIVE. [First published June 25, 1878, as a. communication in the N. Y. Stockkolder.l No hope of relief for the industrial depression in this country, un- til there is silver enough coined to relax the strain put upon the European markets by the accumulation of gold in the United States Treasury. Those who say that this country is on the immediate eve of a large recuperation from the depression of industry and trade under which it has so long suffered, are blind leaders. Those who rely upon them will only be betrayed to their ruin. Business stagnation is all summed up in low and falling prices. Production languishes because there is little or no profit, and that means simply that the prices of articles pro- duced leave little or no margin for the capital employed, and compel a minimum rate of wages for the labor employed. The currency of this country has already substantially reached the metallic standard, and after the first day of next January will completely reach it. Wisely, or unwisely, the determination of those in power is not to repeal the Re- sumption Act, and the resources and credit of the Govern- ment are strong enough to provide for the coin resumption of the greenbacks. With a currency consisting of the metals, and of paper actually convertible into the metals, it is impossible that the general prices of merchandise should rise here, above the standard fixed by a certain relation to the prices of Europe. As to all those large classes of merchandise which we export, we copipete, without any advantage, with similar merchandise produced in Europe. In our home markets we have the advantage of tariff duties, but even in home markets our prices are limited to such a percentage of advance above European prices, as will not. bring in the foreign competitor. Now, the fact is that general prices in Europe are stilt 247 falling, and it cannot be successfully pointed out that there is as yet any check to the cause of this fall. When iron had so fallen in Belgium in 1876 that daily wages in that industry had been reduced to five francs instead of the eleven francs paid in 1872, it was thought that what is called solid bottom was reached at last, but it did not prove so. The five francs of 1876 are reduced now to four francs. The same downward tendency is strong to-day in England and Germany. It is gold which measures prices in Europe. The supply of that metal has been substantially steady for ten years. The two new and extraordinary demands which have pro- duced the pressure upon the gold market and the resulting fall in gold prices are still operating with unabated force. These demands are : — 1. The German demand, from the change ( still in pro- gress) in its metallic currency, from silver to gold, and from the suppression of bank notes to the amount of $ 130,000,000, being all such notes below the denomination of 100 marks, '^r about $25. 2. The demand of the United States, from the Act of Feb- ruary, 1873, forbidding the coinage of silver dollars, and the Act of January, 1875, decreeing resnmption January i, 1879, of payments in coin, being necessarily payments in gold, as there was no other description of coin. Both these demands are operating to-day. Germany is still absorbing gold and the report (June i, 1878) of the U. S. Treasury shows a lock-up of $ 136,884,381 in coin, nearly all of it gold, in readiness for resumption, and this lock-up is to be increased, rather than diminished. Nothing that can or will happen to our paper currency so long as it is held to the metallic standard by convertibil- ity, will enable general prices of merchandise to escape the controlling influence of European prices, and there is no suflB.cient reason for expecting any present rise in European prices. Nobody anticipates any immediate marked increase in the gold production. 348 Wars, or revolutions, on a scale sufficient to cause a sus- pension of metallic payments in European countries now using large amounts of gold, would liberate that metal, but events of that kind depend upon too many contingencies to be calculated upon. The policy of Germany, which has occasioned its new demand for gold, is not expected to be changed. The policy of the United States in respect to gold has been changed, but by a measure coming into effect so slow- ly, as to promise scarcely any present relief. The most we can hope is, that the coin lock-up in the National Treasury January i, 1879, will include about $25,000,000 in silver, so that the lock-up of gold will be less by that sum. At this moment, the whole relief of that kind does not exceed f 10,000,000. And even these reliefs, actual and expected, will be lost, if the Secretary of the Treasury can be induced to retire, or reduce the circulation of, the $ i and f 2 green- backs, so that the few silver dollars permitted to be coined, may be substituted for the paper in circulation, instead of liberating gold for export to Europe where it would serve to sustain directly the prices in Europe, and indirectly our own. This is a case, where it is folly to '-indulge in the illusions of hope.'' With a currency in this country at a parity with the metals, prices of merchandise will rise here only as they rise in Europe, and the only visible means of causing such a rise there is the transfer to the other side of the Atlantic of the masses of gold mischievously piled up here under the silver demonetization of 1S73-4 and the Resumption Act of 1875. The silver restoration law of February 28, 1878, will do the work at last, but so slowly, under a coinage limited by law to four millions per month as a maximum, and likely to be considerably less than that in fact, that tens of thousands of merchants and manufacturers will go to the wall, while the mint is doling out a feeble and vacillating relief. Those who infer that the prospects of trade and industry are brightening, because stocks and bonds have risen and 249 are rising, reason badly. As to fancy stocks, they rise, or fall, according to the current whims, or under the calculated manipulations of the bubble-blowers of the stock exchanges. Certain stocks, for the whole mass of which the outside public would not pay one penny to hold, are quoted to-day in Wall street at an aggregate valuation increased $ 150,000,- 000 within a twelvemonth. As to securities which are solid, or confided in and dealt in as solid, a rise in their market value indicates, not prosperity in general business, but pre- cisely the reverse of that. As the employment of capital in industrial enterprises falls off, safe interest-paying bonds rise in price. Within a fortnight, with almost every branch of British trade and manufacture broken down, British consols have touched a figure in London higher than any reached within the past twenty years. Stocks and securities have risen, and it is altogether pos- sible that real estate, using that expression in its most strict sense and as not including structures upon it, may rise un- der the stimulus of increasing capital and of a low and still falling rate of interest. But prosperity in trade and industry, will not result from, nor be necessarily indicated by, a rise in real estate, any more than by a rise in stocks and securities. With a paper currency brought to a parity with gold, and kept at a parity with gold by convertibility into it, this country links its fortune indissolubly to those of Ger- many and England, in the wages of labor and the price of merchandise, and just to the extent that it retains and piles up gold, it keeps wages and merchandise prices down. Re- lief can only come, as the gold of the United States is lib- erated for the European markets, by the law of February 28, 1878. Under the restrictions of that law, forced upon it by the necessity of conciliating strength enough to override the presidential veto, this relief must come slowly. As long as prices continue to fall in Europe, it is impossible that they should rise here. It oftentimes happens, that the larger crops are, and the larger production of any kind is, the more ruinous the losses are. There can be no prosperity 25° with low and falling prices. It will not come until there is a suflScient cause for its coming. It will not drop from , the clouds. It cannot be shown by any sound process of reasoning, that gold prices in Europe can rise, until the United States decisively relaxes the strain it put on the European gold markets by joining the insane movement of Germany against silver, and it will take more than one year's operation of the law of February 28, 1878, to produce such a relaxation. PAPER NUMBER TWENTY- SIX. [First published October, 1878, as a communication in the N. Y. Banker's Magazine^ Some British opinions from 1864 to 1876 upon the gold and silver question. The London Economist, Lord Beaconsfield, and Mr. Goschen. The subsidence of the passions excited by the controversy about silver in this country makes it an opportune time to reproduce some British views on the subject, which were taken prior to the German demonetization of silver, or sim- ultaneously with it, or not long afterwards, and before the debate upon it had passed, as it ultimately did, from the region of argument to the region of vituperation, under the pressure brought to bear by^ powerful interests and classes upon financial writers and journals. The London Economist publishes annually, generally in March, a review of the financial and commercial movements of the preceding year. All these reviews are written with care and deliberation, but they are now quoted from, not merely, or even mainly, from any weight of authority to which they may be entitled, but from the intrinsic force of the facts and considerations which they set forth. They will be found to cover the whole grounds of the more recent debates, such as the absolute and large decline of the gold production since 1856 ; the failure of the aggregate pro- duction of the two precious metals to keep even pace with the advance of the world's commerce and population ; the too - plainly manifested tendency of property and wages to 251 fall under the constriction of deficient money ; the great extent to which nations had been driven into forced paper money by the scarcity of the metals ; and the predicted and inevitable consequence to the general gold markets, of the German silver demonetization, supplemented and intensified as that was by silver demonetization by the United States. It in no wise detracts from the force of those views of the London Economist, that it now stoutly denies that there is any such thing as a scarcity of gold, or that a sudden and enormous demand for that metal from two nations of the commanding importance of Germany and the United States either does, or by any possibility can, have any effect to make gold dearer, and gold prices consequently lower. Mankind have witnessed many such changes of opinion. An eminent professor in an English university, who in a book written and printed as late as 1875, said that in these days of representative paper the weight and bulkiness of metallic money had ceased to be of any consequence, was found ready in 1877 to write a letter to this country, in which the stress of his objection to silver was the same weight and bulkiness which seemed to him so harmless two years before. There are also given below some extracts from an address of Disraeli, now Lord Beaconsfield, at Glasgow, in 1873. He was then the leader of the English opposition, and is now the English Prime Minister. If he has seen occasion for a change of his opinions, as to the disastrous conse- quences of a general movement of Europe and the United States to a gold standard, he has not so far seen fit to indi- cate such a change. There will also be found, appended hereto, extracts from a speech delivered in the British House of Commons, August 10, 1876, by the distinguished author, banker and statesman, Mr. Goschen, the most eminent, certainly the most trusted, financial authority of the present dajr in England. He was the Chairman of the Parliamentary Commission on Silver in 1876, and one of the British delegates to the International Silver Conference at Paris, in August, 1878. The sagacious 252 forebodings which he expressed two years ago, as to the disastrous effects of striking down one of the money metals of the world, have been, it would seem, now converted into absolute convictions, since we find him reported as declaring at the recent conference, that the attempt to produce the general adoption by commercial nations of the single stand- ard of gold is both impracticable and fatal. OPINIONS or THE LONDON "ECONOMIST."' Financial Review of 1864, printed March 14, 1865 : — For the" last seven years, the new sources of supply have yielded year by year a diminishing supply of gold, and the old sources of supply have done little more than maintain the former rate of production. As regards silver, the increase throughout the fifteen years has been, if not very great, still so continuous as to represent at present a production twenty per cent, larger than in 1849-51. But in the case oi gold Xhit present annual production from all sources is thirteen per cent, less than in the five years 1852-6. We should, however, very imperfectly apprehend the prob- lem to be considered, if we did not ascertain, as far as we can, the growth in the number and magnitude of the trans- actions to be