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THE 
 
 Gold Standard 
 
 ITS CAUSES, ITS EFFECTS, 
 
 ITS FUTURE^^nur* 
 
 ■c ,/''< 
 
 % 
 
 FROM THE GERMAN OF ~ '- ^ , 
 
 BARON WILLIAM VON KARDORFF-WABNITZ. 
 
 PHILADELPHIA : 
 
 HENRY CAREY BAIRD & CO., 
 
 INDUSTRIAL PUBLISHERS, BOOKSELLERS AND IMPORTERS, 
 
 8x0 WALNUT STREET, ><i^CE/V^ 
 
 1880. / ' ^ 
 
 JAN HI 1924 
 
 
V4 Gr X 7 
 
 CONTENTS. 
 
 pAGa. 
 Introduction 5 
 
 I. — Nature and Significance of the Gold Standard 8 
 
 II. — The Introduction of the Gold Standard into England 12 
 
 III. — Adoptionof the Gold Standard in the United States 18 
 
 IV. — The Monetary Policy of France 25 
 
 V. — The /introduction of the Gold Standard into the German Em- 
 pire . . .'. ."■, 29 
 
 VI. — The Prophecies of Messrs. Seyd and Wolowski - 35 
 
 VII. — The Ecqnomic Importance of Metallic Money. — Demonetiza- 
 tion of Silv-er and its Effects. — The Universal Adoption of 
 
 the Gold Standard '38 
 
 VIII. — The Principal Objections to the Double Standard, and One 
 
 Great Objection to the Gold Standard 44 
 
 IX. — The Paris Monetary Conference. — The Bland Silver Bill. — Sus- 
 pension of the Sales of Silver by the German Empire 50 
 
 X. — The Future Monetary Policy 55 
 
 @^- 3 ?^-'X/ 
 
 (ii) 
 
PREFACE TO THE AMERICAN EDITION.. 
 
 The question of ihe relative merits of bi-metallism and the single gold 
 standard, and of the consequences involved in an attempt to give univer- 
 sality to the gold standard, has attracted but little attention and elicited less 
 popular discussion in this country. Although our Government invited an 
 International Convention on the question, and has been instructed by 
 Congress to take further steps to promote the universal acceptance of the 
 double standard on a basis to be fixed by treaty between all the great 
 commercial powers, the import of its action appears to be but little under- 
 stood by those who, without having considered European opinion on the 
 subject, dispose of it as though it were but an unimportant local question, 
 and treat that which is pre-eminently an international question as though 
 it were exclusively a national one. 
 
 The following pages by Baron William von Kardorff-Wabnitz, will give 
 the reader an idea of the breadth and earnestness of the continental dis- 
 cussion of this question. The profound and general study which Baron 
 Kardorff has given to it is illustrated by every page of his pamphlet. He 
 many years ago avowed himself a disciple of Henry C. Carey. He ac- 
 cepted and labored earnestly to promote the establishment of the Empire ; 
 but he dissented from the action of the Government when it abandoned 
 the protectionist traditions of Germany, and substituted approximate free 
 trade for the system of protective duties which had grown up under the 
 Zoll-Verein — the customs union, the avowed object of which, while giving 
 freedom of intercourse to the German people among themselves, was to 
 protect their industries against foreign competition, and which gave that 
 breadth, stability, and power to those industries, and that union among 
 the several German states which resulted in the great German Empire 
 of 1866-70. 
 
 During his more than ten years' service in the Reichstag, when the cause 
 of protection seemed utterly hopeless, like his great teacher in similar 
 periods of discouragement in this country. Baron Kardorff proclaimed the 
 true doctrines of Social Science and National Economy, both on the floor 
 of the Reichstag and in many popular letters and addresses. With Herr 
 
 (iii) 
 
iv PREFACE TO THE AMERICAN EDITION. 
 
 Windhorst, who led the Ultra-Montane wing of the Conservative forces 
 of 1879, ^^ shared the honor of re-establishing the protective policy as that 
 of the German Empire. 
 
 From the first, he also dissented from the attempt to abandon the use 
 of silver and establish a gold standard in a country whose metallic money 
 consisted exclusively of silver; and in his earliest writings on the subject 
 portrayed scarcely less clearly than did Messrs. Wolowski and Seyd at 
 the close of the Paris Monetary Convention of 1867, the paralysis of trade 
 that would be produced by the attempt to demonetize one-half of the 
 metallic money of the world. To Germany he therefore speaks as an 
 authority, and his rapid discussion of the times in which and the means 
 by which the gold standard was established in England, the United States, 
 and Germany, and his portrayal of the superior management of France, 
 cannot fail to be full of interest, and to carry great weight with the Amer- 
 ican people. 
 
 In presenting this translation of his pages to the American public, we 
 bespeak for it a general and careful perusal. 
 
 Philadelphia, September, 1880. 
 
THE GOLD STANDARD, 
 
 ITS CAUSES. ITS EFFECTS, AND 
 ITS FUTURE. 
 
 INTRODUCTION. 
 
 Scarcely any economic or political question appears so little 
 calculated to produce a deep and general interest in the wider 
 circles of our country, as that politico-monetary controversy 
 which is called the monetary standard question. 
 
 When the German Empire, through its legislative agents, 
 gave unity of form to the German system of coinage, the parlia- 
 mentary debates of the Reichstag were indeed able to attract at- 
 tention, both inside and outside of the Chamber ; yet the estab- 
 lishment of a German unit of coinage in the place' of the intoler- 
 able confusion which had previously reigned in Germany, in 
 the place of the varied competition which the previous thalers, 
 guldens, florins, Louis-d'ors and Friedrichs-d'ors, silver grosch- 
 ens, gute groschens, schillings, kreuzers, grotes, etc. — who 
 shall enumerate them ? — had produced, must be regarded as in 
 the highest sense a national work. It was the removal of a 
 nuisance which had hindered the development of our commercial 
 relations. 
 
 Compared with the important consideration which now 
 presses to the foreground, the question whether we did well in 
 
 (S) 
 
6 
 
 choosing the single gold standard as a basis for the reform of 
 our monetary system, possesses a minor importance. 
 
 The few members who were to some extent familiar with the 
 history of the introduction of the gold standard — or of whom 
 such an acquaintance was at least supposed — were uncondi- 
 tional advocates of the single gold standard. While I do not 
 state that the authority and eloquence of Messrs. Bamberger, 
 Michaelis, Delbriick, etc., would have secured for it the almost 
 unanimous adoption which it received in the Bundesrath as well 
 as in the Reichstag ; they were, I think, led generally by the 
 vague sentiment that the German Empire, in the thriving 
 financial position of recipient of five billions, could, without 
 any danger, follow the precedent of England and the simul- 
 taneous example of the North American Union, in the regula- 
 tion of its monetary basis. 
 
 To the theoretical considerations : 
 
 That it is as little advisable to have in gold and silver two 
 different measures of value for the transfer of commodities, as to 
 establish two different kinds of water-mark for the determination 
 of the height of the water in a stream; 
 
 That in double-standard countries the variability of the rela- 
 tion of values between gold and silver prejudices the security and 
 reliability of trade, and produces disturbing fluctuations in the 
 value of goods ; 
 
 That tht double standard country constantly runs the risk of 
 being deprived of its better metal, i. e., of the one whose value 
 in relation to the other is rising ; 
 
 That the diminution in the value of silver in relation to gold, 
 which has been perceptible for thousands of years, makes the 
 former appear no longer suitable as a standard metal ; etc. 
 
 To these and similar theoretical considerations the vague sen- 
 timent is, in my opinion, in great measure due that the adoption 
 of the gold standard represents a step forward in civilization 
 which England had first taken, and which we could all the less 
 
neglect to imitate, since the French war-contribution afforded 
 us immediately the requisite supply of gold. 
 
 At present it is but an exceedingly small proportion of 
 the financial politicians in public life — in the civil service as 
 well as in the parliamentary bodies — who are sufficiently in- 
 formed on the question of a monetary standard. While German 
 savants, as formerly Humboldt, later Nebenius and Soetbeer 
 and others, have long been furnishing valuable historical and 
 statistical contributions on the production and use of the pre- 
 cious metals, the practical statesman, in the monetary disorder 
 of Germany prior to 1870, could scarcely find means for sub- 
 jecting to a special study questions whose concrete political 
 solution then appeared to lie very far of — questions which for 
 this reason are to-day deemed dry, difficult, and complicated, 
 as indeed they are. 
 
 Nothing could be more natural than that in this state of 
 things the recent prohibition of the silver sales of the German 
 Empire by the imperial Chancellor, should have been, especially 
 in its inner causes and import, correctly comprehended by those 
 only who instinctively felt that with this measure for the first 
 time a check was offered to the gold standard theory repre- 
 sented by them and hitherto reigning unrestrained, and that the 
 nation was called upon to grapple earnestly with the economic 
 effects of the monetary policy which we had heretofore pursued, 
 with the possibility of its further extension, and the necessity of 
 eventually guiding it into other channels. 
 
NATURE AND SIGNIFICANCE OF THE GOLD 
 STANDARD. 
 
 Mr. Thomas Baring, one of the chiefs of the English banking 
 house of Baring Brothers & Co., bore witness that in London, 
 during the financial crisis of 1 847 it was not possible to borrow 
 a guinea on 60,000 pounds sterling of coined silver. On the 
 other hand, it is an authentic fact that in Calcutta, a possessor 
 of 20,000 pounds sterling of gold coin during the commercial 
 crisis of 1 864, was obliged to declare himself insolvent because it 
 was impossible to raise a single rupee on this gold.' 
 
 'H. C. Baird. — Money and its Substitutes.* Philadelphia, 1876, p. 13, 
 note 2. 
 
 W. D. Kelley. — Silver as a Commodity, as Money, and as Material for 
 Token Coins. Philadelphia, 1877, p. i. 
 
 Messrs. Baird and Kelley are eminent disciples of Carey. Mr. William 
 D. Kelley, one of the most prominent leaders of the Republican party, 
 has become known here in Germany through his interview last year with 
 Prince Bismarck, in consequence of which a. portion of our press exposed 
 its ignorance by suspecting him of being an agent of the American silver 
 mining interests ; a proof that the political and scientific importance of the 
 man were as little understood as the North American mining relations, 
 which, aside from the probably preponderating interest of the gold pro- 
 duct, have this peculiarity, that in the principal mines (the Comstock lode, 
 etc.), gold and silver are obtained in approximately equal values (cf. 
 Suss, The Future of Gold). As the value of gold rises in the exact pro- 
 portion that that of silver falls, the proprietors of these works obviously 
 have no special interest in the standard question. 
 
 * The exact words of my statement are as follows : 
 
 " On the testimony of Thomas Baring we are assured that it was found impossible, during the 
 crisis of 1847 in London, to raise any money whatever on a sum of £60,000 in silver. During a 
 similar crisis in Calcutta in 1864, it was equally impossible to raise even a rupee of paper money 
 on ;£2o,ooo of gold. The silver in London was not a legal tender above forty shillings, while the 
 gold in Calcutta was not so for any sum whatever." ^H. C. B. 
 
My object in placing these two practical examples at the 
 head of my discussion, is to show that the monetary standard 
 problem deals with serious things, and not with controversies 
 whose decision would be a rather indifferent matter; and to 
 make clear the nature and consequences of the single standard 
 even to those who have hitherto lacked the opportunity, leisure, 
 or desire to occupy themselves deeply with questions of mone- 
 tary policy. 
 
 In crises men want money ; and if the legal tender of a coun- 
 try which the debtor is bound to pay and the creditor to 
 accept consists, as in India, of silver coin, the greatest quan- 
 tities of gold are as ineffectual in supplying this legal medium 
 of exchange as a given quantity of cotton, iron, indigo, or other 
 merchantable commodity. 
 
 On the other hand the single gold standard in England, not- 
 withstanding that London is the greatest silver market in the 
 world, and that the charter of the bank of England permits the 
 covering of its notes at one-fifth in silver, is so powerful in times 
 of catastrophes that, there, silver at such times falls completely 
 into the category of other merchandise. 
 
 In 1813, during the great financial depression of Prussia, it 
 proved an efficient aid when the patriotic spirit of the people 
 sent the quantities of silver plate in their possession direct to 
 the mint, when even the little store of silver of small house- 
 holds, the few teaspoons or sugar-boxes from the scanty do- 
 mestic stores of private citizens, were immediately transformed 
 into thalers ; and in France during the late war similar occur- 
 rences, if not on an extensive scale, at least in special cases, 
 are said to have taken place. 
 
 It is to be hoped that the German Empire may never again 
 be exposed to such exigencies, for it will be evident to all that 
 after the establishment of the gold standard these offerings upon 
 the altar of the country, which possess not only a material but 
 a moral importance in strengthening and protecting the national 
 
lO 
 
 sentiment of the people, would be placed beyond the reach of 
 possibility. 
 
 It was reserved for the 19th century, to make the attempt 
 through the proscription of that precious metal upon which the 
 entire exchange of the world had hitherto almost exclusively 
 rested, viz., through the demonetizing of silver — which in all 
 parts of the world had served pre-eminently as coin, and to far 
 greater extent than gold — to overthrow a custom of nearly three 
 thousand years' standing. 
 
 At the end of the seventeenth century Locke' was still able to 
 declare without contradiction that silver was the only possible 
 and proper metallic standard, and to regard the coinage of gold 
 as only resorted to in order to have a standard of the weight 
 and fineness of gold wares, since gold was neither a current meas- 
 ure of value for goods nor a current metal of coinage of the 
 world, but was wholly unadapted to both these objects. Some 
 twenty years later, 171 7,' great uneasiness still prevailed in 
 England over the fact that the English silver coins were seen to 
 be disappearing and emigrating and only gold ones were circu- 
 lating; and it is of the highest interest that the great Newton, in 
 an official opinion on this subject, rendered by him as mint- 
 warden, expressed the view which in our day is everywhere 
 discussed, namely, that the coinage of various countries should 
 be conducted according to the closest possible relation between 
 gold and silver — a discovery which we owe to the diligent zeal 
 of Mr. Henri Cernuschi.* Nothing could have been easier for 
 the renowned founder of the theory of light and discoverer of 
 the law of gravitation, than the solution of the then existing 
 difficulties, which are to-day regarded as so simple, and so 
 self-evident, by recommending the transition to the single gold 
 standard. Strangely enough, he did not go so far! 
 
 "Locke — "Further Considerations" quoted by Henri Cernuschi in his 
 ' Bimetallisme en Angleterre." Paris, 1879, p. 12. 
 'Ernest Seyd — The Decline of Prosperity. London, 1879, P- 85. 
 * Henri Cernuschi — Bimet. en Angleterre, p. 15. 
 
II 
 
 Yet, so recently as 1858', such eminent national economists 
 as Michel Chevalier and Cobden, recommended the adoption of 
 exactly the opposite course in the policy of coinage, viz.: the 
 demonetization of gold ! Have we at last succeeded in dethron- 
 ing King Silver ? Is further advance in the path we have en- 
 tered upon necessary or desirable, or the return to the former 
 condition inconceivable? Are all these questions as definitely 
 and unchangeably solved as the gold-fanatic would make us be- 
 lieve — or have there appeared, in consequence of the partial 
 demonetization of silver, economic phenomena which render it 
 probable that the world has learned to recognize the transition 
 to the single gold standard as one of those errors which, from 
 time to time, mysteriously acquire supremacy over the minds 
 of men ? 
 
 * Michel Chevalier — On the Probable Fall in the Value of Gold (trans- 
 lated into English with preface by Cobden, 1858). 
 
12 
 
 II. 
 
 THE INTRODUCTION OF THE GOLD STANDARD 
 INTO ENGLAND. 
 
 When Lord Liverpool, in 1816, proposed to Parliament the 
 legal adoption of the gold standard, the circulation of the cduntry 
 consisted almost exclusively of depreciated bank notes, a con- 
 sequence of the long Napoleonic wars. 
 
 To remove this condition, the government thought an entirely- 
 new system should be proposed. It declared that the English 
 people evinced a preference for gold ; that the richest nation of 
 the world should adopt the most valuable metal as its standard ; 
 that if they should adopt gold coin as the measure of value in 
 the exchange of commodities, they would especially need silver 
 coin for change.^ 
 
 England therefore demonetized silver at a time when it was 
 not necessary to throw any stores of silver on the market, since 
 no such stores existed. 
 
 It made gold a standard metal at a time when silver was still 
 the customary metal, and sought for in the general trade of the 
 world. 
 
 Whether the choosing of this course was due to the tacit con- 
 viction that it was easier for England to restore its coin circu- 
 lation in gold than in silver — or in the well-founded assumption 
 that Great Britain, the Queen of the Seas and of the commerce 
 of the world, could monopolize the gold-trade for many years 
 to come, as had been again and again asserted — is not germane 
 to our present investigations. The sole important fact remains 
 that Parliament passed the law in question, and that thereby for 
 the first time the gold standard was established in a nation. 
 
 'E. Seyd — Decline of Prosperity, p. 9. 
 
13 
 
 But not without considerable opposition. Lord Lauderdale, 
 who has made himself a name as a politico-economic writer, 
 declared in his protest delivered in the upper house, " that the 
 idea was absurd that a rich country should banish silver, and 
 that the statement was ridiculous that the nation had a special 
 preference for gold." ' 
 
 Many of the most prominent financial minds were of the same 
 opinion ; Mr. Baring among others, who three years afterwards 
 advocated the restoration of the double standard, and in 1846, 
 as member of the upper house, expressed himself in a pamphlet 
 as follows : * 
 
 " The first Lord Liverpool gave a very foolish reason for preferring 
 gold to silver as a single standard, that the richest country in the 
 world should have the richest metal for a standard. Common sense 
 should have led an accurate observer to the very opposite conclusion. 
 The wealth of a nation like ours does not consist in the precious 
 metals. We hold little more of them than is necessary to circulate 
 the almost countless millions of our wealth, and much less in pro- 
 portion than is held by many much poorer countries. In proportion 
 to the amount of wealth circulated, it is essential to enlarge for safety 
 the metallic base which is to preserve paper from depreciation ; and 
 that, it cannot be doubted, is greatly enlarged by conforming to the 
 practice of all our neighbors in taking the double, and if not the 
 double, the silver standard." 
 
 In refutation of such utterances it is customary to assert 
 ■that the powerful rise of the national wealth in England, since 
 the introduction of the gold standard, affords the best proof 
 that this was no mistake, but a step accompanied by the most 
 brilliant results. But a man to whom no one will deny the gift 
 of acute observation of the development of the condition of Eng- 
 land, and whom we may confidently quote as authority, namely, 
 none other than the present British Prime Minister, Lord 
 
 ' Hansard's Parliam. Debates. Vol. 34. 
 
 «H. C. Carey — Appreciation in the Price of Gold. Philada. 1877, p. 15. 
 
14 
 
 Beaconsfield, expressed himself in his inaugural address as 
 rector of the University of Glasgow in 1873, in the following 
 manner :° 
 
 "It is the greatest delusion in the world to attribute the commer- 
 cial preponderance and prosperity of England to our having a gold 
 standard. Our gold standard is not the cause of our commercial 
 prosperity, but the consequence of our commercial prosperity. ' ' 
 
 It should be further considered that the introduction of the 
 gold standard into England was fictitious, in so far that the one 
 hundred and eighty millions of British subjects in India pre- 
 served the silver standard ; that the immense compass of 
 British trade rendered it possible to transfer the chief silver 
 market of the world to London, and thus to meet the require- 
 ments of the silver standard countries at any time with ever 
 self-replenishing stores of silver. 
 
 It need not be determined here whether England's policy of 
 allowing the silver standard to remain in India proceeded, as 
 Carey intimates," from shrewd calculation, because at that time 
 silver was still the desirable metal and its demonetization would 
 have caused the danger of producing a strong depreciation of 
 silver, and thereby sensibly diminishing Great Britain's large 
 drafts from Hindostan ; or whether the feeble attempt in India 
 to introduce the gold mohur failed through unscientific coinage 
 regulations, or through the Indian preference for silver :" certain 
 it is that this greatest and richest of all the British dependen- 
 cies, with a circulation which is estimated at about two hundred 
 million pounds sterling, possesses to this day the single silver 
 standard. 
 
 'E. Seyd— Decline of Prosperity, p. 38. Likewise W. D. Kelley. The 
 
 Silver Question, speech in the House of Representatives, Washington, 
 May 10, 1879. 
 
 '0 H. C. Carey. — System of Social Science. Adler's translation — Munich, 
 1863, ii., p. 457- 
 
 " E Seyd. — Decline of Prosperity, p. 8. 
 
IS 
 
 But even England found herself obliged, in 1 844, to subject to 
 a revision her banking act, which excluded silver bars as security 
 for the notes issued, and so to alter it that in future the metallic 
 reserve of the notes need no longer consist exclusively of gold, 
 but might also consist of silver bars to the amount of one-fifth " 
 — a decidedly significant step in the direction indicated by Mr. 
 Baring, of securing a broader basis for the metallic reserve of 
 the notes. And to any one who reads the speech of Sir Robert 
 Peel delivered the 20th of May, 1 844, there will remain no doubt 
 that that noted statesman was^then far from belonging to the 
 ■ believers in the infallibility of the gold standard theory; but 
 rather will it be seen that the views which he had perhaps held 
 under his former chief of cabinet, Lord Liverpool, had been con- 
 siderably modified in the course of years. He said: 
 
 "The reasons in favor of permitting the issue of silver are these : — 
 The facility of exporting silver in preference to gold, when such ex- 
 port is expedient, is the true remedy against the inconvenience of our 
 standard differing from that of other countries ; and unless the circu- 
 lation department is allowed to issue against silver, that inconveni- 
 ence might occasionally be severely felt." 
 
 As the last mentioned event shows, the whole controversy — 
 gold, silver, or double standard — took place in the years follow- 
 ing 1 8 16, and has remained of only secondary importance for 
 the participation of the British public ; first, because from the 
 causes above discussed no depreciation of silver had occurred, 
 and secondly, because the entire economic interests of the nation 
 were primarily and completely engrossed by the bank-problem 
 and the severe struggles which preceded the adoption of the 
 present English banking law. 
 
 England, it is true, had enjoyed this advantage over states of 
 the European continent, that it had never been the immediate 
 theatre of the frightful wars which in the time of Napoleon I. 
 visited all the nations of Europe in rapid succession with ravages 
 
 "Loc. cit. p. 57. Also: H. Cernuschi — Bi-m6tallism en Angleterre, III. 
 
i6 
 
 and devastations; but participation in the wars had brought with 
 it a heavy increase of her national debt, and the circulation of 
 the country, as already remarked, consisted almost exclusively 
 of depreciated notes. 
 
 While in our days France, with a skill in her financial opera- 
 tions which merits the highest admiration of all times, has met 
 similar circumstances by quiet trust in her indestructible power 
 of production, and in the pursuit of a commercial policy 
 maintained for centuries, and has restored in an astonishingly 
 short time the par value of her bank notes by the gradual 
 strengthening of her metallic reserve — mindful of the truth, 
 repeatedly established by practice, that rapid contraction of the 
 currency produces inevitable crises and catastrophes of the most 
 dangerous kind — England in those years was a prey to all the 
 experiments which preceded the establishment of the present 
 prevailing banking system. 
 
 The immense resources of the British empire ; its supremacy 
 in the commerce of the world ; the rapid development of those 
 astonishing industries, resting upon its natural treasures of iron 
 and coal, which the inventions of Watt and Arkwright had 
 called into life; the ceaseless influx of the wealth of India into 
 the British Islands; all this could not prevent the fearful crises 
 which the several rapidly changing phases of the British finance 
 and banking policy necessarily brought on. 
 