accomplished, ultimately, in some form, re- quiring the command of gold and silver coin ; as well as the annual supplies available for purposes of commerce. We find in the United Kingdom of Great Britain and Ire- land an external trade doubled in the last twelve years, and this external trade is, we believe, but a faint representation of the increase of transactions throughout the whole of our domestic industry. But not only has this multiplying pro- cess been carried on in these islands ; — it has prevailed almost as largely in France, and the activity that has pre- vailed in France, and already profoundly modified French society and institutions, has spread all over Germany. It ' has filled Italy, aroused Spain from its long lethargy, and penetrated even to the remote provinces of Russia. No cor- ner of Europe has remained insensible to the new stir of industry and enterprise. In Turkey, Asia Minor, Egypt, and other countries of the eastern Mediterranean, the creation of new employments, the appetite for pursuing new avenues to wealth, has become one of the most remarkable circum- stances of our time. All these facts are indications of the enormous addition which has been made during the last fifteen years to the 253 extent and depth of the channels of circulation required to be filled with metallic money in some form or other ; and they are also facts which enable us to understand how it is that the addition of say 300 millions (sterling) of gold frorn new sources during those fifteen years, has produced so little influence on prices. The truth is, that with the present extended and growing commerce of the world, far more mischief and inconvenience will arise from the effect of what seems to be a continuous gradual decline in the new supplies of gold, than from any effects which have flowed or may flow from the California and Australian discoveries. Financial Review of 1867, printed March 14, 1868 : — Speaking in general terms, our impression is that at the opening of 1868 prices and wages are from fifteen to twenty-five per cent, lower than in 1865. And after giving comparative tables of prices at various dates from 1851 to 1868, the review proceeds : — The evidence of this table, taken in conjunction with other facts, quite justifies the conclusion that in the years 1864-5, general prices had risen to a level higher, perhaps, than had been attained since the peace of 1815, and they also justify the conclusion that the continual fall of the last two years has reduced us to a point almost as low as in the opening of 185 1, the year in which culminates the long train of unfavorable influences commenced in 1847, and extending through the three following j^ears. The persons who are still haunted by a fear of an ap- proaching decline in the exchangeable value of gold may derive some consolation from the reflection — that at this moment six of the greatest and most populous countries of the world ( United States, Brazil, Italy, Russia, Austria, and Turkey) are under dispensations of paper money, exces- sively depreciated. The mass of paper money in use in those six countries cannot be much less than 600 millions sterling ; and the whole of this vast aggregate must, in pro- cess of time, be replaced by coin. Financial Review of 1868, printed in March, 1869 : — Very little has been heard for a long time of the alarms which prevailed extensively twelve or fourteen years ago, regarding the then apprehended depreciation of gold. Lat- terly the fear has been rather of an opposite kind. The falling off in the supplies from new sources, that is, Australia, New Zealand, California, and British Columbia' 254 is more than forty per cent, as compared with the maximum period 1852-6. The maximum and minimum years of gold production in Victoria and California have been as follows : — California maximum in 1853, ;^ 11,500,000 ; minimum in 1867, ;^ 5,000,000. Victoria, maximum in 1856, ^^ 12,000,000 ; minimum in 1867, _;^ 5,700,000. The silver mines of Nevada have been at work since 1859, and the annual produce has already reached 4 1-2 millions sterling, with every probability of a large increase. The production of gold in New Zealand is over two millions sterling per annum. It may be safely affirmed that the present annual supply of thirty millions sterling of gold is no more than sufficient to meet the requirements of the expanding commerce of the world ; and prevent that pressure of transactions and com- modities on the precious metals, which means in practice insufficient bullion reserves and, therefore, high and fluctu- ating rates of interest, and prices and wages tending con- stantly towards decline. Let us again point out that there are immense masses of depreciated paper money in Europe and America, which sooner or later must be replaced in a large degree by gold and silver. It is true that the prices of many commodities seem to be higher than before 1850, but the disturbing causes which have been in constant operation must be remembered, in India, China, Europe, and North and South America, the cessation of slave labor, rebellion in China, serf-emancipation in Russia, and fifty other clauses, all tending to disturb former methods of pro- duction. The real danger is that the present supplies of gold should fall off. Financial Review of 1869, printed in March, 1870 : — The controversy relative to the depreciation of gold ( that is, a general rise of prices ), consequent on the Cali- fornian and Australian discoveries, still retains its interest but not the urgent kind of interest of the earlier days of the influx. Mr. Jevons arrived at the conclusion that the general rise of prices is eighteen per cent. We think this conclusion an extreme one. Professor Jevons, however, ad- mits, that the extreme views of alleged depreciation favored by M. Chevalier, Mr. Cobden and others, in 1853-4, are no longer tenable ; and, as we understand, limits his modified opinions to the point, that the new gold has arrested the decline of general prices which had been in progress for some years prior to 1849, in consequence of the pressure of 255 increasing population and transactions upon the then sta- tionary annual supplies of the precious metals. We fully accept this latter doctrine. The annual production of gold from the new sources, that is, California, Australia, New Zealand, and British Co- lumbia, remains at about fifteen millions sterling, with a tendency to decline. It may safely be affirmed that the pres- ent enlarged commerce and population of the world could easily and advantageously absorb a much larger annual pro- duction from those or other' newly-found sources ; and it is one of the most conspicuous evidences of the profound changes of the last twenty years that the commercial por- tions of the world now require a total annual supply of thirty millions sterling of gold in place of the fourteen mil- lions, which was the average prior to 1849, and not only absorb the thirty millions, but look anxiously for the dis- covery of further deposits. JFinancial Review of 1871, printed in March, 1872 : — We print in appendix statements relative to the extension and process of quartz gold mining both in Australia and California, which seem to indicate a higher annual produc- tion of gold in future years. No fact can be more welcome, as we have repeatedly affirmed that the danger in these modern times is, not that the world will furnish every year too much, but too little, gold and silver. To the long list of -countries afflicted with inconvertible paper currencies, the United States, South America, Russia, Austria, Italy, Tur- key, and Spain, must now be added France. It is probable that not less than 1,000 millions sterling represent the amount of these currencies, descending, as most of them do, to fractional sums of a few pence ; and the time must be contemplated when the development of the resources of the several countries and the establishment of a sounder national finance, .will enable them gradually to replace the larger part of their paper with gold and silver coin. But besides the absorption of gold and silver which will arise by the withdrawal of compulsory paper, there will be the effort of the substitution of a gold for a silver standard in many countries. The German Empire has already made this change. Financial Review of 1872, printed in 1873 : — Next to the effect and nature of the French payments, has been the new imperial ( German ) coinage. At the end of 1872, the gold coinage amounted to twenty-one millions sterling. On the 8th of February, 1873, it had been raised 256 to 23 1-2 millions sterling, and the following paragraphs from the well-informed city writer of the Daily News gives the latest facts, and properly draws attention to their im- portant character : — "Only to introduce the new system, the German Govern- ment must have £ 30,000,000 of the new coinage ready in six weeks, and must continue coining £, 20,000,000 annually for several years to come. As the annual new supply throughout the world is reckoned at £ 20,000,000, and the usual demand for miscellaneous purposes is very large,, it follows that, if the German Government perseveres in its policy, the strain upon existing stocks and currencies will be most severe. For a time, at least, unless the annual pro- duction of gold should suddenly increase, the money mar- kets of the world are likely to be perturbed by this bullion scarcity." Holland, after much deliberation, has resolved to set up for the present a double standard in place of the silver standard. There can be no hazard in predicting that for many years to come, all the annual supplies of gold, on the present or even upon an enlarged scale, will barely suffice for the demands which are even now apparent. Financial Review of 1873, printed March 4, 1874 : — 1873 has been a year of monetary pressure in Australia, Germany, this country, and the United States. . . Dur- ing 1874, it seems to be likely that the Berlin mint will coin chiefly silver and copper, and so relieve the strain which it has exercised for two years over the gold markets of Europe. Financial Review of 1874, printed March 13, 1875 : — The available annual supplies of gold are steadily dimin- ishing. The year of maximum production was 1856, when the figures were, California fifteen millions sterling, Austra- lia fourteen millions, and Russia three millions. For 1874, the estimate is, California six millions, Australia 8 3-4 mil- lions, and Russia 4 1-2 millions ; total 19 1-4 millions. The fall here exhibited is from thirty-two millions in 1856 to nineteen millions in 1874. As much as 2 1-2 or three millions is absorbed by wear and tear of the existing stock, leaving, say, sixteen millions, to meet the require- ments of the commercial world, and to furnish the masses of "gold required, and likely to be required, first by Ger- many in carrying out its policy of a gold standard, and shortly by the United States. The German gold coinage has already reached 55 1-2 mil- 257 lion pounds and will have to be carried much further, and to carry it further by any considerable steps will re-open great difficulties in the European money markets. The large central banks will find increasing difficulties in the preservation of their bullion reserves. Between the neces- sity existing at Berlin to provide gold for coinage, and the policy at Paris to add bullion to the reserve, the money markets of Europe have been under constant apprehensions. Financial Review of 1875, printed March 11, 1876 : — During the eighteen years, 1857-74, the total annual pro- duction of gold fell from twenty-three to nineteen millions, or seventeen per cent. There is good reason to believe that in the current year the gold production of California and Nevada will be increased from six millions up to ten. Such an augmentation would carry the total yield to the level of 1857-61, and would remove many of the difficulties beginning to be felt in consequence of the declining, or stationary, supplies of gold, in the face of the enlarged re- quirements for the metal on the part of countries which have adopted, or will adopt, a gold standard. From the London Economist of January 16, 1875 : — It is not difficult to trace the signs of pressure which the new great demand for gold for Germany has made upon the diminished supply. The present position of the gold question is a very sim- ple one. The annual production of all the mining regions which are worth reckoning upon is at the outside about £, 20,000,000. But in this sum the Russian production is reckoned at about a fourth or fifth, and this does not really come into the general market of the world, being either re- tained in Russia itself to support the paper circulation, or absorbed fe Germany, without fully supplying the extraor- dinary demand for that quarter. Of the £ 15,000,000 a year, which appears to be generally available, the annual supply necessary for England alone is / 5,000,000 ; for France, on a specie basis, to which it is now returning, it was always more than that, say, £ 8,000,000 ; and at least £ 5,000,000 was required for the other countries which we coin for. This makes £ 18,000,000 a year, and how is the amount to be supplied, even without an extra demand from Germany, and without any resumption of specie payments in the United States? At some point or other, we venture to say, the pressure in the