 First, following out the doctrines of the prevailing financial 
 school, there was a strong contraction of the note-circulation 
 in order to force the resumption of specie payments, in conse- 
 quence of which a busmess and financial crisis occurred, whose 
 severity has not been exceeded by any in our times. Then 
 inflation, great increase in the issue of notes, and in consequence 
 of this apparent prosperity, apparent rapid growth of the national 
 interests ; then a second contraction of the currency and conse- 
 quent return of the crisis; and so on, until ultimately the present 
 bank act came into existence, the note circulation acquired a 
 
17 
 
 certain stability, and the inexhaustible resources of British pros- 
 perity were able, undisturbed by human folly, to enrich the 
 country." 
 
 It is self-evident that these events were of decidedly greater 
 significance in economic development, and necessarily occupied 
 public attention more, than the question whether the country 
 could have withstood the blows of war more easily by the 
 preservation of the single silver standard than with the gold 
 standard which it had adopted. 
 
 The controversy as to standards appears to have lain dor- 
 mant, until the discoveries of gold in California and Australia, 
 in 1858 called forth the doubts of Michel Chevalier and Cobden 
 as to the adaptability of gold; and until in the year 1867, during 
 the Paris Exposition, an assembly met, which as Lord Beacons- 
 field in his above mentioned address says " grappled with a 
 very beautiful, and in itself harmless, but not very easily realized 
 ideal, namely, with the idea of establishing a uniform basis of 
 coinage for the 'whole world ; and yet never arrived at a definite 
 recommendation respecting this object, but only at the conclu- 
 sion that all the States of Europe must immediately take steps 
 to introduce a uniform gold standard." 
 
 It is probably this conclusion of the gold theorists to which 
 America and Germany are indebted for the introduction of the 
 gold standard, the effects of which will be discussed further on. 
 
 •'McCulloch — Note 9 to his edition of the Wealth of Nations — Article, 
 Money. Also Carey — System of Social Science, ii., 482. 
 
i8 
 
 III. 
 
 ADOPTION OF THE GOLD STANDARD IN THE 
 UNITED STATES. 
 
 The great commonwealth of the United States of America 
 found itself after the war of secession in a monetary and finan- 
 cial condition similar to that of England in l8i6; metallic 
 money banished from trade, a large circulation of depreciated 
 paper, a heavy national debt — everything just as it had been in 
 England half a century before. 
 
 But while in England the introduction of the gold standard at 
 that time was thoroughly discussed — while in the German 
 Reichstag the question was, perhaps one-sidedly, but yet exten- 
 sively talked about — America adopted the gold standard without 
 itself knowing it. 
 
 The event is so peculiar that I cannot refrain from presenting 
 it to my readers by citing appropriate passages from a Congres- 
 sional address of the well-known member of the American 
 House of Representatives, Mr. William D. Kelley, a copy of 
 which lies before me, as separately published in Philadelphia in 
 1879." 
 
 I will premise that a bill had been presented to the House of 
 Representatives which contained a statutory change, a new 
 regulation for the management of the mints. Of this wholly 
 innocent bill the Senate so amended one section as to accom- 
 plish the demonetization of the silver dollar and the substitution 
 of the gold standard, and this change escaped the observation of 
 the meiHbers entirely on its return to the House of Representatives, 
 so that certain members were very much astonished when the 
 charge of having demonetized the silver dollar was raised 
 
 "W. D. Kelley— The Silver Question. 
 
19 
 
 against them. Moreover, even the President of the United 
 States in signing the bill had no intimation of its present con- 
 tents, as the following account of the proceeding shows. Let 
 us then hear Mr. Kelley in his speech of May lo, 1879: 
 
 "The bill — and I wish gentlemen to know what that bill was : it 
 was a bill to reorganize the mints ; not to revise the coin money of 
 the country, but to reorganize the mints — and it was passed without 
 allusion in debate to the question of the retention or abandonment of 
 the standard silver dollar. The then Speaker, now a distinguished 
 member of the Senate, and Hon, Mr. Voorhees, of Indiana, who is, 
 also a member of that body, were then members of this House ; and 
 during the last Congress this colloquy occurred between them. It was 
 denied, I think, by Mr. Voorhees, that members of the House knew 
 that the bill proposed to demonetize the silver dollar, and to sustain 
 his view he said to the ex-Speaker, " Did you know it, sir?" " No," 
 said Senator Blaine ; " did you ?" " No," replied Senator Voorhees. 
 "/ was chairman of the committee that reported the original bill, and 
 T ai'er on my honor that I did not know the fact that it proposed to 
 drop the standard dollar, and did not learn that it had done it for 
 eighteen months after the passage of the substitute offered by Mr. 
 Hooper, when I disputed the fact and was shown the law. The dis- 
 tinguished gentleman from Ohio (Mr. Garfield,) who now leads this 
 side of the House, was then as now an attentive, and already a dis- 
 tinguished member of the House; yet when in joint debate before the 
 people of Ohio (in October, 1877,) the question arose as to who was 
 responsible for its demonetization, he frankly said that he did not 
 know that such a provision was in the bill when it passed the House. 
 
 " Nor did the President who signed the bill know that it abolished 
 legal tender standard silver dollars, for in his letter to Mr. Cowdrey 
 of October 6, 1873, (cited by the gentleman from Ohio, Mr. Warner,) 
 he said: 'Silver will gradually take the place of this currency 
 (namely, of greenbacks) and further, will become the standard of 
 values, which will be hoarded in a small way. I estimate that this 
 will consume from ;J!2oo,ooo,ooo to ^300,000,000 in time, of this 
 species of our circulating medium. * * * I confess to a 
 
20 
 
 desire to see a limited hoarding of money. It insures a firm founda- 
 tion in time of need. But I want to see the hoarding of something 
 that has a standard value the world over. Silver has this.' 
 
 " Gentlemen will observe that this letter was written several 
 months after the writer's signature had given the force and effect of 
 law to the bill which prohibited the further minting of the kind of 
 coins he expected the people to hoard. 
 
 "Let me, in passing, say tliat the statement of Mr. McNeely, of 
 Illinois, which has been so often cited as though it discredited my 
 word, that the bill had been read line by line and paragraph by par- 
 agraph in the committee, has my endorsement. It is true as to the 
 original bill. Hence it was that I admitted, as I so long and fre- 
 quently did, that I had reported a bill which demonetized the standard 
 dollar, and that I continued to believe that that provision had escaped 
 my notice, until my friend who sits before me, the gentleman from Illi- 
 nois (Mr. Fort) investigated the subject from the egg up and brought 
 me the bill I had reported, retaining the standard dollar, together with 
 a Senate bill which had been substituted for it, which changed a sec- 
 tion and omitted it." 
 
 We have here a pretty piece of American parliamentary his- 
 tory. Quietly, without a word being said about it in the 
 debates or the press, an unimportant bill relating to the man- 
 agement of the mints is made use of to put the gold standard 
 in the place of the prevailing silver standard, and this entire 
 change is overlooked by the House of Representatives ; and the 
 bill on its return from the Senate is adopted en bloc without any 
 opposition, and what is more, approved by the President of the 
 United States, without his having an intimation of its proper 
 contents. 
 
 That similar occurrences are possible in our parliamentary 
 bodies, when the general interest is absorbed by other matters, 
 as was probably the case there, can not perhaps be absolutely 
 denied, though it is to be hoped that such experiences may be 
 spired us. In order to understand and excuse this event, how- 
 ever, it must be remembered : 
 
21 
 
 1. That in a country where only paper money is to be seen, 
 the standard question is habitually regarded as a very subordi- 
 nate one. 
 
 2. That though America legally possessed the silver dollar as 
 the basis of her coinage, the issue in" later years of the gold 
 dollar, with a relation of value between silver and gold differing 
 from that of other countries, had had the effect of driving the 
 silver dollars, having too high coinage value, out of the coun- 
 try, so that prior to the war of secession, the circulation of 
 gold predominated. '^ 
 
 Under these circumstances, it was possible even for those few 
 members of Congress who knew something of the change in the 
 law to regard it as immaterial. Mr. Kelley, to-day one of the 
 best read and best informed advocates of the double standard, 
 frankly confesses in the further course of his speech, that at that 
 time he had as yet no idea of the importance of the standard ques- 
 tion, even if he had perceived the alteration in the law; and he 
 adds that he moreover does not consider it discreditable that on 
 the part of the government and of other parties participating in 
 the change, all should have failed to bring it to his knowledge ; 
 a remark which seems to indicate that he shared the opinion of 
 Carey openly, expressed, that the surprise about the gold stand- 
 ard was the work of those interested circles which, under the 
 name of the " New York gold-ring," have acquired a rather un- 
 enviable notoriety. '° 
 
 In the near relationship of the English and American people 
 in the intimate connection in which the American civilization 
 stands with the English, in the close and extensive commercial 
 relations between the two nations, it was in the nature of things 
 that the American financial administration should stand in a 
 great degree under the influence of the observed financial prac- 
 
 "H. C. Carey — Monetary Independence. Phila., 1875, P- 2. 
 '*H. C. Carey — Resumption, When and How will it End? Phila., 1877, 
 p. 2. 
 
22 
 
 tice of England, and under the power of the doctrines prevailing 
 there. 
 
 In England since 1816 the watchword has been reduction of 
 the note-circulation, and the Americans, true to their duty, made 
 the contraction of the currency the next war-cry." 
 
 In England at that time a definite date had been provided for 
 the resumption of specie payments; in 1875 the law-makers of 
 the American Union fixed the resumption of specie payments 
 for the first of January, 1879/* 
 
 In England, at that time in an analogous situation, the gold 
 standard had been introduced : the Americans would probably 
 have thought they were committing an economic sin of omis- 
 sion if they had neglected to follow the example of England in 
 this respect also. 
 
 It is in this light that American events appear to me ; and 
 this mode of viewing them enables me to comprehend many 
 things otherwise unintelligible concerning them. 
 
 For the reduction of the circulation, that is, the contraction 
 of the non-interest-bearing national paper money (the green- 
 backs) which Congress had almost unanimously resolved upon 
 in 1865 — "of all the parliamentary votes," says Mr. Kelley on 
 one occasion, "the one which I most regret" — involved difficul- 
 ties in its practical prosecution which were not to be overcome. 
 
 Four hundred and thirty million dollars in greenbacks was 
 the total amount in circulation with which they had to deal," 
 an amount which, considering the immeasurable resources of 
 the country, and compared, for example, with the forcible issue 
 of the uncovered notes of exchange of France in the year 1870, 
 
 "The Report of the Secretary of the Treasury, Mr. Hugh McCulloch, 
 December 4, 1865, says literally, that the work of retiring the notes 
 which have been issued should be commenced without delay, and care^ 
 fully and persistently continued until all are retired. 
 
 '* Report of Secretary Bristow, December 6, 1875. 
 
 "W. D. Kelley — Speech of February 14, 1879. 
 
23 
 
 does not appear to us to-day at all disquieting. But these four 
 hundred and thirty millions constituted the only current circu- 
 lating medium of the country ; and the complicated operations 
 of the ' government, which consisted chiefly in the issue of in- 
 terest-bearing bonds of the Treasury (principal and interest re- 
 deemable in coin), with the proceeds of which the greenbacks 
 were taken up and canceled, were by no means sufficient to 
 supply with cash the deficiencies arising in the circulation, as 
 had been hoped, but on the contrary produced the following 
 less desirable results : 
 
 1. Perceptible lack of current circulating medium, from 
 whence the so-called national banks, by increasing their issues, 
 derived the chief advantage.''" 
 
 2. Increase of the interest on the foreign debt, payable in coin, 
 from 30 million dollars (1865) to 120 milHon dollars (1877^'.) 
 
 3. Permanent gold speculation in the principal trade centers, 
 such as had never before been heard of, and which grew more 
 active after the adoption of the gold standard.^^ 
 
 4. A constantly increasing distrust on the part of the people 
 of the entire financial condition of the country, which naturally 
 brought on a crisis whose severity, though not to be compared 
 with that which visited England in 18 16, under similar experi- 
 ments, nevertheless entailed incalculable losses upon the coun- 
 try.^' 
 
 Under these conditions the protective system which alone 
 seemed adapted to put a check upon the complete cessation of 
 American production, and to keep the metallic money in the 
 country 'was fortified. 
 
 After endlessly repeated, experiments, which had only re- 
 sulted in substituting for about one hundred million dollars of 
 
 '"H. C. Carey — Resumption, p. 6. 
 
 "'Same Author — Appreciation, p. 6, et seq. 
 
 ''H. C. Carey — Resumption, p. 2. 
 
 ^W. D. Kelley— Speech of February 14, 1879. 
 
24 
 
 the greenbacks, interest-bearing paper notes (treasury bonds) 
 for whose redemption no legal obligation exists — an exchange, 
 by the way, the advantages of which are of a veiy doubtful 
 nature — they gave up the further contraction of the currency in 
 view of the murmurs of the people becoming ever more 
 audible ; and as soon as they had decided to admit the green- 
 backs, all the time circulating to the gross amount of three 
 hundred and forty million dollars, as a legal tender for the pay- 
 ment of custom duties, and to set aside the gold standard, 
 through the much assailed Bland silver-bill, confidence and 
 cash returned to the country, so that the "rag-baby" (the 
 greenback) reached par value with coin." 
 
 After a checkered series of financial experiments whose per- 
 nicious effects, as their opponents declared, did more injury to 
 the national prosperity than the war of secession itself, not one 
 single act of the original programme could really be carried out. 
 
 To-day it is very clearly perceived in America that if they 
 had had the wisdom and courage to allow* the four hundred and 
 thirty millions of greenbacks to circulate for the time being 
 undisturbed, they would have come earlier into a position for 
 securing the return of a coin circulation. But for the unwhole- 
 some shocks which the forcible contraction of the currency 
 gave to the entire economic life of the country, they would 
 have been able long before to commence a gradual withdrawal 
 of the paper circulation, so far as this exceeded a proper 
 amount. A bitter and severe experience has taught the nation 
 that the interest of the capital represented by the national banks, 
 which were loudest in assaults upon the greenbacks, is not 
 always identical with the general interests of the people, and 
 that heavy sacrifices would have been spared the country if 
 it had followed the counsels of the venerable Carey, in the 
 question of the forced contraction of the currency, in the ques- 
 tion of the resumption of specie payments, and in that of the 
 gold standard more promptly than it has done. 
 
 "Loc. cit. 
 
25 
 
 IV. 
 
 THE MONETARY POLICY OF FRANCE. 
 
 France had, by the war of 1870, incurred a burden of national 
 debt which far exceeded that of the United States. It had been 
 compelled to permit the issue of unsecured notes, which up to 
 that time had amounted to about twelve hundred million francs, 
 and was increased at the very commencement of the war by about 
 eight hundred million francs, and in December, 1870, received a 
 second increase of about three hundred million francs. All these 
 bank notes were given the quality of legal tender. Moreover, 
 on the restoration of peace, the obligation to pay the five milliard 
 war indemnity to the victorious German Empire within a few 
 years, rested upon the country. And yet the financial adminis- 
 tration after the conclusion of peace, had the courage to still 
 further increase the issue of notes to the amount of three hun- 
 dred million francs (1871)." 
 
 After the experience of England and the United States, ac- 
 cording to the financial philosophy of the school long repre- 
 sented almost exclusively in Germany, and governing entirely 
 her financial administration, an entirely clear course was marked 
 out for French finances in this situation of affairs. 
 
 1. Paper money drives coin out of the country — conse- 
 quently a forcible reduction (contraction) of the issue of notes 
 must precede all measures, because otherwise coin could not 
 circulate. 
 
 2. The restoration of the public credit rests on the legal 
 resumption of specie payments at a definite time — consequently 
 it would have been necessary to fix such a time immediately. 
 
 ^»H. C. Carey — Resumption and Appreciation. 
 
26 
 
 3- The double standard is an injurious arrangement, scien- 
 tifically condemned — therefore it ought to have yielded to the 
 single gold standard, according to the conclusion of the gold 
 fanatics, mentioned by Lord Beaconsfield. And if France was 
 hindered by the Latin Coinage Convention from advancing 
 independently in the standard question, she was at least under 
 obligations to make the strongest exertions to win it over to 
 the gold standard. 
 
 France was, however, disrespectful enough to do the opposite 
 of all that the infallible doctrine prescribed. 
 
 She did not think of forcibly reducing the issue of bank notes, 
 but left it to the foresight and intelligence of the managers of 
 the bank to bring about a gradual strengthening of the metallic 
 money for the redemption of the notes. 
 
 Instead of fixing a date for the resumption of specie payments, 
 she merely made an arrangement with the bank management 
 according to which as soon as the part of the French national 
 debt assumed by the bank should be paid back to it, the forcible 
 legal tender character of the notes should cease. 
 
 Instead of being won over to the gold standard, she quietly 
 adhered to the double standard. 
 
 And notwithstanding that France heightened all this with a 
 commercial and customs policy which, according to the view of 
 our theorists, must be destructive to all economic progress, the 
 results of this French financial policy have been as follows: 
 
 1. The immediate reappearance of coin in circulation, so that 
 the bank management easily succeeded in accumulating gold 
 and silver to cover the notes in amounts which, for example, 
 soon far exceeded the metallic stores of the German Imperial 
 bank, and then, without hindrance to trade, it succeeded in 
 again gradually contracting the note circulation. 
 
 2. The par exchange of bank notes when their legal tender 
 character was removed. 
 
 3. Increasing prosperity of the country, which is so little 
 
27 
 
 affected by the great commercial and financial crisis visiting the 
 whole world, that even thexollapse of the recent gigantic swind- 
 ling establishments of Philippart made scarcely an impression 
 upon the public credit. 
 
 The contrast between the events in France and the operations 
 which the United States permitted under similar antecedent 
 conditions, is, as will be confessed, a glaring one. 
 
 In the comparison which involuntarily obtrudes itself, it may 
 be observed that France, through the monopoly of the Bank of 
 France, was placed in a position to take refuge in the emission 
 of bank notes ; while the United States, without any concentrated 
 banking administration, was obliged to resort to the issue of 
 non-interest-bearing national paper money, which in itself per- 
 haps presented too great difficulties for its depreciation to be 
 avoided, merely by the restoration of confidence in the produc- 
 tive forces of the country and in the skillful management of its 
 finances, while the bank notes are also protected from distrust 
 by the strengthening of the metallic reserve. But just here the 
 fact should not be overlooked that the creation of this metallic 
 reserve, as well as the reappearance of coin in trade, was essen- 
 tially facilitated by the fact that the double standard country 
 France allowed both the noble metals to flow in unimpeded, 
 while America forced the rich products of her own silver mines 
 to seek employment abroad, and thereby interposed a barrier to 
 the increase of metallic circulation in the country, while at the 
 same time it attempted to forcibly reduce the circulation of 
 greenbacks. 
 
 It is further to be borne in mind that'both countries, France 
 as well as the United States, had the protective system ; but that 
 in France this system was a prevailing tradition which no party 
 dared disturb, while the practical realizations of Carey's doctrines 
 in the United States possessed only a short history, were attacked 
 by powerful parties, and were said to have barely demonstrated 
 their usefulness in enhancing the national welfare. 
 
28 
 
 In his opinion on the causes of the changed relation of value 
 between gold and silver, which Carey gave before the commit- 
 tee of the American Congress, the great American — who in 
 the evening of his life had the satisfaction of seeing his polit- 
 ico-economic doctrines triumphantly called into the practical 
 policy of his country — expressed himself as follows : 
 
 " The standard coin of France has throughout been different from 
 that of Britain, having been the silver five-franc piece. As a conse- 
 quence of this difference she has not only passed unhurt through the 
 ever-recurring crises of Britain, but has, on at least two very import- 
 ant occasions, through the Bank of France, been enabled to render 
 assistance of the highest importance to the Bank of England. Had 
 the two countries been using gold exclusively, the drain thereof from 
 France to England would have effectually prevented such assistance 
 from being rendered. 
 
 "Alone among the nations, France has throughout the whole cen- 
 tury pertinaciously adhered to that protective system which has for its 
 object that of bringing consumers and producers together, with con- 
 stant reduction in the cost of exchange and transportation. Alone, 
 she has maintained the double standard, gold and silver being alike 
 legal tender in discharge of money obligations. Alone, she has in 
 that brief period so succeeded in giving to her people perfect confi- 
 dence in the circulating note, that gold, silver, and paper, to a larger 
 amount than can be found in any other European State, pass freely 
 from hand to hand at par, each with every other. Alone, she stands 
 now as bearing 'a charmed life,' and prosperous to an extent that 
 till now she has never known ; poverty and distress, waste of labor 
 and capital, and fears for the future, begoming more and more the 
 characteristics of those nations which, having set up for themselves a 
 golden image, now call upon the people of the world at large to fall 
 upon their knees and worship it."^* 
 
 '"H. C. Carey. — Appreciation, pp. 13, 16. 
 
29 
 
 V. 
 
 THE INTRODUCTION OF THE GOLD STANDARD 
 INTO THE GERMAN EMPIRE. 
 
 The introduction of the gold standard in England, and later 
 in the United States, took place at a period in which coin had 
 almost entirely disappeared from circulation; the task of natural- 
 izing it in Germany seemed the easier as the coin, then plenti- 
 fully circulating in that country, in conjunction with the large 
 cash payments of the French contributions, offered, by ex- 
 changing the large bulk of silver coin and bullion for gold, 
 more than sufficient means to insure for the country at once the 
 metallic basis of the new standard. 
 
 England had proudly proclaimed that the richest country 
 must have the most precious metal for its standard ; the United 
 States, who had just fought a giant battle for their national ex- 
 istence, the war of secession, to a victorious close, with the 
 abundant resources of their immense territory in virgin soil and 
 mineral treasure, with their surprising increase in population 
 and prosperity, might well feel justified in making the same 
 claim ; and it was pardonable if, after the glorious resurrection 
 of the German Empire, the dazzling magnitude of the French 
 tribute produced a similar sentiment with us. 
 
 These facts were strengthened by the undisputed authority 
 still enjoyed by the tenets of the Manchester school of financial 
 and commercial policy. If America, accepting the same maxims, 
 tried to copy the proceedings of the English policy of finance 
 and coinage, it was but natural for us to make the same attempt. 
 Ingeniously discussed by able speakers in parliamentary bodies, 
 in the press, and in clubs, these theories were sure of popularity 
 from the beginning. Possibly only a few persons had a fixed 
 
30 
 
 conception of their bearing if applied to real practice. By far 
 the greater majority of the practical politicians had to vote on 
 .questions for the solution of which the experiences in their 
 native country — in consequence of its previous political and 
 monetary confusion and incongruities — could afford no -key 
 and the stages of whose development in other civilized countries 
 were, as I confidently affirm, not sufficiently known in their 
 details and premises. 
 
 The already cited speech of Lord Beaconsfield, with its warn- 
 ings against the dangers of the demonetization of silver, pro- 
 duced in Germany, as late as 1873, hardly any impression. The 
 fact that a number of smaller states would be forced to follow 
 the example of Germany; that the embarrassments of countries 
 having depreciated standards, as Austria and Russia, would be 
 increased by our proceeding ; that France would be compelled 
 to stop its coinage of silver ; all this was then considered as 
 unimportant, and even as desirable. Even the question whether 
 a general depreciation of silver would follow, appeared important 
 only in so far as slower sales of silver would cause greater losses 
 to Germany. 
 