money market must again become severe ; or one of the great gold-using countries must abandon its 17 2s8 standard ; or the supply from the mines must be increased ; and the chances, we fear, are altogether against the occur- rence of either of the two latter alternatives. OPINIONS OF DISRAELI, NOW LORD BEACONSFIELD. At a banquet given to him November 19, 1873, by the corporation of the City of Glasgow, on the occasion of his installation as Rector of the University of Glasgow, Mr. Disraeli said : — I do not observe myself that there are any symptoms in Britain of reckless speculation. No doubt our young relations on the other side of the Atlantic: — with that ardor which is characteristic of youth — have been doing some things somewhat extravagant. But I do not believe that the disorders which have arisen there could have occasioned, or were adequate to occasion, the disorders that have occurred in our own country, with reference to the value of money. I attribute them to quite another cause. I think the cause is not exhausted, and is deserving the grave attention of men who are so deeply interested in the prosperity of the country and the action of commerce as those I have the pleasure of meeting to-day. I attribute the great monetary disturbance that has oc- curred to the great changes which the Governments in Europe are making with reference to their standard of value. I know myself that an opinion has been extremely prev- alent among the statesmen of Europe, and among distin- guished economists and merchants abroad, that the commer- cial proposerity and preponderance of England were to be attributed to her gold standard. But it is the greatest delu- sion in the world to attribute the commercial preponderance and prosperity of England to our having a gold* standard. Our gold standard is not the cause of our commercial pros- perity, but the consequence of our commercial prosperity ; and it is very well for us to have it ; but you cannot estab- lish a gold standard by violent means. It must arise grad- ually from the large transactions of a country, and the consequent command it may have over the precious metals. When the various States of Europe suddenly determined to have a gold standard and took steps to carry it into effect, it was quite evident that we must prepare ourselves for convulsions in the money market, not occasioned by specu- lation or any old cause, which has been alleged, but by a new cause with which we are not yet sufficiently acquainted, and the consequences of which are very embarrassing. 259 MR. GOSCHEN IN THE HOUSE OF COMMONS, 1876. The topic under discussion August lo, 1876, in the British House of Commons, was the introduction of the gold standard into India, to which prominence had then been recently given by an article recommending it, .which had appeared in the London Times. The proposition was re- garded as so preposterous and alarming that the Secretary for India, Lord George Hamilton, deemed it to be his duty to make a public declaration that he meditated no such act. He was followed by Mr. Goschen, who said : — He was quite satisfied with Lord Hamilton's declarations, made, he hoped, on the part of the Government. He trusted the Government- would speak with no uncertain sound, as any illusion would only tend further to disturb a market already so agitated. There were powerful advocates of the introduction of a gold currency into India, but he had not seen any practical mode suggested for carrying it out. The interesting process which had been going on in Germany stnce 1871, in con- nection with a change of currency, might afford them a very instructive lesson on that subject. The difficulties of that operation had been enormous in Germany, and must be far greater in a country like India. But further, if it was put to the intelligent majority in Germany whether they had gained by the substitution of gold for silver, he doubted whether the answer would, on the whole, be in the affirmative. . . . What the advocates of these changes of currency Jooked to was what might be called the interna- tional currency, or the means of settling the great mercan- tile transactions between one country and another. But the currency had an equally important function internally. . . There was one other point to which he wished to call at- tention. There was at this present moment a great plethora of gold in the banks of England and France, but that had not always been the case, and he would be a bold man who would withdraw silver from that partnership with gold, by means of which a sufficient supply was furnished to do the currency for the whole globe. We had seen the results of a great increase in the supply of gold, but we had not seen what the result would be of the withdrawal of a large mass of money from the currency of the world. 26o PAPER NUMBER TWENTY- SEVEN. [First published October, 1877, as a special report made by the author, as the Secretary of the United States Monetary Commission.] Steadiness and reliability of the flow of silver to Asia. English errors on that subject. Of current British writers known on this side of the Atlantic, Jevons alone seems to have an adequate idea of the importance and reliability in the future of the Eastern demand for silver. Many leading British writers entirely misunderstand the causes which give rise to this demand, which is an essential element in fixing the value of silver, whether measured in gold or in general commodities. These mistakes of British economical authorities will be found to be remarkable both in character and persistency, and they undoubtedly constitute the principal origin of the delusion that the general tendency of silver is towards depreciation, which prevails largely in England, and which Seyd and other English advocates of the double standard do not wholly escape. The most authentic exhibition of the errors current in London in recent years, in respect to the general nature of the trade between Europe and Asia, is to be fouftd in the annual reviews of finance and commerce in the London Economist, the principal portions of which have been regu- larly reprinted in the Journal of the London Statistical Society as possessing a high, recognized, and permanent value. As respects the special case of India, it may safely be assumed that the current ideas of England are authentically expressed, not only in the London Economist, but in the report of the British Silver Commission of 1876, the chair- man of which, Mr. Goschen, seems to be regarded in that country as one of its most eminent financiers, both in prac- tical experience and in clearness and breadth of theoretical views, and in the resolutions of the governor and council 26l of India, (September 22, 1876,) which cover the entire sub- ject of the monetary relations of India with the world, and especially with Great Britain. OPINIONS OF THE LONDON "ECONOMIST.'' Review of 1864, printed March 11, 1865 : — In four years the imports from India and the Levant have certainly doubled in value. These- are countries of exceed- ingly backward civilization. Hitherto, the native cultivators have had few wants, and have been so ignorant of the real principles of trade as to regard gold and silver as precious beyond all other things, and as fit only to be buried in secret hoards, instead of being put away as rapidly as pos- sible in exchange for articles of use and enjoyment. A trade, therefore, of imports from these countries, suddenly doubled in volume, necessarily implied the- transmission of a large part of the price in specie and bullion ; and so it actually happened. The average annual export of treasure to India and the Levant for the five years 1857-61 was thirteen and a half millions sterling ; the average export of 1863-64 was twenty-three millions. A free and vigorous commerce is potent to arrive rapidly at a state of things in which trade, even with very backward countries, becomes the barter of one set of commodities for another set of nearly equal exchangeable value. The probability seems to be that in 1865 the action of the eastern demand for bullion remittances will be on a much more restricted scale than in 1863-64 ; and that the taste already excited in those countries for articles of English production will have laid the foundations of a commerce as regular as that with America or France. The immense wealth poured into Bombay and Bengal during the last two years has apparently at last broken down most of the barriers to the reception by the natives of thoroughly European notions of commerce. Review of 1865, printed March, 1866 : — The great rise in the price of cotton led to large and urgent orders to India and elsewhere for further and early supplies, and such orders of necessity implied considerable remittance of treasure, and that treasure chiefly in the form of silver, to be purchased on the continent by means of gold sent there from this country. The four countries or regions which have been most pro- fouridly affected by the demand for cotton at high prices have been India, China, Egypt, and Brazil. 262 Merchandise imports from Merchandise exports to- year. India, China, Brazil, India, China, Brazil, and Egypt. and Egypt, Millions stg. Millions stg. 1864 94.6 — 38.3 1863 83.6 .... 32.7 1862 62.9 .... 24.8 1861 42.1 .... 29.1 i860 37.0 — 30.3 The peculiarity of these figures is the amazing increase they exhibit of nearly sixty millions sterling in the imports from India, China, Brazil, and Egypt against an increased export of no more than eight millions sterling. For five years we have been laying widely and deeply the founda- tion of a vast future trade with those fertile tropical coun- tries. We found the people who inhabit them rude, igno- rant, without enterprise and with few wants, but the golden ( silver ) shower which has descended so plentifully upon them since i860 has already had some effect, and it is quite certain that the increase of eight millions in the export is only the beginning of a demand which will presently reduce the trade to the sound condition of an exchange of merchandise representing values not very widely different. Review of 1866, printed March, 1867 : — The large drain of gold and silver to Egypt, India, and the East, which has been in progress since 1861, chiefly in payment of cotton, came to an end in March and April last, ( 1866.) The total export from Europe was nine and a half millions, or one-third less than the export ( fourteen millions) of 1865. For five years the tide of the precious metals has run so strongly and constantly toward the East that the supplies from the gold countries have been absorbed for that desti- nation as quickly as they appeared. We shall now see a dif- ferent state of things. Review of 1867, printed March, 1868 : — The revival of the cotton cultivation in America has al- ready reduced the export of gold and silver to India to a narrow compass. Instead of the enormous drain of twenty- four millions sterling in each of the years 1S63 and 1864 and of fourteen millions in 1865, the exports fell to ten millions in 1866, and in 1867 to the comparatively small sum of three and a half millions. A few years will enable us to judge of the effects on the Indian populations of the prodigious prosperity of the last 263 five years. The railways will have effectually opened up new markets in the interior, and will have carried European goods where they never appeared before, and the improved means and wages of the cultivators will enable them to buy articles formerly beyond their reach. All these influences will powerfully tend to make European exports to India more nearly balance than hitherto the European imports from it, and will, therefore, reduce the trade to such an exchange of commodities as will require but small supplemental trans- missions of specie. It is, indeed, conceivable that at no dis- tant period the current of the metals might tend more strongly from India than to it. Review of 1868, printed in 1869 : — The Abyssinian war has led to a large increase in 1868 in the export of gold and silver to Egypt and the East. The total exports by English and French steamers were : — In 1867 £ 3,695,000 In 1868 10,075,000 Of this six and one-third millions of increase, nearly four millions is due to the Abyssinian war The slightly in- creased exports to India have arisen from the. revived demand for Indian cotton. The effect of the cessation of the bullion drain to the East early in 1866 is strikingly shown in the rapid rise of the total bullion reserves of the Bank of England and the Bank of France. In India, a system of sound paper currency has been established, which, in the course of twenty years, may, by remote possibility, lead to a real economy of coin in that country. At present, the bank notes are not less than ten millions sterling, probably not a thirtieth part of the circu- lation of the presidencies. Review of 1869, printed March, 1870 : — In 1869, there has been no Abyssinian war^to swell the exports of gold and silver to Egypt and Bombay, but the figures are nevertheless not very different — say nine millions in 1869 against ten millions in 1868. The peculiarity of the 1869 figures is the large increase in the silver and the falling off in the gold shipments. During the ten years, 1860-9, the total export of gold and silver ( chiefly the latter ) from Europe to China has amounted to about