 German scientists are to-day laboring to prove, and to attest 
 with statistical tables," that the German sales of silver did not 
 perceptibly affect the falling of the price of silver; a useless 
 piece of labor, as the depreciation of silver is not caused by the 
 sale of the stock of silver which Germany did or could place on 
 the market, and which is but a small portion of the sum total 
 of the silver in the world, but by the following agencies: 
 
 1. The active consumption of silver for coinage by Germany, 
 France, and the lesser states which have adopted the gold 
 standard, has ceased with the stoppage of their silver coinage. 
 
 2. Even countries with depreciated standards, forced, as Aus- 
 tria and Russia have recently been, to, contract loans bearing- 
 gold interest, must resist a more active influx of silver. 
 
 2' Dr. Edwin Nasse-^Die Demonetisirung des Silbers. Bonn 1876. 
 Dr. Soetbeer — Gott gel. Anzeiger, 1879. 
 
31 
 
 3- Above all, the danger which threatens the silver market 
 that France also may be compelled to adopt the gold standard, 
 and to throw its large supply of silver on the already overstocked, 
 market. 
 
 These are the plain causes which must effect an irresistible 
 depreciation of silver, even if India, through better crops and 
 other favorable circumstances, should be able to increase its 
 ability for silver consumption to the extent of former rates. 
 
 If we observe that the commencement of the great crisis in 
 the commerce and trade of the world coincides precisely with 
 the demonetization of silver in North America and Germany, 
 we shall easily perceive the connection of causes between that 
 fact and these phenomena, and see that the mischievous results 
 of the demonetization of silver nlust, from year to year, become 
 more apparent. 
 
 The double standard of France, rich in metallic money, had 
 in previous years preserved the balance in the fluctuating de- 
 mand for gold or silver. If the demand for one kind increased, 
 the other would immediately fill the gap caused by its with- 
 drawal ; to-day the circulation would be chiefly in Napoleons, 
 to-morrow exclusively in five-franc pieces. After the gold 
 discoveries of California the influx of gold increased so 
 alarmingly that Michel Chevalier declared that gold must be 
 demonetized — and not long thereafter the chances were entirely 
 reversed. But whether gold or silver had the prestige, France 
 possessed at all times a larger stock of metallic money than any 
 other country. For these reasons did the government look 
 with equiminity upon these monetary fluctuations, and, as 
 mediator between the gold and silver countries, rendered valu- 
 able and beneficent service to the universal commerce of the 
 world. ^' 
 
 France was forced from this position, and had to suspend her 
 own silver coinage, as soon as Germany, followed by a number 
 
 ^H. Cernuschi — Bimftallisme u. Diplomatic Monftaire. 
 
32 
 
 of lesser, and in their financial policy dependent states, adopted 
 the gold standard ; because with its widely spread international 
 commercial interests, it could not afford the risk of finding itself 
 dependent on the metal which other countries repudiated, and 
 it did not feel itself strong enough to resist the depreciation 
 of silver solely by its domestic consumption thereof 
 
 Certain authors assert that this constant and irresistible 
 depreciation of silver, the result of the conditions produced by 
 Germany's monetary policj', could be stopped — 
 
 1. By increased consumption in India, China, or the barbaric 
 nations of Central Africa and Asia. 
 
 2. By increased coinage of fractional silver money. 
 
 3. By a greater use of silver for ornaments and plate. 
 
 4. By lesser production of the silver mines. 
 
 These opinions are all alike chimerical. The silver con- 
 sumption of Asia and Africa will not increase with the deprecia- 
 tion of silver, but will diminish as the example of China and 
 other countries already shows ; "' the application of silver to 
 domestic purposes, so far as statistics show, has not increased 
 with its depreciation;™ the demand for fractional currency is 
 comparatively so small that it is not worthy of consideration ; a 
 cessation of silver production to any extent can not be expected, 
 since by far the larger part of silver is found in conjunction with 
 other metals, as gold, copper, lead, etc., and as the cost df pro- 
 duction is steadily lessened by mechanical or chemical im- 
 provements." , 
 
 The adoption of the gold standard by the German Empire 
 was the signal for the immense commercial collapse the de- 
 plorable effects of which have not yet been effaced. The 
 like action by the North American Union by later legislation, 
 would have remained isolated, and could hardly have produced 
 
 '" E. Seyd, Decline of Prosperity, p. 49. 
 
 ^ Ibid, page 12. 
 
 "Suss — Die Zukunft des Goldes, Wien 1877. 
 
33 
 
 similar results. There was in that country no large stock of 
 silver which, like that of Germany, had to be placed on the 
 market; there the greenbacks — the national paper money — still 
 formed the basis of circulation. If, under these circumstances, 
 the United States alone had adopted the gold standard, and 
 Germany retained the silver standard with subsidiary gold coin- 
 age, the United States would probably have experienced diffi- 
 culties andr embarrassments, but the acute and general depre- 
 ciation of silver, which resulted from the change in the German 
 standard, would never have occurred. 
 
 The introduction of the gold standard in Germany caused no 
 decrease in the circulation of metallic money, as not only the 
 withdrawn German silver and gold coins, but also the not 
 inconsiderable amount of foreign coin circulating in Germany, 
 (Napoleons, ten-guldens, five francs, Austrian thalers ajid 
 guldens), were amply replaced; indeed, the minute calculations 
 by Soetbeer suggest that, including the changes in note cir- 
 culation caused by the German bank-law, the amount of 
 circulating medium has been increased. This, according to the 
 scholastic theory should have resulted in advanced prices of all 
 commodities, and in an export of money. But the higher gold 
 prices, in conjunction with the introduction of free-trade prac- 
 tices in our commercial policy, produced the opposite result, 
 viz : a preceptibly increased purchasing power of money, and a 
 decrease in the prices of all commodities. The wild chase 
 after gold in which all countries immediately joined, enhanced 
 the price of gold, and thus caused an unprecedented deprecia- 
 tion of the value of land and commodities. The Imperial 
 Board was obliged to exercise all circumspection and caution 
 to secure to the country its share of gold, by a timely increase 
 in the rate of discount — not to the advantage of production. 
 
 Who profited by this revolution in prices, the immediate result 
 of the rapidly increasing purchasing power and the unparalleled 
 scarcity of gold ? Only the owners of bonds, mortgages, rents 
 3 
 
34 
 
 and annuities. And who lost ? All other than these. Industry 
 and agriculture alike declined, groaning under the mercilessly 
 enforced free trade experiments ; all estates depreciated in the 
 ratio of the increase in the value and purchasing power of gold ; 
 production was paralyzed; wages were reduced; misery and 
 involuntary idleness spread over the country. 
 
 Dear money— rcheap goods ! Germany now learned prac- 
 tically the value of this favorite maxim of that school which 
 conceived the lowest possible price of commodities as the chief 
 aim of all sound national economy. But since she has called 
 an emphatic halt to the enforcement of free trade doctrines, I 
 doubt not that she will, in her monetary policy, learn to appre- 
 ciate the truth of Carey's warning to his countrymen against 
 the contraction of the currency, the forced resumption of specie 
 payment, and the gold-standard. Abraham Lincoln described 
 the government of the United States as one " Of the people, 
 by the people, and for the people." But his successors have 
 perverted it to one "Of the money-lenders, by the money- 
 lenders, and for the money-lenders."^'' 
 
 "^ Carey — Resumption. 
 
35 
 
 VI. 
 
 THE PROPHECIES OF MESSRS. SEYD AND WOLOWSKI. 
 
 Count Wolowski and Mr. Seyd published the following 
 theses in 1868, the year in which the agitation for the introduc- 
 tion of the gold standard began in Paris : 
 
 " The demonetization of silver," they predicted, " by any great 
 civilized nation, must produce the following results : 
 
 " I. The international trade of the world will instantly show signs of 
 decline, to the special injury of countries having the largest inter- 
 national trade. * 
 
 " 2. The spirit of public enterprise, in railroads and other useful 
 undertakings, will be immediately checked, and consequently the gen- 
 eral-progress of civilization will suffer. 
 
 "3. The decline in price will compel countries internationally in- 
 debted to depart more and more from the principles of free trade 
 toward a policy of protection. 
 
 " 4. The nations of the world will be divided into two groups — the 
 one trading in gold, the other in silver — and this condition will 
 render commerce between them unsafe and precarious. 
 
 " 5. Throughout the world a decline in prices will follow, injurious 
 alike to owners of real property and the laboring classes, and advan- 
 tageous only — and unjustly so — to the holders of state bonds and 
 similar securities. 
 
 "6. One of the principal difficulties in this period of general de- 
 pression will be that the people will look-for its causes in all possible 
 directions. The advocates of the gold-standard will offer all possible 
 groundless and fantastic excuses or reasons of a secondary nature only, 
 and the real cause, the demonetization of silver, will be overlooked 
 until the perspicuity of the phenomena and dire necessity shall force 
 thinking men to point it out.'"' 
 
 Few prophets can boast of such literal verification of their 
 predictions. But if we hear Mr. Seyd, in a public lecture given last 
 
 '^E. Seyd — Decline of Prosperity and Depression of Trade. 
 
36 
 
 year before the British Society of Arts, explaining the reasons 
 whieh influenced Mr. Wolowski and himself, in 1868, to pro- 
 claim these predictions, we must confess that everything there 
 said by him on the importance of the commercial balance and 
 its relations to the movement of the precious metals, is in direct 
 contradiction to the customary rnaxims of the Manchester 
 school. 
 
 "The extent of the international trade,'' says Mr. Seyd," 
 "generally depends upon the means available to liquidate bal- 
 ances. Hitherto both gold and silver, in nearly equal pro- 
 portions, had served this purpose. But since Germany dis- 
 turbed the balance by the adoption of the gold-standard, silver 
 gradually ceased to be an effective medium of exchange be- 
 tween civilized nations, and trade has had to be confined within 
 limits in which it could be regulated by gold. The recog- 
 nition of this reciprocity between the sum total of the possible 
 trade and the amount of cash available to liquidate the balance 
 — which is denied by the theory of the Manchester school — a 
 knowledge based as much on scientific principles as on the com- 
 mon-sense and experience of every business man, led us to ^ 
 prophesy the decline of international trade, which has since so 
 unmistakably taken place." 
 
 A striking proof of this is furnished by the statistics of British 
 commerce, which the same author adduces in " The Decline of 
 Prosperity," pps. 48, 49 and 50, showing that, since the demone- 
 tization of silver in 1872, the trade with single standard or gold 
 using nations increased from 52 to $6^-^ million pounds sterling, 
 while during the same period, the trade with silver using nations 
 fell from 2031*17 to I3Stt million pounds sterling. 
 
 "If," says Mr. Seyd, in one of his other writings, "communi- 
 cation is maintained by say lO.OOO freight wagons, the supply 
 would be materially interrupted if half of these wagons were 
 suddenly captured. This applies with equal force to metallic 
 
 "*£. Seyd — Decline of Prosperity, p. 23. 
 
37 
 
 money. If a given amount has hitherto been found necessary to 
 carry on the international trade, the latter must suffer if half of 
 this money — silver — by demonetization is prevented from par- 
 ticipating in the trade movement." '^ 
 
 The views of Messrs. Seyd and Wolowski were also held by 
 the distinguished statesman who is now the head of the British 
 Cabinet — Lord Beaconsfield — who in 1873 foresaw the coming 
 and the obstinacy of the recent great commercial crisis, and in 
 his above cited speech '" said : 
 
 " I attribute the great monetary disturbance that has occurred, 
 and is now to a certain degree acting very injuriously to trade 
 — I attribute it to the great changes which the governments in 
 Europe are making with reference to their standards of value." 
 And again: 
 
 " It is quite evident we must prepare ourselves for great con- 
 vulsions in the money market, not occasioned by speculation or 
 any old cause, as has been alleged, but by a new cause with 
 which we are not sufficiently acquainted, and the consequences 
 of which are very embarrassing." 
 And finally : 
 
 " Convulsions must come, and no one will be able to form an 
 adequate idea of the monetary derangements of the times in 
 which he lives, if he omits from his consideration the important 
 subject to which I have called your attention." 
 
 Even in England the agitation for the double standard has 
 steadily increased of late. A number of important Chanjibers of 
 Commerce, Liverpool at their head, have pronounced for the 
 abandonment of the single gold standard, and recognized author- 
 ities on finance, such as Mr. Hucks Gibbs, late Director of the 
 English Bank, have expressed similar views. 
 
 The United States have already initiated legislative steps to- 
 ward the reestablishment of the double standard. 
 
 Under these circumstances, is it not time for us to consider 
 .■seriously the means so plainly indicated for the future monetary 
 policy of the German Empire? 
 
 •'Seyd — Depression of Trade. 
 
 3«W, D. Kellev — The Silver Question; and E. Sayd, Daclina of Pros- 
 
38 
 
 VII. 
 
 THE ECONOMIC IMPORTANCE OF METALLIC 
 
 MONEY.— DEMONETIZATION OF SILVER AND 
 
 ITS EFFECTS.— THE UNIVERSAL ADOPTION 
 
 OF THE GOLD STANDARD. 
 
 The fallacies of the mercantile systems which prevailed dur- 
 ing the last century in nearly every country, originated in the 
 unfounded and exaggerated fears caused by transient and acci- 
 dental deficits in trade; and in the over-estimation of the im- 
 portance of a stock of precious metals. The fundamental error 
 of the theories of modern free trade and gold standard is due 
 to the entire disregard of permanent trade deficit, and the failure 
 to appreciate the influence, so immense and so important to the 
 progress of all civilization, of the undisturbed influx of the pre- 
 cious metals into trade." The demoniac fascination which the 
 precious metals exercise over human passions has engaged the 
 human mind from time immemorial. Innumerable fables and al- 
 legories, poems and historical traditions (the legend of Midas 
 and others, and the golden calf of the Israelites) attest this ; and 
 philosophers have, from the earliest time, attempted to construct 
 society hypothetically without metallic money, and thus to ban- 
 ish all vice and all wrong. But history proves indisputably that 
 every increased influx of the precious metals into human inter- 
 course — by new discoveries or the increased production of the 
 mines — has always been accompanied by a decided amelioration 
 of human necessities — by the increase and diffusion of every 
 means for a more humane existence of the masses — which we 
 
 ^'Suss. — "Future of Gold." Carey. — "Social Science," "Appreciation 
 in the Price of Gold," and " Resumption." 
 
39 
 
 call the progress of civilization. The great prosperity of Eu- 
 rope which preceded the age of the Reformation followed in 
 the wake of the great increase in precious metals caused by the 
 discovery of America; the immense development of modern 
 trade by railroads, steamships and telegraphs, followed the tide 
 of gold and silver with which California and Australia supplied 
 the world. 
 
 The Utopian idea of the friends of the gold standard that all 
 countries will choose gold as their sole monetary basis, an idea, 
 the realization of which, according to Mr. Bamberger, is only a 
 question of time,^' would, by the proscription of silver, limit 
 the influx of precious metals to gold, or about one-half the 
 present rate, and thereby would evidently retard the advances 
 of civilization, so far as these depend upon the use in trade of 
 the precious metals. But the supposition of the possibility 
 of such development is Based on two erroneous hypotheses : 
 First, that the natural and traditional conditions under which 
 the use in trade of the precious metals has developed for centur- 
 ies, and which has elevated us to our present state of civiliza- 
 tion, could be permanently and finally changed by the arbitrary 
 legislation of single countries. Next, that the functions of 
 metallic money in modern trade could in a great measure be 
 discharged by the various paper substitutes (greenbacks, bank 
 notes, drafts, checks, etc.), and that thereby metallic money 
 could be made more or less unnecessary. 
 
 As to the first supposition, the present conspicuous and gen- 
 eral reaction against the gold standard proves that the fantastic 
 dreams of the gold theorists will presumably end in a great 
 disillusion, namely, the remonetization of silver. The other 
 hypothesis— the application of paper substitutesi for metallic 
 money — rests upon a misapprehension of the fact that all such 
 substitutes may temporarily discharge some of |chei fijpctions of 
 metallic money, such as furnishing a measure ■ of valije and 
 
 ■ , M ■ ' l -'-^-^^ 
 
 88 Ludwig Bamberger — "Reichsgold," p. 131, ' 
 
40 
 
 price, and serving as mediums of exchange, settlement, convey- 
 ance and deposit,*' but that none of these combines in itself the 
 ability to discharge all these functions so completely as metallic 
 money — and that, besides, these substitutes pre-suppose a basis 
 of metallic money. 
 
 This disregard of the importance of metallic money has pro- 
 duced the most heterogeneous phenomena — on it are based the 
 theories of the American inflationists, who not only would main- 
 tain the existing stock of paper money, but propose to increase 
 it by new emissions of non-interest bearing state paper ; and also 
 the other theory, that metallic money always represents a capital 
 invested without interest, and that therefore it is the duty of the 
 government to furnish trade with the minimum of indispensable 
 metallic money, and thus to incite trade to seek other mediums. 
 
 The inflation doctrines were naturally tempting in the United 
 States, a country which, little affected by the complications of 
 European countries, does not need to guard the preservation of 
 its national credit with the same zeal and solicitude. But how- 
 ever plausible it may have appeared that such paper money does 
 not emigrate and is therefore preserved to the home trade — that 
 its procurement entails no sacrifice in either capital or interest, 
 that its eventual depreciation in international commerce does 
 not injure home production, but on the contrary affords effectual 
 protection — they met with no sympathy from the sound com- 
 mercial sense of the Americans, and served only to paralyze in 
 some measure the endeavor of the national banks to replace 
 greenbacks with their bank notes, and so to bind the general 
 trade to the interests of the private banks. 
 
 On the other hand the idea that a country should have me- 
 tallic money just sufficient for trade, since a surplus would be a 
 waste of interest has in England resulted in combining into a 
 carefully planned system all the mediums which could replace 
 metallic money in settling and balancing (checks and drafts, 
 
 '»K. Knies— '" Gold and Credit." I. 1873. 
 
 . \ . 
 
 >' / 
 
 
 
 m/ 
 
41 
 
 endorsementSj exchanges and clearing houses), while France 
 steadily pursues the opposite pohcy of basing trade principally 
 on a free circulation of metallic money." 
 
 The pretended saving of interest of the English system is, in 
 my opinion, only apparent and illusory, as the costliness of all 
 the above mentioned artificial means of trade, by which thous- 
 ands not only procure a living, but amass fortunes, is likely to 
 more than offset the saving of interest on a lesser circulation of 
 metal. If we consider further that in the whole English system' 
 of settlement, one form of credit or the other is always uncertain 
 and at the time of a general convulsion of credit depreciates, we 
 shall naturally conclude that one wheel or the other of this com- 
 pHcated machinery must stop oftener than will the simpler meth- 
 ods of balancing and settling as practiced by the French, and 
 that all trade crises are generally of a more malignant and con- 
 tagious character in England than in France. 
 
 But even if all countries should adopt this system of reducing 
 their stock of metals absolutely to the minimum, it remains very 
 doubtful if, with a more general adoption of the gold standard, 
 the total production of gold would be sufficient to cover abso- 
 lute necessities. The rise, beyond all possible calculations, in 
 the price of gold which followed the establishment of the gold 
 standard in Germany, and which would probably repeat itself in 
 an increased ratio should France also adopt the gold standard, 
 seems to indicate that the demand for, but not the supply of 
 gold is capable of a considerable increase. A prominent geolo- 
 gist, Mr. Siiss, of Vienna, has in his admirable treatise, " The 
 Future of Gold," undertaken to demonstrate that all historical 
 experiences and geological calculations indicate that the present 
 supply and the prospective production of gold can never be suf- 
 ficient to meet the demands of a universal gold standard. 
 
 Whoever examines the interesting data furnished by Mr. 
 
 '"Carey — "Resumption," "Monetary Independence, and "Appreciation 
 in the Price of Gold." 
 
42 
 
 Siiss, of the immense sums which are annually withdrawn from 
 trade for gilding purposes for instance, and follows his historical 
 proof of the rapid exhaustion of all known gold sources, cannot 
 fail to see that here a calm, objective investigator points out 
 dangers of the gold standard which, with the undoubted influ- 
 ences on civilization exercised by the use in trade of the pre- 
 cious metals, must threaten civilization itself 
 
 Some have endeavored " to disarm these fears and doubts by 
 pointing: i. To recent important gold discoveries in Austral- 
 asia. 2. To the probability of the discovery of new gold beds 
 in the unexplored regions of Central Asia and Central Africa ; 
 and, principally, 3. To the unexpected discovery of a great ex- 
 pansion of the gold region of Western North America. But if 
 we observe that a not inconsiderable proportion of the advocates 
 of the gold standard, who formerly acknowledged absolutely no 
 difficulty in the general establishment of the gold standard, in 
 Germany are to-day clinging anxiously to the hope that the 
 return of the United States to the double standard will allow us 
 to effect the gold standard — while in England the hope is ex- 
 pressed that Germany will suspend the gold standard and 
 thereby insure its preservation in England ; we may be per- 
 mitted to infer that the doubts of Mr. Siiss are more important 
 and substantial than his opponents were at first disposed to 
 acknowledge. 
 
 "If," said Mr. Goschen, "all states should resolve on the ad- 
 option of a gold standard, the question arose, would there be 
 sufficient gold for the purpose without a tremendous crisis ? 
 There would be a fear, on the one hand, of a depreciation of 
 silver ; and on the other, of a rise in the value of gold, and a 
 corresponding fall in the prices of all commodities. Again, 
 there was a further important question. Italy, Austria, and 
 Russia, whenever they resumed specie payments would require ■ 
 metal, and if all other states went in the direction of a gold 
 
 *' "Edinburgh Review." " New Golden Age," January, 1879. 
 
43 
 
 standard, these countries too would be forced to use gold. 
 Resumption on their part would be facilitated by the mainten- 
 ance of silver as a part of the Legal Tender of the world. The 
 American proposal for a universal double standard seemed im- 
 possible of realization, but the theory of a universal gold stand- 
 ard was equally Utopian, and, indeed, involved a false Utopia. 
 It was better for the world at large that the two metals should 
 continue in circulation than that one should be universally sub- 
 stituted for the other." " 
 
 Mr. Goschen, who as has been shown, is known to be one of 
 the most widely recognized authorities on the question under 
 consideration in England, declared at the Conference, that it is 
 of the greatest importance to England to preserve silver as a 
 standard in other countries even if England retains the gold 
 standard. He does not go so far as Mr. Seyd, who logically 
 demands from England the acceptance of the double standard, 
 but acknowledges that the inlflux of both metals into interna- 
 tional trade should continue unchecked ; that it is to the interest 
 of all nations not to lessen the metallic basis of this trade, and 
 that the demonetization of silver by Germany has caused a de- 
 preciation of this metal followed by results injurious to the 
 whole world. 
 
 It may be said that Mr. Goschen's position lacks logic, but it 
 still proves that the failure to appreciate the importance of main- 
 taining the volume of metallic money, which was the main cause 
 of the demonetization of silver has already been abandoned by 
 the leading financiers of England. 
 
 *-" International Monetary Conference." Washington, 1879. p. 52. 
 
44 
 
 VIII. 
 
 THE PRINCIPAL OBJECTIONS TO THE DOUBLE 
 
 STANDARD, AND ONE GREAT OBJECTION 
 
 TO THE GOLD STANDARD. 
 
 The most prominent objection to the double standard will 
 always be that the variability of the relative value of the two 
 metals produces fluctuations in the prices of commodities, and 
 a consequent disturbance of trade. That as we should not 
 measure the height of a river with two different water-gauges, 
 we must have either gold or silver as the only standard, namely 
 as a measure of the value of commodities. This objection or- 
 iginates in an undue emphasizing of the function of money as a 
 measure of value. Thus the ruinous effects of the double 
 standard (to which Mr. Bamberger devotes a whole chapter in 
 his ' Imperial Money') are ascribed principally to the discount 
 which always rests on gold or silver, and which is said to have 
 deprived France, for instance, sometimes of silver, sometimes of 
 gold coin, so that the depreciated metal always remained in, 
 and the appreciated one emigrated from the country. 
 