twenty millions sterling. But this sum represents only about half the influx of the precious metals 264 into China, inasmuch as the import into that country from California is believed to be nearly as large as the import from Europe. The effect of the improved condition of India, the higher wages, and the cheaper modes of transit, has already ex- tended the Indian markets for English goods, and so set in action a train of causes likely to diminish permanently the drain of gold and silver to the East. Review of 1870, printed March, 1871 : — The bullion trade with India has fallen into small propor- tions. In 1863 and 1864 the export of gold and silver to India and China was twenty-four millions sterling per an- num ; last year, 1870, it had fallen to four and a third mil- lions, and a reflux from the East to Europe has actually been witnessed in mercantile calculations of exchange. It is not unlikely that this reflux current will expand and continue. During the twenty years 1851-70, Europe has sent to the East fifty-one millions sterling of gold and one hundred and seventy-six millions sterling of silver — together two hundred and twenty-seven millions, or an average export of (say) eleven millions per annum. The annual production of gold from the new sources, California and Australia, has been about fifteen millions sterling. The eastern demand has amounted, therefore, to over 70 per cent, of the new produc- tion. The Australian and Californian supplies seem to be gradually but steadily diminishing, and there is an apparent probability that the effect of the development of India may be to render the hoards of treasure possessed by the natives avail- able for western purposes, and available at the very time when they are needed. This result will be assisted by the steady pro- gress of the bank-note circulation of India. The authorities have quite recently satisfied themselves that the bank notes may be pushed more vigorously into circulation, and that the minimum denomination may be reduced from ten to five rupees.- Review of 187 1, printed March, 1872 : — We give our usual table of the movement of gold and silver to the East. There has been some revival in 1871 of these exports, and the total reaches 61-4 millions against 4 1-3 millions in 1870. The higher prices of cotton will lead to augmented remittances to India. Review of 1874, printed March 13, 1875 ■ — Mr. Herzog, the delegate of Switzerland to the Monetary 26s Conventions of 1865, 187 1, has investigated the subject ( silver ) with care. He lays stress on the diminution by one- half since 1866 of the export of silver to the East, aris- ing from the advancing diffusion of European goods over the Asiatic countries. All the predictions of the Economist as to the course of the Asiatic trade have been falsified by the event. The fiow of the metals to Asia is still as active as ever. The Econo- mist entirely overlooks the real cause of this flow, and nearly all which it has to sa)' about it is quite aside from the mark. Asia was called " a sink of silver " in the time of the Romans, but if the view is limited to the past four cen- turies, the reasons why it is a sink of silver, and to some extent of gold also, will more clearly appear, because the facts of these later centuries are more exactly known. Since 1492 the great bulk of the supply of the precious metals has been from the New World. Chevalier estimates that from the voyages of Columbus to the California gold discoveries the world's metallic supply was derived : — From the Old World $ 1,072,000,000. From the New World 7.259,000,000. Since the California gold discoveries, from 1849 to 1876, both inclusive, taking the mean of the figures given by accepted authorities, the world's metallic supply was de- rived : — From the Old World $ 82 7,000,000. From the New World 3,755,304,927. In the New World, in this last statement, Australia is included. Since 1492 the flow of the precious or money metals has been continuous from the New to the Old World, and could not have been otherwise. The flow of those metals is deter- mined by the tendency, always at work, of prices to an equilibrium. Nothing but an impassable Chinese wall could' have prevented the outflow from Australia of the bulk of the $1,200,000,000 of gold produced there within the past twenty-five years. If such a wall had existed, the principal part of this gold would not have been produced, as the 266 wages of labor would have risen so high that the cost of the gold would have exceeded its exchangeable value No such wall exists in this case, and therefore prices are only kept high enough in Australia, relatively to prices elsewhere, by the production of gold there, to cause the constant out- flow of that metal, and that condition of things will not be changed until the mines give out. Those parts of the world which specially produce the precious metals can never have, on that account, any greater excess above their due proportion of them than is just suf- ficient to produce an adequate current of overflow. That is the limit of the perturbation of the money level in such cases. The same circumstances which prevent the metals from remaining in the New World, in which they are principally mined, prevent their remaining in the country or countries in the Old World which receive them in the first instance. All the gold and silver of America, exported in the early periods of its discovery, passed to Spain, but neither did nor could remain there. Until within a few years Europe has received substantially the whole of the exported gold and silver of America and Australia, and does now receive much the greater part of them, and it is through and b)' Europe that they have been diffused over the Old World, each portion of it always receiving and retaining its due proportion. It is these facts which have caused the flow of the metals from the Occident to the Orient during the past four centuries. The flow depends upon the relatively excessive production of the metals in the New World, and will continue without interruption forever, subject only to the possibility that the discovery and working of mines in Asia may bring up its metallic production to the average of the general production of the world. The due proportion of the precious metals which the dif- ferent parts of the Old World will receive and retain is that proportion which is determined by the various circum- stances of population, commerce, wealth, laws of currency, 267 national habits, and vicissitudes of prosperity, adversity, growth, and decay, which fix the relative amounts of the metals held at any given period in the several subdivisions of the globe. The flow of the metals from Europe to India may have been quickened at particular times by a specially high price for India cotton, just as the same flow to China is quickened to-day by the specially high price of raw silk. But the flow in the direction of India would have been as steady, and perhaps as great, if no such substance as cotton had ever existed. Changes are constantly occurring in the things which are the subject-matter of commerce. Industry takes one direction to-day and another to-morrow. If India could not have supplied its imperative want of silver by producing cotton, it would have supplied it by the production of some- thing else. The export of cotton from this country does not date so far back as the adoption of the present Federal Constitution. Cultivation of it in our Southern States was preceded by that of indigo, and may be followed by some- thing else now wholly unanticipated. It has been said of India that it never fails to produce anything which is de- manded from it, or, in other words, anything which it can sell. It is now selling wheat, until lately entirely unknown in its list of exports ; and is at this moment third on the list of countries furnishing wheat to England, being sur- passed only by Russia and the United States. The precise way in which the extra cotton exports of India, during the American civil war, and the extra prices then received by India for cotton, may have affected the amount of its metallic stock is, that it was a circumstance which may have permanently enriched India as compared with Europe. If it did, by so much does it permanently enhance the percentage of the precious metals which India will retain. That is true of any other circumstances which may advance the relative position of India. It is unques- tionable that British domination in India during this cen- tury has been favorable to its wealth and commerce. It has been a better government than India ever had before, 268 •subject to the objection, whatever the force of it may be, that it is a foreign domination, established and maintained by the sword. The continuous metallic flow from Europe to Asia is determined by the fact that Europe, as the first receiver of the treasures of the New World, always has an excess of metallic money as compared with Asia. The necessarily lower wages and prices of Asia will always attract money. No " taste for European goods " can ever be created there which will be equal to its necessity for money, or put an end to the demands of its vast, rich, and industrious popu- lations for the precious metals for other purposes, which arise from their immemorial usages and habits. The extent of the metallic flow from Europe to Asia is determined in the long run, and aside from the temporary effect of exceptional circumstances, by the one single fact of the extent to which Europe receives the metals from other quarters. Before California and Australia, it was determined by the greater or less production of the Spanish-American mines, which had been, from the discovery of this continent to 1848, the chief source of the supply of the precious metals. At the beginning of this century, Humboldt esti- mated their annual production at forty-three million dollars, of which he computed that twenty-five millions were sent to Asia. When that production fell off so greatly after 1809, in consequence of the revolutions in Spanish-America, Eu- ropean supplies fell off, and the flow to Asia diminished ac- cordingly. The fact is stated correctly in the book of W. Nassau Lee, printed in 1863, entitled Drain of Silver to the East, but the reason assigned for it by him is entirely er- roneous, being precisely that of the present views of the Economist. Mr. Lee says : — Up to 1814 no great change in tlie normal state of things was perceptible ; but in that year, consequent upon the great increase of British imports which followed the breaking up of the Md East India Company's monopoly, the flood of silver began to shallow, and in 1832-3 it had almost dried up. From this time the tide continued to ebb and flow with uncertain flue- 26g tuations untik 1849-50, when it set in with redoubled strength, and has since been increasing in depth and breadth with such rapidity as to cause some alarm for the equi- librium of prices in India. The returns of trade with England and China have for some years shown an average balance of jQ 10,000,000 in favor of India. The "great increase of British imports after 1814" did not result from the " breaking up of the old East India Company's monopoly" but was due to the fact that the metallic prices of commodities fell greatly in Europe after 1809, in con- sequence of a sudden diminution of the metallic supplies, consisting principally of silver from America. Humboldt estimates the annual average American silver production, at the commencement of this century, at ;^ 7,071,831. From. 1809 to 1829, this annual average production was reduced, according to Jacob, to ;^ 3,109,000, and Europe, which re- ceived this production, sent less silver to Asia, for the plain reason that it had less to send. The falling prices in Europe attracted fewer commodities from India, and caused more European goods to be sent to India. It was this which caused the "great increase of British imports after 1 8 14" into India, and reduced the metallic flow to India. When the flood set in again, after 1849-50, "the old East India Company's monopoly " was as much broken up as it was in 1814, and India was equally as open to unrestricted "British imports." But after 1849-50, Europe could spare both gold and silver "in abundance; gold, because the mines of Australia and California were producing it ; and silver, by substituting gold for it in the channels of its own cir- culation. Comparing the five years after with the five years before April 30, 1849, the excess of metallic imports into India over exports, taking its trade with all nations, rose from ^8,578,572 to ;^ 18,938,601. A more, instructive comparison will be to take periods of ten years before and after Apr?! 30, 1849. This comparison will show a rise in the excess of Indian metallic imports from ^^20,699,090 to .