 The Parisian chief of the house of Rothschild is reported to 
 have said at the time of the estkblishment of the gold standard 
 in Germany, " The Germans appear to me like a man who cuts 
 off a sound arm because he imagines that he will be stronger 
 with one arm than with two." He had evidently observed that 
 France needed both arms — silver and gold — as much during 
 and after the war as before it, and indeed the free influx of both 
 metals into trade appears to have helped to give that strength 
 and elasticity to the French finances which enabled that country 
 not only to overcorrie with ease the hardships of an unhappy 
 
45 
 
 war and to pay a contribution of five milliards to Germany, but 
 also to develop the prosperity of the people in an unprece- 
 dented degree. If we admit on the one hand that a discount 
 between gold and silver coin will affect the fluctuations of the 
 prices of commodities, and will, therefore, disturb trade, we 
 must concede, on the other, that this discount, if the double 
 standard as proposed by America was generally accepted, must 
 be reduced to a minimum, if it did not, as Mr. Cernuschi sup- 
 poses, disappear altogether.** 
 
 And those advocates of the gold standard" who admit that 
 the gold standard has increased and intensified the fluctuations 
 in the relative value of gold and silver, must concede that, so 
 far as international trade with countries having the silver 
 standard is concerned (the whole of Africa, Asia, Mexico, Peru, 
 Chili, etc.) the situation has not been improved but rather im- 
 paired by the gold standard. 
 
 The advocates of the gold standard further argue that the 
 exclusion of silver prevents the precipitate advance in the prices 
 of all necessaries which would result from an unchecked influx 
 of both metals.*" Born of a theory which we deem erroneous, 
 — that the greatest possible cheapness of all necessaries must 
 be the ideal aim of every national economy, — this opinion 
 . seems to ignore these very important points : 
 
 1 . That with free coinage of gold and silver, trade will never 
 consume more metal as money than it will be able to digest. 
 
 2. That the experiences of modern history show that an in- 
 creased circulation of metallic money, even though sudden and 
 considerable, has never seriously affe-cted prices, while an infla- 
 tion by banknotes or paper currency does, under certain condi- 
 tions, disturb the equilibrium of prices." This result is practi- 
 
 "Cernuschi — " Bimetallisme." 
 *'E. Nasse — " Die Demonetisirung des Silbers." 
 
 ^ Ibid. ■'^Roscher — "Elements of Political 
 
 Economy." Tooke — " History of Prices." 
 
46 
 
 cally explained by the fact that to-day, as Roscher shows, the 
 whole world is a consumer of the streams of gold and silver, 
 and that this large vessel does not alter its level so 'easily; and 
 again, because the increased circulation of metallic money has 
 lessened the necessity for all substitutes for money and me- 
 diums of credit. 
 
 3. That the single gold standard presents the opposite dan- 
 ger, viz., that the need of a country for metallic moiiey, which 
 becomes greater with the increase of its population and pros- 
 perity, can not be adequately supplied, as with the expansion 
 of the gold standard the demand for gold, must steadily in- 
 crease, while the stock of metal, by wear, melting, exportation, 
 its application to industrial uses, etc., will be constantly less- 
 ened." 
 
 Of all civilized countries, Germany, next to the United States, 
 possesses the least supply of metallic money per capita. Even 
 England, where all the different substitutes for money, as 
 checks, etc., are much more extensively employed, has a larger 
 stock of metallic money in proportion to its population. 
 
 The less the supply of metallic money becomes in Germany, 
 the more general will become the English financial system ; 
 and the greater the power of the capitalist, the more easily will 
 commercial crises occur when capitalists feel obliged to avoid 
 those operations which a larger volume of money had formerly 
 enabled the people to undertake and complete. 
 
 Frequent complaints are made of the steadily increasing 
 practice of long and complicated credits in Germany ; and it 
 has been shown with apparent justice that if, for instance, the 
 manufacturer buys his raw material on credit, and sells his pro- 
 duct to the wholesale dealer, and he to the retailer, and he to 
 the customer on credit, there must gradually arise so compli- 
 cated a chain of indebtedness that the soundness of the general 
 mercantile business must be undermined. 
 
 "Siiss — " Die Zukunft des Geldes." 
 
47 
 
 It has been pointed out that the stability of French trade is 
 due to the opposite practice of prompt cash payments. 
 
 It will, however, be well to consider that the French system 
 is made possible by the much larger circulation of metallic 
 money in that country. Knowing that the oil which keeps the 
 great trade-machinery moving — a comparison used by Hume 
 and Kelley — is allowed us in much less proportion than to 
 France, we cannot be surprised that with us the wheels will 
 sooner creak, and that disturbances must occur from which 
 France is exempt. * 
 
 Hence what our opponents praise as the beneficent result of 
 the demonetization of silver — viz., the check to the increase of 
 the stock of metallic money — appears to us the ruinous effect of 
 the single gold standard. 
 
 And lastly, we may consider the objection that from the 
 earliest times, a 'gradual modification of the relative value of 
 the two metals to the disadvantage of silver can be proven, and 
 that, for this reason, silver is becoming less and less desirable 
 as a standard metal. The fact of a decrease in the value of 
 silver as compared with gold cannot in general be denied, but wc 
 must also consider the indefiniteness and unreliability of most 
 data as to their relative value, which we find in older works. 
 
 If in modern times the world was surprised by the discovery 
 that in Japan the ratio of gold and silver was four or five to one, 
 instead of fifteen or fifteen and one-half to one, as in other coun- 
 tries, and this surprising phenomenon eventually found its expla- 
 nation in the fact that a large part of the Japanese gold coins 
 contained only one-third of their weight in gold, we must ad- 
 mit that in olden times many unknown causes may have influ- 
 enced the reports of the relative value of gold and silver. 
 
 We find that while the Greek coinage of gold and silver re- 
 mained uniform at the rate of twelve to one, ancient Persian 
 inscriptions show their ratio as one to 13.33.** 
 
 *"E. Seyd — " Decline of Prosperity." p. 83. 
 
48 
 
 The depreciation of silver from the age of the Roman Empire 
 (12:1) down to the last two centuries (15.5:1) has been so 
 gradual and imperceptible to each succeeding generation, that, 
 even allowing the probability of its continuance, it could for 
 thousands of years afford no serious excuse for excluding silver 
 from coinage, especially since it may be considered an estab- 
 lished fact that increased or decreased production of either 
 metal has hardly ever seriously affected their relative value, the 
 opposite -view of Mr. Soetbeer has, in my opinion, been finally 
 disposed of by the arnpl? and carefully arranged statistics in Mr. 
 Seyd's " Decline of Prosperity."** 
 
 In connection with the above stated objections to the double 
 standard, I may be permitted to mention an objection which 
 Mr. Seyd has very properly raised against the gold standard. 
 
 He traces the demonetization of silver, to its incipient cause, 
 in the coinage of silver fractional currency of less than its full 
 value, which practice, he says, originated in the- times of 
 the " Kipper and Wipper" in Germany. As this deterioration 
 in coinage originally resulted in the use of alloyed silver coins, 
 so the fractional silver coin is an unavoidable concomitant of 
 the gold standard, to carry on the smaller trade of every-day 
 life.*" But this so-called small daily trade from village to town, 
 and from town to village, this small trade within a narrow area, 
 really, as Carey shows, constitutes the large trade of every civil- 
 ized country." Its activity and diversity form a sure scale of 
 the civilization of the people, and the sum total of its trans- 
 actions exceed by far that of any foreign trade. " Is it then," asks 
 Mr. Seyd, "just to force the great mass of the working people 
 to carry on their trade in base pennies? Is it just to force these 
 classes to make their small savings in coins greatly below their 
 
 «Ibid, p. 85. 
 
 *"£. Seyd — "Decline of Prosperity." p. 59. 
 
 "Carey — "Social Science." Vol. I. p., 280, etseq " Appreciation in the 
 Price of Gold." 
 
49 
 
 face value? Is it not a crying injustice if the wealthier classes, 
 who enjoy the advantages of commerce, credit, etc., can make, 
 their savings in gold coins of full value, while the laboring 
 classes, who have none or few of these aids, are restricted to base, 
 silver coin ?" " If the leaders of the democracy," he continues, 
 "were men of wit enough to understand such subtle questions 
 as these, there would be a popular outcry against such fearful in- 
 justice, an injustice which lies at the root of many anomalies in 
 the social condition of these and other classes." " 
 
 The coinage of alloyed fractional currency which is necessi- 
 tated by the single gold standard to facilitate the falsely so- 
 called small trade, yields greater profit to the State than the 
 emission of coins of full value. But this profit is unimportant ; 
 the subsidiary coin being legal tender to a limited amount only, 
 and therefore not exportable, trade is therefore able to accept 
 and permanently use only a small portion of the total circulating 
 medium in the form of fractional coin. Thus there was circu- 
 lated in Germany in 1878, with 1626 million marks of gold 
 coin, only 426 million marks of alloyed silver fractional coin ; 
 and I hardly think that the steady use of a larger amount by 
 trade could have been expected, since it does not bear what Mr. 
 Bamberger justly terms the test of a good coin-exportability. 
 
 The demand that, in case of a return to the double standard, 
 the limitation of the legal tender of silver coins should be dis- 
 continued, seems only fair in the interests of those classes who 
 are restrained to the use of fractional coins. 
 
 ""E. Seyd—" Address before British Society of Arts." April, 1878. 
 
IX. 
 
 THE PARIS MONETARY CONFERENCE— THE 
 
 BLAND SILVER BILL— SUSPENSION OF 
 
 THE SALES OF SILVER BY THE 
 
 GERMAN EMPIRE. 
 
 The ruinous effects of the demonetization of silver had been 
 predicted by Messrs. Wolowski and Seyd, and widely recog- 
 nized and discussed by prominent men (as Carey, Baird, Kelley, 
 Seyd, Wolowski, Lavaleye, Cernuschi, Hucks Gibbs, Baring, 
 Lord Beaconsfield, Goschen, and Siiss) before the international 
 monetary congress convened at Paris in 1878, at the request 
 of the United States, in which Germany refused to participate, 
 
 This Congress considered the possibility of the remonetization 
 of silver, and, although its adversaries rejoice over its indefinite 
 result, its proceedings certainly demonstrated that the gravity 
 and importance of the question was everywhere appreciated, 
 and that a large majority of the assembled authorities on finance 
 were unanimous on the following points : 
 
 1. That the adoption of the gold standard by the German 
 empire caused a fatal disturbance of the previous equilibrium 
 between gold and silver. 
 
 2. That a universal adoption of the gold standard must result 
 in a still greater depreciation of all commodities through an in- 
 creased revolution in the relations of prices, and consequently 
 in an increased depression of international trade. 
 
 The delegates of the United States, France, England, Austria, 
 the Netherlands, Scandinavia, Russia — although its representa- 
 tive was an advocate of the single standard — and Italy, declared 
 unmistakably against a farther extension of the gold standard, 
 which was supported by Belgium and Switzerland only; but 
 the views of the majority differed greatly as to the practical 
 measures necessary to prevent a further depreciation of silver. 
 
 (50) 
 
SI 
 
 The United States had proposed that the countries repre- 
 sented at the conference should engage to effect the free coin- 
 age of silver, on the basis of a relative value fixed by treaty. 
 
 This proposition failed partly through the non-participation 
 of Germany, partly through the refusal of England to abandon 
 the single gold standard. Mr. Goschen, the delegate of the 
 English government,- while admitting that the demonetization 
 of silver caused England many troubles, principally on account 
 of the Indian silver standard, expressed the belief that the ex- 
 isting status in the relative value of the two metals would be 
 maintained if either of the gold standard countries, America or 
 Germany, should return to the double standard, or if France 
 should again permit the free coinage of silver. ^ 
 
 France, represented by M. Say, assumed toward the propo- 
 sal of the United States a position which, while not one of re- 
 jection, was rather one of expectation, and maintained the same 
 reserve toward advice to other countries, since she could not 
 accompany it with any authority. By far the majority, the 
 Netherlands, Scandinavia, Austria, Italy, openly avowed their 
 sympathy with the double standard.^^ 
 
 To be brief, England expected, as Mr. Cernuschi pointedly 
 remarks, to make a cat's paw of one of the other countries, while 
 France, in view of the non-participation of Germany, could not 
 in my judgment possibly pledge herself to any future monetary 
 policy. 
 
 In spite of the apparently fruitless proceedings of the Con- 
 gress, it has been followed by two events of great importance as 
 opposing the gold standard, viz., Germany temporarily sus- 
 pended farther sales of silver, and America made the first at- 
 tempt toward the remonetization of silver in the Bland bill. 
 
 The American government, by recommending the suspension 
 of the coinage of silver dollars, and inviting a new International 
 Conference, has confessed that the Bland bill, which restored a 
 
 =' Cernuschi — ^Diplom. Mon^taire; p. 46. 
 
S2 
 
 limited coinage of silver dollars on a basis, discriminating 
 against silver by about three per cent, and, therefore, conflict- 
 ing with the French system, was a step, which has not im- 
 proved, but embarrassed the general situation. Still the ener- 
 getic proceeding of the United States proves their determination 
 to take a most energetic initiative toward the remonetization of 
 silver. 
 
 As regards the suspension of the sales of silver by Germany, 
 we must not forget that, although the adoption of the gold 
 standard by the German empire had been decreed by law, it 
 had been by no means effectually executed. Silver bars 'and 
 coins form to this day part of the reserve for the notes of the 
 Imperial Bank and the silver thaler is as good a legal tender as 
 the gold piece of the new standard 
 
 Whether from fear of increased losses from further sales of sil- 
 ver, or from the instinctive presentiment that any haste must 
 force France to adopt irrevocably the gold standard, the German 
 government had resisted the pressure of the friends of the gold 
 standard, and withheld the sales of silver. Germany would, in- 
 deed, have assumed heavy responsibility had she attempted to 
 hinder or prevent any international agreement on the standard 
 question, which through the Paris Conference had become pro- 
 bable. 
 
 England benefited more than any other country by the sus- 
 pension of the German sales of silver. For the experience 
 which England had had in the decline of her international trade 
 from the demonetization of silver indicates plainly that the re- 
 cent and but half-forgotten commercial crisis would re-appear 
 with increased vigor should the depreciation of silver spread, 
 and should France, for instance, be forced to the adoption of 
 the gold standard. 
 
 Let us hope that the increased agitation for the double stand- 
 ard, through future international conference or negotiation, may 
 induce England to take a position different from that which Mr. 
 Goschen assumed at the Paris Conference. England, although 
 
53 
 
 she would naturally prefer to use another country as cat's paw, 
 must acknowledge that there is small hope of an international 
 agreement so long as she persists in the gold standard. 
 
 Germany, if she alone should return to the double standard, 
 would risk seeing her gold exported to France, or to the United 
 Sta|;es, for the introduction and maintenance of the gold stand- 
 ard. Similar dangers menace the United States and France in 
 an analagous case ; and if England believes that these three 
 leading countries will agree upon the re-establishment of the 
 double standard, and thus restore to trade the unchecked influx 
 of both metals, she will discover that she has made a fatal mis- 
 calculation. For each of these countries may justly claim : 
 
 1. That should the existing crisis continue and increase, their 
 protective tariffs would, in a great measure, insure them against 
 its dangers. 
 
 2. That the pressure on international trade caused by the 
 depreciation of silver,, must affect England most injuriously, 
 since that country has the most extended international trade. 
 
 3. That the more and more unbearable conflict between the 
 silver standard in India and the gold standard in England — 
 which steadily decreases the flow of silver from India to Eng- 
 land, and seriously complicates the Indian finances — makes it 
 obhgatory upon England to begin the introduction of the 
 double standard simultaneously in both countries. 
 
 The most experienced English statesmen of both parties have 
 always hesitated to attempt the introduction of the gold stand- 
 ard into India. And it was no secret to the sound mercantile 
 sense of the English that it would be totally impracticable to 
 introduce the double standard in India alone, since any such 
 attempt could result only in the expulsion of Indian gold to 
 to the advantage of other countries. 
 
 If, therefore, England persists in the opinion of Mr. Goschen, 
 who — contrary to his distinguished countryman Newton — de- 
 nounces the idea of a basis of fixed relative value between 
 the two metals in the coinage of all countries, with the univer- 
 
54 . 
 
 sal resumption of the double standard (the American propo- 
 sal), as a Utopian scheme, she had better calculate the conse- 
 quences. England should consider that such proceedings may 
 make it impossible for the German government to resist suc- 
 cessfully the pressure of the advocates of the gold standard for 
 its immediate and decided enforcement in Germany ; that in 
 that case France would most probably be whirled into the same 
 current, and that the United States would not care to make 
 single-handed the vain attempt to free the world from the night- 
 mare of the gold standard. 
 
 I doubt not that the ruinous consequences of such a depre- 
 ciation of silver as must result, will in the end lead humanity 
 to return to the old system of using the two precious metals in 
 trade ; but the responsibility of causing the crisis will rest with 
 England, to whom its dire effects will be most directly and 
 most heavily brought home. 
 
X. 
 
 THE FUTURE MONETARY POLICY. 
 
 The advocates of the gold standard point with especial de^ 
 light to its introduction into England, Germany and the United 
 States, as a result which developed itself with the irresistibility 
 of a natural law, against whose force all human resistance 
 would have been vain, and to which the remaining countries 
 will also soon succumb. Hitherto, they say, gold and silver 
 peaceably and jointly sufficed for the trade of the world; Tjut 
 now a war has broken out between them, which must end in the 
 destruction of one or the other as a standard metal. 
 
 A thorough study of the history of the standard question 
 proves this opinion to be entirely unwarrantable. A human ca- 
 price or, if you will, human assurance, induced England to adopt 
 the gold standard, and the singular dualism of England and 
 India, and other causes, prevented this monetary change from 
 producing that immediate depreciation of silver which at once 
 took place when Germany and the United States, infected by 
 her example, imitated England — not yielding to the force of a 
 natural law, but drawn into that current which a zealous propa- 
 ganda of fallacious theory had temporarily produced in public 
 opinion. 
 
 The present situation is the more cramping and depressing, 
 as the German Empire alone cannot undo accomplished facts 
 without provoking dangers to its economic development which 
 are recognized and appreciated even by decided opponents of the 
 gold standard. The fruitless attempt by the United States to 
 remonetize silver has demonstrated the helplessness of a single 
 country in such an eminently international matter as the stand- 
 ard question; and should Germany attempt alone to resume the 
 double standard, she would either undergo experiences similar 
 
 (55) 
 
56 
 
 to those of the United States when they attempted to adjust the 
 ratio of gold and silver to then present conditions, or would be 
 in danger of losing her gold without arresting the depreciation 
 of silver. 
 
 However much we may be convinced that Germany, for 
 many reasons, would have done better if she had retained the 
 silver standard with subsidiary gold coinage, and thereby possi- 
 bly prevented the depreciation of silver with its injurious con- 
 sequences, we now find the situation changed : 
 
 1. As before intimated, it is questionable whether the isolated 
 return of Germany to the double standard — which virtually 
 means the change to the silver standard — would not lead 
 France and the United States to opposite measures, thus accel- 
 erating rather than checking the depreciation of silver. 
 
 2. The objection which was so strongly urged against the 
 Bland silver bill, that the interest on the State obligations is 
 guaranteed in gold,* would be energetically pressed in this case 
 also. 
 
 3. Finally, Germany would lose the real advantage gained by 
 her gold standard : in that she has gained a foothold in the 
 English market for her bonds, the competition resulting from 
 v'hich may gradually produce a reduction of our rate of interest, 
 the English rate being generally lower — and which must greatly 
 facilitate the negotiation of state and national loans, England 
 being in fact the great capitalist of the European countries. The 
 great change of railroad bonds into consols — by making the 
 roads, state institutions, for instance — is greatly facihtated and 
 expedited, because England is already a good customer for 
 Prussian consols. 
 
 If we therefore must renounce the idea that Germany alone 
 could proceed in the matter of standard, we recognize eventually 
 
 *The interest on United States bonds is not payable mgoid, but in coin, 
 either silver or gold, of the standard value existing at the date of the Re- 
 funding Act. — Translator. 
 
57 
 
 an international agreement as the only possible means of re- 
 storing the double standard and remonetizing silver. As has 
 been previously stated, England may have hoped that such 
 an agreement would be concluded between Germany, France 
 and the United States, to which England need not be a party, so 
 that she would be able to retain her gold standard. But the 
 proceedings of the Paris monetary conference have apparently 
 shown England that the position assumed by her delegate is 
 untenable, and that the other great civilized countries, however 
 desirous to prevent further depreciation of silver and its ruinous 
 consequences, will be powerless to settle finally the monetary 
 question so long as England maintains her isolated position. 
 It is evident that no state can guarantee certain future legislation. 
 Such assurances can only be possible if they at once establish 
 a situation which makes it very difficult for any one of the 
 contracting countries to adopt a policy inconsistent with the 
 agreement. Such a situation would ensue, if the contracting 
 states, including England, should determine, at a specified time: 
 
 1. To substitute full value silver coins for silver fractional 
 currency. 
 
 2. To permit the coinage of both, silver and gold according 
 to the fixed ratio of 15.5 : i. 
 
 While the non-participation of England in such a convention 
 would admit the possibility that any country might find it to its 
 interest to join England in adherence to the gold standard; the 
 universal adoption of the double standard would make it impos- 
 sible for any country, including England, to re-open the stand- 
 ard question without seriously injuring its own interests. 
 
 As this palpable deduction must restrain all interested coun- 
 tries from entering into any agreement on the standard question 
 without England, it will on the other hand induce them to ex- 
 ert all their influence«to gain the co-operation of England; and 
 England will be forced to consider whether, by maintaining her 
 isolated position, she will accelerate the depreciation of silver 
 which cannot fail to follow if Germany throws her remaining 
 
58 
 
 stock of silver upon the market, thereby obhging France to 
 adopt the gold standard. 
 
 As I understand it, Germany has, by suspending her sales of 
 silver, intimated that she is not now averse to international 
 negotiations on the standard question, and that she recognizes 
 and appreciates the mischievous results of her demonetization of 
 silver ; but the assumption by England of an attitude of hesita- 
 tion or hostility would force her to continue her present course, 
 to prevent other countries from profiting by her sales of silver, 
 an advantage which must inflict fresh losses upon Germany. 
 The crisis we have endured would be child's play compared 
 with the catastrophe which must result from such a development. 
 
 Lord Beacon sfield's clear perception and broad view of the im- 
 portance of the standard question ; the lively agitation in the 
 commercial centres of England ; the exhaustiveness of the con- 
 troversy, technical and scientific, by English financiers, permit 
 hope that this repetition and aggravation of the crisis will not 
 be necessary to lead the trade of the world back to the channels 
 in which it has moved for centuries. There is hope that the 
 decision of England in favor of the remonetization of silver, 
 and the establishment of the double standard in England and 
 India, will re-open the influx of both the precious metals which 
 has at all times been so conducive to the progress of civilization. 
 
 " England," says Mr. Kelley, in conclusion of a short treatise 
 on the double standard, " will be one of the signatory powers 
 to a convention which will establish bi-metallism for the world, 
 and by making it universal, make it as enduring as society." °* 
 May he be a true prophet in the interest of the economic devel- 
 opment of our German fatherland, and of the progressing civili- 
 zation of all countries of the globe. , 
 
 5*W. D. Kelley— "Bimetalism." PhiladelpUia. 1879. 
 

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