^70,721,378. It took longer than five years after April 30, 1849, to cause the 270 new gold discoveries to be fairly felt in India. The Cali- fornia production was active in 1849, but Australia, until 1852, had only produced $7,000,000. McPherson ( Commerce with India ) says : The Indian trade arose to a considerable magnitude at the same time that the American mines began to pour their treasures into Europe, which happily has been preserved from being overwhelmed by the inundation of the precious metals, as it must have been if no such exportation had taken place. Jevons {^Mechanism of Money and Exchanges, 1875,) says: — Asia is the great reservoir and sink of the precious metals. It has saved us from a commercial revolution, and? taken off our hands many millions of bullion, which would be worse than useless here. From the earliest historical ages it has stood in a similar relation to Europe. In the Middle Ages it relieved Europe of the excess of Spanish- American treasure, just as it now relieves us of the excess of Australian treasure. Nothing short of a complete interdiction of commerce and intercourse will prevent the flow of the metals from the Occident to the Orient. The tendency of money, through its influence upon prices, to come to an equilibrium, is as certain and irresistible as the tendency of water to a level, and, like that, can only be arrested by absolutely cutting off the connections. It will be seen how untenable the view is, which the Economist insists upon in so many different forms of lan- guage, that the great supplies of the metals, principally silver, sent from Europe to the East, during the period immediately following the California and Australian dis- coveries, had produced, or were rapidly producing, such a saturation of Asia with the metals, manifested in advancing wages and prices, that the flow of the metals to Asia must cease, and even be changed into a reflux current. That no such saturation has yet been produced is shown by the current fact that the flow to Asia is as vigorous as ever. From the nature of the case, no such saturation ever can occur. The metallic flow could by no possibility proceed further at any time than to produce a monetary equilibrium 271 between Europe and Asia ; but this equilibrium would be forthwith disturbed agaiil by the continuing fact that Europe is the receiver of the products of the mines, and that Asia is a great consumer of them. Water may come to a level between two connected reservoirs, but cannot remain at a level if new water flows into one of them while the water in the other is constantly oozing, leaking, and evaporating. The California and Australian discoveries in- creased the metallic supplies of Asia, but in no greater pro- portion than they increased the metallic supplies of Europe. They produced no greater effects in raising wages and prices, and in stimulating new wants and new tastes for luxury in Asia, than they did in Europe. If Asia consumes more European goods than formerly, Europe consumes more of the peculiar products of the Orient than formerly. Asia bas only received, since 1848, its due proportion of the nev/ supplies, in the form, largely, of silver thrown out of the European currencies by the substitution of gold, or, if any excess has been received, it is accounted for by an anterior deficiency. The water has merely risen to higher points than before in both the reservoirs at the same time, the rise in one corresponding always to the rise in the other. The direction of the flow has not changed, and never will change so long as one of the reservoirs is the sole or prin- cipal receiver of new supplies. No reflux current will set from the reservoir which is subjected without intermission to the exhaustion of oozings, leakages, and evaporation, and whose sole resource of recuperation is its connection with the other. In respect to the two hundred and twenty-seven millions sterling of the metals sent by Europe to Asia during the twenty years ending with 1870, the Economist may have in- tended to say that it was 70 per cent, of the metallic pro- duction of California and Australia received in Europe during the same period, but it was certainly only 29 per cent of the metallic production of the world during the same period. If to the two hundred and twenty-seven millions sterling received during those twenty years from Europe by 272 Asia there be added what Asia may have received directly from the metal-producing countries, the aggregate would not seem to be out of proportion to Asiatic wealth, commerce, and population. OPINIONS OF THE BRITISH SILVER COMMISSION. The question of British trade and financial relations with India, as a part of the more general question of those rela- tions between Asia and the Western World, occupies a lead- ing position in the report of the British Silver Commission of 1876. The question deserves the position given to it, as the general Asiatic and special Indian demand for silver is of the first importance in fixing both its absolute value and its value relatively to gold. The general view of the situation presented by the commis- sion is, that the annual ainount which the Government of India has to pay in England by way of interest on debts, and such charges of administration as are payable in Eng- land, which ranged between four and five millions sterling before the Sepoy rebellion, attained between 1861 and 1867 the higher range of from nine to eleven millions, and in 1876 had reached fifteen millions sterling, or seventy-five million dollars. The commission note, also, the following circumstance : Less of the money received by Europeans in India appears to be retained in that country than was formerly the case. It has been stated that, owing to various circumstances, more funds are remitted to England, not only after fortunes have been made, but during the sojourn of the various of- ficials, or European residents, in the country. A remittance from India to England is equivalent to a draft from Eng- land on India. It diminishes the aggregate balance wliich India has to claim when transactions are squared. And in proportion as this practice increases, so is the demand for silver diminished. The commission state that in the four years ending March 31, 1872, the total merchandise exports of India were, in round numbers, £ 224,000,000, and the total merchandise im- ports were £ 135,500,000, and that in the four years end- ing March 31, 1876, tlie total merchandise exports were 273 /^ 2 23,000,000, and the total merchandise imports were ^140,- 500,000. The merchandise balances of trade in favor of India were not materially different, on a comparison of the two periods, but the modes in which the balances were adjusted were materially different. Thus, during the first period, England paid India £ 40,000,000 in gold and silver, and ;i^ 29,500,000 in government bills, representing a part of the collection of the interest on the debts of India. During the second period, England paid India ii^ 16,500,000 in gold and silver, and .j£^5o,5oo,ooo in government bills. The com- missipn treat the annual interest payments as so much deduction from its possible imports of specie, and while admitting that " a desire to obtain and use silver will exist " always in India, they regard it as a serious question, " Aow, looking to the amount it has to pay to this country, it will be able to pay for that silver." The question really raised by the situation, and in its na- ture of the first practical importance to Englishmen, while to the rest of the world its interest is purely speculative, is the reversed question of the power of India to pay in Lon- don amounts of annual interest constantly enlarging, con- currently with the necessity it is .under of keeping up its stock of money by importations of silver, and concurrently with the certainty that this stock of money, happen what may to anything else, will be kept up as a matter of fact. It is not proposed to discuss the question of the continu- ance of imports into India of silver for other purposes than as money. The British commission believe that the "passion for accumulating ornaments" is so strong in India, that its import for that use will " displace some of the other articles imported." Be that as it may, so long as the money of India is silver, the amount of this silver money cannot be affected in any degree by the greater or less amount of In- dian indebtedness to Great Britain. In the case of countries using metallic money, the amount of such money in circulation and the flow of it, whether outward or inward, are necessarily determined by the range of prices of commercial commodities within such countries, 18 274 as compared with the general range of prices in the world. Money is as absolute a necessity to nations in any degree civilized and commercial as air is to the existence of the animal creation. A permanent deficiency of it below that proportion to the amount existing in the world which will maintain the general equilibrium of prices is impossible, and a similar permanent excess is equally impossible. There may be temporary deficiencies or excesses, but they speedily correct themselves. The falling prices which result from a deficiency of money stimulate exports and discourage im- ports, until money flows in and the deficiency of it is sup- plied. By a reversed operation the rising prices which result from an excess of money stimulate imports and dis- courage exports, until money flows out and the excess is thus carried off. No nation can pay debts so as to become permanently deficient in money, or can receive payments as a creditor so as to have a permanent excess of money. In short, neither a permanent deficiency nor a permanent excess can be brought about by payments or receipts in interna- tional relations of debtor or creditor, or in an}' other way. What makes it the more remarkable that the British com- mission should have fallen into the fundamental error on this point which runs through their entire discussion of the India problem, is the fact that they have constantly before them, in the British situation, the most striking illustration of the truth, that the amount of money in a countr)' is not increased by any amount it may receive as a creditor. During the calendar year 1876 the excess of British mer- chandise imports over merchandise exports was, in round numbers, $ 800,000,000. A part of this excess represents, doubtless, freights and mercantile profits, but it largely represents the annual revenue of England, as the great creditor of the world. Whatever the exact figure of that magnificent revenue may be, there is not, on account of it, one pound the more in the monetary circulation of that country. Great Britain has nominally a good deal less metallic money than France, in round numbers, $ 600,000,000 as compared with f 1,000,000,000, although the populations 275 are about the same. Undoubtedly, Great Britain has effec- tively as much, as the various expedients of economizing the use of money by checks, etc., are more resorted to than in France. If England should determine to collect its revenue from investments abroad, for one year, in gold and silver, and if its debtors could, by possibility, pay for one year in that form, the money in the English circulation would, of course, be by so much enlarged. But as soon as the en- largement became sensible the causes of depletion would be set in operation. Prices would rise, England would be the best place for all the world to sell in, while English exports would dwindle until the equilibrium was restored. It is by the reversed operation of the same principles that the number of rupees in India is determined wholly by the commercial equilibrium of prices, and in no degree by in- debtedness to England, large or small. And, by conse- quence, the Indian importation of silver is so determined, because India has no mines from which to extract the raw material from which rupees are manufactured, but must obtain it by purchases from abroad. In respect to the fact noted by the British commission, that in the four years ending March 31, 1876, British remit- tances to India in the precious metals fell off, while remit- tances in government bills increased, it is sufficient to observe that simultaneous things are by no means necessarily con- nected things. It is related of a country gentleman who made a purchase of stocks in Wall street which resulted to his advantage that he had happened to notice that, at the time of the purchase, the thermometer stood at 75 ° Fah- renheit. His conclusion was to watch his thermometer, and when it marked ' 75 ° , no higher and no lower, to purchase more of the lucky stock. There is no more connection be- tween the demand of India for silver and remittance to India in government bills than there is between the thermometer and the course of the prices of stocks, and perhaps not so much, as the weather does somewhat affect the temper and enterprises of mankind. 276 The account-current of India trade for the four years ending in March, 1876, as the British commission present it, consists of three items, namely, ( i ) the payment of interest from India to England represented by government bills drawn on India ; ( 2 ) the balance in favor of India of mer- chandise exports over merchandise imports ; and ( 3 ) the cash, remitted to India by England. The material questions in the case are, which of these items is the dominating one and controls the others, and which ( if either ) of them is completely controlled by the other two ? The British com- mission assumes that the dominating item is the annual interest to England, and that this will always be paid, let the other two items fare as they may. They assume, also, that the cash remittance to India is controlled by the con- dition of the other items, and is always merely what hap- pens to be left after deducting from India's merchandise balance the amount of its annual interest account to Eng- land. The actual order of pre-eminence in power of these three items is precisely the reverse of what the British commission assume it to be. The demand which India, or any other country, makes for money is the most urgent and resistless of all its demands, and overbears everything else. The de- mand for money, instead of taking what happens to be left after deducting imports from exports, conclusively deter- mines, by its action upon prices, what the balance of exports over imports shall be. The balance of trade depends upon prices, and prices are controlled by the abundance or defi- ciency of money. In the four years ending in March, 1876, the money wants of India required and were satisfied with a remittance of treasure by England of sixteen and a half millions sterling. In the preceding four years India had re- ceived treasure from England in a much larger measure, and its money want was temporarily less urgent. The India money market, requiring only sixteen and a half millions sterling in the four years ending in March, 1876, permitted a range of prices for merchandise which made the merchan- dise export balance what the British commission state it to 277 have been. If their report, instead of being made July 5, 1876, had been delayed another year, they would have found the facts in a new phase. India's interest payment to Eng- land is now -somewhat greater than it was on the average of the four years ending in March, 1876. Its money demand, which had lulled during those four years because the imme- diately preceding treasure imports had been somewhat ex- cessive, has resumed its normal condition of activity and power, and, in fact, far exceeds the average of twenty years past. And whatever it may be, it will compel the merchan- dise balance and, if necessary, the debt payment to Eng- land, to conform to its own superior power. This debt payment, instead of being the pre-eminent one in the list of the necessities of India, as the British commission assume it to be, is, in fact, subordinate to both the other necessities of India, for money and for merchandise. It is as true in financial dynamics as it is in physical dynamics, that the greater force always overcomes the less. The possession by nations of their due proportion of money is an absolute necessity and an absolute certainty. The pay- ment by nations of their debts, however desirable it may be, is neither necessarj- nor certain. Mankind have not had a very long experience in the matter of national debts, as they have not been much known until within a century. But it is certain that some of the most flourishing nations of Europe, as France, Austria, and Russia, have at various times repudiated, or scaled down, larger or smaller portions of their debts. Still others, as Spain and Greece, are in a chronic condition of bankruptcy. England, from 1797 to 1821, paid nothing but suspended and depreciated bank notes And it is now inevitable that all the nations in Europe, including England, which have very large debts, will become bankrupt in the event of a general and pro- tracted war. The law of morals is the same for Asia as for Europe, and the philosophy of facts is the same. If India cannot pay its debts, and also maintain its stock of money, it has no power of choice as to which of the two things it will do. Its stock of money will be maintained, and its 278 debts will be postponed to a more convenient season, or will be reduced to more practicable figures, or will remain permanently unpaid. It is undoubtedly true that a nation may be deprived of money of one kind by the substitution of money of another kind. No fact is more familiar than that in the experience of mankind. The English are the political masters of India. If they are restive under a drain of silver to India, and pre- fer a drain of gold, they may try the experiment of an ex- clusive gold currency there, but they will certainly not try it until they have determined to again suspend specie pay- ments themselves and resort to paper money. Under the demands for gold from other nations, that metal does not exist, and is not at all likely to be produced, in quantities sufficient to sustain a gold currency in Great Britain and India at the same time. Or, adopting a different policy, and one which is not obstructed by any physical impossibility, they may decree a paper money for India, and undertake to force its circulation there by law. To whatever extent they might succeed in that, they woiild arrest the further export of silver to India for monetary purposes, and might even possess themselves of more or less of the silver now in the Indian circulation. Theoretically, there are no limitations upon the omnipotence of Parliament, anywhere within the British dominion. The managers of the London Times evi- dently supposed that there were no practical limitations, when they proposed last summer that the Indian occupiers of lands, who possess nothing but pilver rupees, should be commanded to pay their rents in gold sovereigns. The wise and cautious statesmen of England know that the practical limitations are numerous, and are very careful not to over- step them. The integrity of their great empire, encircling the globe, and embracing so many diversities of religion, habits, and race, is preserved not more by arms than by policy. They will do nothing rashly in dealing with peoples so wedded to old traditions and ways as their India subjects. That they entertain no present idea of demonetizing silver in the East is illustrated by the British royal proclamation 279 of 1876, establishing in Mauritius a silver currency, with the Indian rupee as the unit, the same as in British Ceylon ; Mauritius having had, since 1852, an exclusive standard of gold. The money of India will remain metallic and remain silver, subject to possible gradual and partial displacements by convertible and voluntarily accepted paper, until a remote future developes conditions not now possible to be foreseen. The stock of silver money needed for India will increase with its increasing exchanges, and with the progress, known to be constant, of the substitution of coin for barter in its transactions. The flow of silver thitherward, required to maintain its stock of money, will continue so long as the seas are open and commerce is unobstructed, and it will never be diminished by the payment of debts. THE FINANCIAL THEORIES OF THE INDIA GOVERNMENT. The governor in council of India adopted September 22, 1876, a series of resolutions upon the financial situation, of which the following was the sixth : — When India is in a normal condition, /. e., when there is no abnormal demand for any of her staples, and she is not borrowing large sums from abroad, the amount of treasure to settle her accounts with the world is not considerable, and of the treasure received a substantial proportion has always been gold. The large imports into India since 1850 are due to abnormal circumstances, as follows : — 1. The Crimean war transferred to India large demands for produce heretofore obtained from Russia. 2. The American civil war exaggerated temporarily the value of India cotton. 3. Great sums of money have been borrowed for : — a. The suppression of the mutiny ' b. The construction of railroads (guaranteed and state) and canals. c. The Bengal famine. This resolution entirely ignores the general and real cause which makes India a constant importer of the precious metals, which is that it has substantially no mines, and es- pecially it ignores the plain and almost exclusive cause of the ^^ large imports into India since 1850" of the precious metals, which is their extraordinary production since 1850 28o in California, Australia, and, more lately, Nevada. Treating these "large imports" as something altogether ^'^ abnormal" it attempts to explain them by " abnormal circumstances" and assigns the chief place among these " circumstances " to the foreign loans of India, whereas it is entirely clear and established by ample experience that no nation ever did, or ever can, increase the amount of its metallic by money foreign loans. In the twenty-seven years from 1849 to 1875, both inclu- sive, the balance of the metallic imports of India over ex- ports, taking its trade with England and all the rest of the world together, was $1,322,941,155, one-third gold and two-thirds silver. During the same period, the total gold and silver produc- tion of the world was % 4,403,969,754. The population of India, including the native protected states, (so called,) is, by a recent census, 237,000,000, or from one-fourth to one-fifth of the population of the globe. It is thus certainly true that if the case is tested by the rule of population alone, India has received something more than its proportion of the increased m-Ctallic supplies since the California discoveries. But as compared with the average of the world, the wealth, industry, and development of India entitle it to a larger proportion of the precious metals than the rule of numbers does, and its people are also uniformly represented as specially addicted to the use of gold and silver ornaments and in hoarding. Mackenzie, one of the witnesses examined by the British commission of 1876, said: — In every large village there is a silversmith, and as soon as a man gets a few rupees he employs the silversmith to come to his house and make the ornaments. Although the peasantry in India have poor houses, yet the amount of ornaments they have would exceed in value the furniture and utensils of the same class of peasantry in England^ That the treasure received by India from 1849 to 1875 did not overstock it is proved by the fact that, although silver has risen very greatly in value and purchasing power within four years, or, in other words, is more costly to obtain than it was four years ago, the demand of India for it, and the purchases of it made by India during the year 1876, and so far in 1877, are beyond the average of the preceding twenty- seven years. Whether India will absorb as much treasure in twenty- seven years beginning with 1876, as in the twenty-seven years ending in 1875, will be influenced in no degree by any of the considerations referred to either by the London Economist or the India government. It will be determined primarily by the amount of the ag- gregate metallic production of the world during the current twenty-seven years. In 1832, the flow of the metals to India "almost dried up." That was because the Spanish- American mines had then "almost dried up," and because Europe held on to what little was received from them. The flow to India commenced again after 1850 in a deeper and broader current than ever before. This was because the metallic production of the world had then become greater than ever before. Two circumstances have increased the proportion received by India of the total metallic production during the past twenty-seven years. First. The abandonment by the United States and by the greater part of Europe since 1850 of the use of metallic money and the substitution of a forced circulation of paper. This, of course has enabled India and all other metal using countries to obtain more of the current metallic supplies than would otherwise have fallen to their share. Second. The great progress made in India during recent years in substituting cash for barter in its internal transac- tions. The India government in this enumeration of "abnormal" causes of India's metallic imports since 1850 overlook both these circumstances. The British commission of 1876 dwell largely upon the one last named and present the facts relating to it with great fullness. Mr. Lee, writing in 1863, {Drain of Silver to the East,) 282 said that the use of, coins was even then almost unknown in India outside of tlie cities, and he estimated that two thousand million dollars of additional coined money would be needed to properly supply it. The real population of India is now known to be two hundred and thirty-seven millions, while Mr. Lee's estimate of the coin needed for its wants was based on an estimated population of only one hundred and eighty millions. If the coins are being con- stantly worked up intp ornaments, in the manner described by Mr. Mackenzie, the required new coinage must be greater than Mr. Lee's estimate, in some proportion not easy to compute. The testimony taken by the British commission of 1876 is all to the effect that large parts of India are still to be supplied with coins. That commission say: — The facts warrant the conclusion that the use of silver coin has greatly extended in India, and will continue to extend, not so much by the use of more silver in the territories already occupied by the existing currency as by the gradual increase of its use in the remoter parts of India. Upon the whole, the evidence seems to be that the intro- duction of coins into new Indian areas of circulation will continue as active during the current twenty-seven years as during the past twenty-seven. If this proves to be so, no circumstance now suggests itself calculated to diminish here- after the proportion which India has been taking, since 1849, of the total metallic production of the world, except that suspensions of specie payments elsewhere may not occur upon so extensive a scale as heretofore. And even if India shall hereafter take a somewhat less proportion of the com- bined production of the two metals, it might still maintain and even increase its absorption of silver. Instead of im- porting treasure in the ratio of two parts of silver to one of gold, the India demand for its money, which is silver, has only to become more urgent to change the ratio of silver to three parts out of four or four parts out of five. There has really been nothing " abnormal" in the metallic imports of India, since 1850, which required the India gov- ernment to cast about for an explanation in some "abnormal 283 circumstance." Undoubtedly they have been extraordinarily large, but so have been the total metallic supplies of the world during the same period. Comparing India with Great Britain, the excess of metallic imports by the latter since the California discoveries would seem on the face of it to be decidedly the most extraordinary and '^abnormal." The imports of coin and bullion into Great Britain and Ireland were not registered at the custom house before No- vember, 1857. The official statements can, therefore, only be given for the eighteen years from 1858 to 1875, both inclu- sive, of the imports and exports of the precious metals. The figures are as follows : — Imports. Exports. Gold ;^ 331,217.152 •■•• ;^ 252,153,402 Silver 185,858,595 .... i72,55S>47o Total 5i7,o75>747 424,708,872 Assuming the same ratio of excess of metallic exports over imports for the nine years ending with 1857, the excess for the twenty-seven years ending with 1875 would be _;^ 138,550,312, or, taking the pounds at $4.85, would be $768,969,014. During the same period, the excess of metal- lic imports into India over exports was $1,322,941,155. Considering that the population of India is seven or eight times greater than that of Great Britain and Ireland ; that India has, since 1848, created the greater part of its metallic currency by purchasing and coining silver, while England had only to keep good a metallic currency already existing in 1848 ; and that national habits in India favor so large a use of the metals, especially of silver, for other uses than as money ; it is much more easy to account for the absorp- tion of $1,322,941,155 by India than the absorption of $768,969,014 by Great _ Britain. The greater wealth of Great Britain does not explain an absorption of the precious metals more than four times as great J>er capita as that of India, which these figures show. The use of the metals, either as money or for ornament and display, does not necessarily increase with wealth and civilization. France 284 has always had more metallic money per capita than Eng- land, and the evidence seems to be that in all those parts of India in which the use of money has fully superseded barter, more metallic money per capita is used than in Eng- land. It would be a very grave fact, as affecting the future value of the metals, and especially of silver, if the movement of treasure to India since 1850 was really abnormal and ought to be principally ascribed to the negotiation of loans in England. On that view, which is the one taken by the India government, the movement of treasure to India must now substantially cease, as these loans are already quite as large as England deems to be safe, and will be increased only under some such overpowering necessity as famine or war. This view is not the correct one. It is based upon an en- tire misconception of the history of India and of Indian financial and trading relations with the rest of the world, and it involves a theory in respect to the effect of foreign loans which is contrary to sound reasoning and to experience. Foreign loans are never ultimately realized in money. They are very rarely even temporarily and partially so realized, and, when they are, the money so received immedi- ately flows out. It must do so, because it must raise the prices of the country receiving it, and thereby stimulate merchandise imports and diminish merchandise exports. The amount of metallic money a country may receive may be temporarily affected by accidental circumstances, such as a foreign loan, but the amount it can permanently retain is fixed by the inflexible rule that it must be such an amount as is consistent with the range of prices which the neces- sary commercial and monetary equilibrium of the world im- poses upon every country having commercial connections with other countries. If this range qf prices, which is per- manently the only possible one, is temporarily exceeded, money flows out until prices fall to the proper level, and, if prices go temporarily below this range, money flows in until they are restored to the proper level. Disregarding all theoretical refinements as to the exact office or offices of 28s money, it is sufficient to know that there is a necessary re- lation between the volume of money and prices, and that therefore the tendency of prices, always at work, to come to an equilibrium between commercial countries, and which may be conveniently described as the law of prices, must at last controi the flow and distribution of money. Disturbing circumstances are of various kinds. Among them have been the facts that the bulk of the money metals was procured in limited localities, or was received by a single country. That these circumstances only temporarily retarded the equable diffusion of the metals, was shown in the cases which conspicuously arrested the ■attention of man- kind, of the Spanish- American countries which for more than three centuries furnished nearly the entire metallic sup- ply of the world, and of Spain, which for a considerable period largely monopolized the metallic exports from its colonies. It was soon seen that the Spanish-American coun- tries, which produced the metals, and Spain, which princi- pally received them, only had permanently just enough more metallic money than they would otherwise have possessed, to set in motion and keep in motion the current of outflow. Instructed by those examples, mankind at once anticipated what they have actually witnessed in the recent cases of Australia and California. Both these regions, no matter how rich in metallic production, are bound rigorously and inex- orably to a certain range of metallic prices, any permanent excess beyond which would cause them to be entirely stripped of money, and, as their prices must have a certain range, they can have no other volume of metallic money than such as is consistent with that range. Another circumstance which may possibly disturb for a time the monetary, equilibrium is that of international loans. But this equilibrium speedily recovers from a disturbance, no matter what the cause of the disturbance may be, .and illustrations are innumerable of the fact that countries in the long run acquire no money by borrowing abroad. This country has been conspicuous for such borrowing since the civil war, and while these borrowings have been in progress 2 86 metallic money, instead of flowing into it, has flowed out of it. Tlie case of the Australian colonies is similar to that of this country, in the fact of the possession of abundant mines, and their borrowing experience has had the same results. They are now in the full career of negotiating loans in Eng- land, under the encouragement of English bankers and man- ufacturers, who profit thereby ; but these loans, as in our case, instead of carrying money from England to Australia, do not even diminish in the least degree the contrary flow of it from Australia to England. Russia, also a mining country, has pushed borrowing abroad since the Crimean war to a point seriously menacing its credit, but with all its foreign loans, added to the treasures of the Ural and of the Siberian gold washings, the only money found there is the paper rouble. Nowhere among all the countries making foreign loans is there perceived an)' inward flow of metallic money, except in the solitary case of India, which of itself suggests what is otherwise established to be true, that the inward flow in that case is due to other causes. If we pass from the borrowing to the lending side in international transactions we see the same thing in a re- versed view. Lending nations never part with any money. England, which has been making loans for fifty years, never had any approximation to the amount of money it has loaned, and possesses as much now as it ever did. Its loans have been, in substance, mere credits to draw upon in payment for merchandise, and their net result has been the conversion of English iron, coals, cotton cloths, and similar things, at round prices and round profits, into foreign securities. As the borrowing nations obtained no money, and only swelled their merchandise imports, England parted with no money and only swelled its exports. The descrip- tion given by a late Secretary of the Treasury ( Governor Boutwell ) of his experience in loan negotiations in Eng- land has been often quoted, and is very familiar. He was politely informed by the Bank of England that the English would be very happy to take his loans to any desired ex- tent, but it must be on the condition that he would agree not to take any money away from London. 287 The recent extraordinary case of a war-fine of one thou- sand million dollars imposed by Germany upon France, and all actually paid by France within a space measured by months, illustrates in its consequences the sure and speedy operation of the economic laws which restore the monetary equilibrium, however extreme and violent the disturbance of it may be. The fine was paid, either in actual specie or in bills of exchange on London and other specie-paying points. France borrowed nothing abroad wherewith to make the payment, and at the end of this vast operation is found to be possessed of as much gold and silver as when the opera- tion began, while Germany has permanently' gained no gold and silver by it. The money flowed out of Germany as fast as it flowed in, from the inflation of prices which it produced. France, on the other hand, has recovered, by in- creased exports of merchandise, all the money paid out for the fine, and has actually prospered from the enlargement and stimulation of the industries which have furnished the means for these increased exports, which would be the ex- perience of this country if it would set resolutely about paying off its foreign debts. But, irrespective of all other aspects of the case, it seems to be clear that, if the mone- tary equilibrium between Germany and France was only transiently disturbed by the memorable transaction of the war fine, it cannot have been affected between England and India by the loans made at intervals during a series of years which are referred to in the sixth resolution (Sep- tember, 1876,) of the India government. It will not escape the most casual observation that the in- creased cotton export of India and the loans made by Eng- land to India did not occur until the metallic import, of which they are proposed as the explanations, was already under full headway. The world was so stocked with cotton by the unprece-. dented American crop of i860 that it was not until 1862 that Indian cotton exporters began to profit by the American civil war. The India debt to England, direct and by way of guarantees of railroad and canal investments, has grown up principally since 1862, the annual charges upon it having swollen from four millions sterling in that year to fifteen millions sterling in 1876. In fact, in the eight years after April 30, 1849, India incurred no direct debt in England, and in the same eight years the total of its debt, incurred in the shape of railroad and canal guarantees, was only £ 7,406,240. Manifestly, the sudden rise of Indian metallic imports to ^70,721,378 in the decade after April 30, 1849,, compared with -^20,699,090 during the preceding decade, cannot be explained by the circumstances recited by the India government. It has been said that coming events cast their shadows before, but it has never been said that com- ing events can be preceded by their consequences. To whatever extent, great or small, India may profit by better markets while Russia is engaged in war, it certainly cannot be described as an extraordinary fact that Russia was so engaged two years out of the twenty-seven ending with 1875. It will not be extraordinary if it shonld be en- gaged in war during a much larger part of the current twenty-seven years. It seems now to be preparing for a war, the duration and scope of which nobody can foresee. It was said by an old English philosopher that war was the normal condition of man in a state of nature. We are farther removed from that state than we were in Hobbes' time and it is to be hoped that the world has since im- proved. But it has certainly not improved so much that a condition of war two years out of twenty-seven can be de- scribed as extraordinary and " abnormal" in the case of Russia, or of any country. The increased quantitj^ and price of India cotton exports during the American civil war, and during the subsequent period of revolution in the labor system of the Southern States, may doubtless be fairly said to have been extraor- dinary and "abnormal" both in the cause and extent of the fact. But a critical examination of India trade during so long a period as twenty-seven years would probably show that the profits to India resulting from the large cotton sales commencing in 1862, have been to some extent offset 289 by periods of depression in the prices of the various exports of India, including cotton, and by periods when India has been obliged to pay extraordinary prices for some of its imports, as notably for English coals and iron in and about 1872-73. Commercial fluctuations of all kinds are of con- stant occurrence. Ordinarily, they balance and compensate each other. It is sufficient that we can be sure that it is not in accidental and temporary circumstances that the true explanation of an immemorial, and constant fact, like that of the import of the precious metals by India, is to be found. The conditions which determine the flow of the metals to the East and* to India may or may not be as permanent as tlic configuration of the American continent which deter- mines the flow of the Gulf Stream. Their permanency can- not, at any rate, be so certainly known. The facts of geog- raphy are patent to the eye, while the possibilities of mining are hidden in the bowels of the earth. There can be no absolute assurance that new discoveries may not reverse the history of four centuries, and cause the current of the metals to set from the Old World to the New. But for that immediate and limited future, beyond which men need not look in practical concerns of life, confidence may reasonably remain unshaken that the metals will still flow as they have flowed without interruption since the voyages of Columbus, and that their distribution among the different parts of the Old World will be governed as heretofore, and by the same circumstances of numbers, 'wealth, industry, tastes, habits, and the possession or lack of mines. THE END. 19 INDEX. PACK Alison (Senator), vievps of, in respect to possibility of using silver in the United States. 4i. 42 Beaconsfield (Lord), speech at Glasgow, 1873, against the demonetiza- tion of silver 258 Baring (Alexander), in favor of the double standard 160, 161 Bonnet (Victor), Danger of too much money 6, 195 Behren (Jacob), England benefitted by a general adoption of gold.... 8 BouTWELL ( Gov.), His views stated and considered " 31-36 " His prediction in 1872 that silver would fall relatively to gold.... 58 Chevalier. Threatened fall of gold 3 Cairnes (Professor J. E.), the greenback currency of the United States did not affect its trade with Europe 44 Cernuschi. His views stated and considered 37-39 ' Unsoundness of his bi-metallic theories 199-207 CONKLING (Senator) did not know, March 30, 1876, that silver had been demonetized 59 Disraeli. See Beaconsfield ( Lord ). Dumas (French Senator) views in favor of the double standard 113, 114 Debts (National). Amounts of the debts of other countries, held in England, France and Germany g EiCHTAL ( M. d' ), against demonetizing silver 113 Economist (London). Prediction in March, 1872, that silver would fall relatively to gold 57 " Its warning against the danger of more than one important coun- try going to the gold standard at the same time 64 " Its opinions from 1865 to 1876, that there was ii deficiency of gold for monetary purposes 252-258 Financial Chronicle (N. Y.) Its admission that the current troubles in Europe arise from a struggle for gold 97 Fauchet (Leon), against demonetizing silver m France, Arguments, in 1869, before Monetaiy Commission of 5, 6 " Leon Say's estimate of silver coins in 213 " Gold coinage of i ig " Amount of silver in Bank of 213 " History of the alternate disappearance of gold and silver from the circulation of 86 GosCHEN (Mr.) Observations against the gold standard in the British Parliament, in 1876 259 GOLOID, the proposed coins of that name 244 Grant (President), Message of, Januaiy 14, 1875, for new mints to coin silver 55 " Letter of Oct. 6, 1873, to Mr. Cowdrey, in favor of silver money 185 Gallatin (Albert) in favor of the double standard 163-5 (291) 2f2 PAGE Gold, pending struggle for, of the European banks 78-81 " Estimated amount of coin and bars in the Western World 237 " The higher it rises relatively to silver, the greater the necessity of maintaining a silver currency 8g Gold and Silver. Production from 1492 to 1849, ^.nd from 1849 to 1876 265 " Consumption and absorption of, in Great Britain 283 " Production from 1851 to 1875 I2I Hoar (E. R.), Resolution, April, 1874, in favor of a currency of gold and silver 55 Holland, argument of Monetary Commission of, in favor of gold ... 6 Hamilton ( Alexander ), in favor of the double standard 114 Hunter ( Ri M. T. ), in favor of the double standard 145, i6g Hawley ( Gen. ), in favor of gold and silver 186 HORTON (S. Dana), supports Cemuschi's view that the United States cannot use silver independently of Europe 40, 41 India, imports of gold and silver from 1849 to 1875 280 " Use of silver in, for ornaments 280 " Decline in its demand for silver in 1878 84 " Gold a tender in, until 1835 156 " Suffers from the rise in gold, but gains from the fact that silver has not risen 48-51 JEVONS. His view that silver will be sustained in Asia and that its disuse in Europe will not contract money 13-19, IS4, 155 " Greater steadiness of the double standard 177 Jefferson ( President ) In favor of double standard 114 " Order in 1806 to suspend coining silver dollars 170 Jones (Senator), effect of his speech of April 24 and 25, 1876 60, 61 LiNDERJIAN (Dr. ) statement that everybody foresaw in 1872 that silver must fall relatively to gold 57 McCuLLOCH (J. R.) benefits of an increasing volume of money 147, 148 Mees (President of the Bank of the Netherlands), views in 1867 against a single and the same standard in all the countries of Europe 232 Money, no such thing as international money 36 " Disastrous effect of making the money of the United States as dear as the best money in the world 92-94 New York, reasons given by the banks and Chamber of Commerce of, for preferring a gold standard 21 Paris Conference of 1867, its actual resolutions i^g Poland (Judge), Revised Statutes not intended to contain new matter 187 Prices, the volume of money ^ principal factor in controlling 21-23 Fall of, during Dark Ages 23 Fall of, between Augiist, 1876, and August, 1878 69 Fall of, in 1877-8 69, 70, 71 Fall of, in British imports from August, 1877, to August, 1878... 71, 72 Marked increase of the fall of, after 1876 72, 73 293 PAGE Prices, in New York in August and September, 1878, statements of mer- chants 74-77 " Theory that there is a normal range of 88, 8q " Fluctuations of, at various dates from 1782 to 1865 125 Rothschild ( French Baron Alphonse ), arguments for the double standard 112, 141, 171 RouLAND (Governor of Bank of France), against a gold standard. 113, 152 Sherman (John), his co-operation at Paris in 1867 in the gold policy. 52, 53 " Report to United States Senate in 1868, in favor of an exclusive gold standard 54 " Statement in his Report of December 3, 1877, that the fall of silver relatively to gold vi'as not foreseen in 1873, shown to be incorrect 56-58 " His first account given in the Senate, March 30, 1876, of the law of February 12, 1873 59 " Speech at Toledo, showing his commencement. May I, 1877, of piling up gold in the United States Treasury 65 " Ruinous effects of his policy of making greenbacks equal to gold, go, 91 ** Ruinous effects of his proposition to make silver equal in value to gold , 9I1 92 ' His second account, given in the Senate, April 25, 1876, of the law of February 12, 1873 190 " His proposition to create silver greenbacks 207-211 Sanford (Senator, from New York) in favor of double standard 168 SCLOPIS (Comte Frederic) Opinions in favOr of the double standard... ig8 Sweden. Monetary Commission of, in 1869, in favor of gold 150 Suspensions in Russia, Italy, and Austria 4 Silver, advantages of its weight and bulk 25-27 " Steadier in value than gold 24, 25 " Specially the product of the American continent 18 " Limiting its coinage ties it to gold and gives it an artificial and unjust value 95 " Dollars of, coinage from 1792 to 1873 i6g, 170 " Dollars of, coinage suspended from 1806 to 1835 l6o Silver and Gold, Production from 1492 to 1849, ^""^ from 1849 to 1876 265 " Consumption and absorption of, in Great Britain. . . ., 283 " Production from 1851 to 1875 121 Tribune (N. Y.) its admission that low prices in England injure the United States 97 Westminster Review (1876) Dangers of the gold scheme 7 White ( Horace ) foreshadows, in May, 1878, the Treasury policy in re- spect to the silver dollar 68 WoLOWSKi. against demonetizing silver iii, 113, 165 THE BANKER'S MAGAZINE AND statistical l^jegistjer. Devoted to the discussion of the Financial Topics of the day, to original and selected- articles upon the principles and practice of Banhing and- the Laws relating thereto, and to Statistics in refer- ence to Banhs, Finance and Political Economy in general. In addition to its valuable statistical and economic information, the Banker's Magazine furnishes reports of all Legal Decisions important to hanks and their dealers. Each numher contains also a careful record of all recent changes among banhs and bankers- The volumes of this Magazine present a full epitome of finan- cial events in the United States for the last thirty years. As a work of reference it is often found to be invaluable, while its immediate usefulness as a source of information is appreciated by a steadily widening circle of readers. The volume contains 1,000 pages yearly, with a copious index. I'ublished Monthly, Five Dollars per Year, By I. S. ROMANS, No. 251 Broadway, New York. NOVEMBER, 1878-CONTENTS. Art. I. — The British Financial Position 321 II. — The Resumption Laws 323 III. — The New Redemption Order 326 IV. — Bank Notes Redeemable in Greenbacks 328 V. — Commercial Prices in England 329 VI.— The Failure of the City of Glasgow Bank 33J VII. — Financial Position of the Governments of Europe 337 VIII.— The Silver Market 342 IX — The Subsidiary Silver Coins 345 X. — The Silver Conference in Paris, 1878 348 XI. — Fiat Money in England 3Si XII. — The Demand Notes and the Greenback Question 353 XIII.— The Theory of Solid Bottom in Prices 355 XIV. — Railroad Stocks and their Current Values 360 XV.— Of the 4i2>i-Grain Dollar 361 XVI. — The Example of France in her Issue of Paper Money 364 XVII.— A Silent Contest 370 XVIII.— The Government Bank 373 XIX. — New Commercial Fields in the Old World 379 XX.— The Rise in the Value of Gold 381 XXI. — Inquiries of Correspondents, addressed to the Editor 386 XXII. — Decision of the Attorney-General on Bank Taxation 392 XXIII. — Banking and Financial Items. Changes, Decisions, Official Circulars, etc 394 XXIV. — Monthly List of New Banks and Bankers — Their Location, Officers, etc 398 XXV. — Recent Changes of President and Cashier in the U. S 399 XXVI. — Dissolutions, Failures and Oranges among Banks and Bankers in the U. S 400 XXVII. — Notes on the Money Market 404 ECONOMICS FOR BEGINNERS HENRY DUNNING MACLEOD, M.A. Author of "A Dictionary of Political Economy," "The Theory and Practice of Banking," "The ELEMENts of Banking," "The Principles of Economical Philosophy," " The Elements of Economics," etc., etc.. One Volutne, Small Crown Octavo, Price $1. I. S. HOMANS, Publislier, NEW YORK. EXTRACT FROM PREFACE. " The most advanced Economists in the world are now satisfied that ancient Authors were right in holding Exchangeability to be the sole essence and princijDle of Wealth : that everything which can be bought and sold, what- ever its nature may be, is wealth : and consequently that the Science of Politi- cal Economy, or, as it may more aptly be termed, Economics, is the Science of Exchanges or of Commerce. " This little work is an exposition of the broad outlines of the Science accord- ing to this view, which is that of the Third School of Economists, whose doc- trines are now rapidly gaining the ascendency throughout the world." CONTENTS. Introduction. — On the meaning of the term Political Economy and on the Three Schools of Modern Economists. Chapter I. Definition of terms used in Economics. — II. On Value. — III. On the Coinage. — IV. The Theory of Credit. — V. On Commercial Credit. — VI. The Theory of Banking.— VII. On Profits.— VIII. On Rent.— IX. On Labor, or Immaterial Wealth, and Wages. — X. On iRights, or Iir- corporeal Wealth. — XI. On the Foreign Exchanges. COMMENTS ON OTHER WORKS BY THE SAME AUTHOR. An Economist of the first order. — Journal des Debats. Mr. Macleod's works are a good first-fruits of the new era of Economic thinkers ; they are beyond all question the most effective exposition of the first principles that are to be worked out of the Economic practice of this age. — Scotsman, IL is a, great service to render to a science to fix well its nomenclature, and to define exactly and clearly its fundamental ideas. Such is the task to which Mr. Macleod brings a patience beyond proof, and the learning of a Benedictine. — From M. Michel Chevalier's Report on Mr. Macleod' s Works to the Institute of France. The Theory and Practice of Banking is beyond all question the most original and most complete and conclusive work that has ever been published on the subject. Which at a stroke placed the Author in tlie rank of the first Econo- mist financiers of England. — Journal des Debats. The Elements of Banking has the merit — too rare in the present day of giving n great deal of thought and information in a veiy small compass. — Bullionist. CCMflriVATION ' REVIEW:.'?. /.?./.0 J. IVJO |(yvUi2v ocU^'^