rii HG 233.8361897""™"" "'™ '^imSmLmmflS"" P""s:being an i 3 1924 013 979 798 QUESTIONS OF THE DAY. ^ 40— The Margin of Profits, Bj^ Edward Atkinsojn. Together: witlj • the;Reply- of E. M;CHAMBEWLX];N,..Ii!ipre5e»tihg to and Mr. Atkin^on'l Rejoinder. -Cloth, 75 cents ;' paper . -., . 40 ,4Si — Bodyke : A Chapter .'m^.the HistOTy' of Iri'sh Landlordism. By H6NRY Norman. Qctavoi cloth,, mustrated . ' . . ■ - . ' 75 43— Slav or Saxon : A Study of:' the GrOjrtlt- and Tendencies' of RttssianI;, Civilization; By Wm, D. Foulke, A.M. Octavo, cloth .-'loO 44— The Present Condition of Economic Science, arid the Dematid - for a Radical Change in its' Methods and Aims. ■ By BoWAsfaV C. LuNT. Octavo, cloth ... . • . . ■ . ■ . ' . 75 ~ 46— Property in Lafld. -By Henry Winn. Octavo, pag^er} . 25 47— The^Tariff History of the United. States, By F. W.'Taussig. Octavo, cloth . . ,- - .. . ' . .' . , .' I 25 48 — ^The President's Message, 1887. With^ annotations by R. il. BoiVKER. Octavo, paper, . . . ', . , . 25 49 — lEssa;fS on Practical Politics. By Theodore Roosevelt. Octavo, cloth - . . ; _,. . ;, ;• . . . .75 50-^Friendly Letters to American Farmers and Others. By J, S. MooreX Octavo, paper . . . . '. , , . .. ,25 .52 — Tariff Chats. By Henry J. Philpott. Octavo, paper , 25 53 — The Tariff and it's Evils ; or, Protection which doefe not Protfect,- ' By John H.Allen. Octavo, cloth . . , , .-100 54^Relation of the Tariff to 'Wia.ges. By David A. Wells. Octavo, paper . . . ■ . . . •: '• • • • 2" 5S.^True or False Finance.' The Issue of 1888. By a Tax-Payer./ Oclavo", paper . . . . . . , ' . . 25 ;jfi — Qtttlines of a New, Science. By E. J. Donnkll. Octavo, cteth, -'""-' ' .' - -- I 00 57^— The Plantation Negro as a Freeman. By Philip A. Bruce. : Octavo, doth . . . . , . ; . . . ■ - r 25 . 58— Politics as a Duty and as a Career, By Moorfield &tory. Octavo, paper . . . . . . . . .25 59— Monopolies and the People, By Chas. W. Bakes.. Octavo, cloth, 60— The Public: Regulation of Railways. By W., D. DABiffiy^ ^ , .. -. - ^-.^ -f^^ ^Q^ ;VkV^vs ■ ^ Copyright, 1896 BY G. P. PUTNAM'S SONS Entered at Stationers' Hall, Londoa tCbe fcniclierboclier fteee, mew tRocbelle, "R. S> PREFACE. . In the years 1869 and 1870 I contributed a series of articles on The Labor Question, to a German periodical, then published in New York, under the tiile. Die Neue Zeit. In these articles I held.that prices were to be considered not as simple units, but as results of all the factors involved in the processes of production and distribution, including the action of government in the exercise of its political preroga- tive. I held, further, that the wage-earners' well-being, and that of all people with small incomes, depends on the extent in which the profit-charges on the several price-ele- ments contribute towards swelling prices. Feudal preroga- tives, privileges, monopolies of all sorts, protective duties, and taxes upon production, as well as all infringements of the exercise of the fullest measure of individual freedom, fell under this ban as a matter of course. I held that the preferences conveyed under these titles, either as inherited rights transmitted from a passing state of society, or as the acts of legislation for the furthering of special inter- ests, raise values beyond the compensation received by the classes engaged in production and distribution, and thereby operate to depress the working classes ; and that it must, therefore, be the aim of enlightened statesman- ship to remove them, or reduce them to the smallest possible dimensions. An analysis of prices necessarily involves, therefore, the examination of all the elements of price-making, and Hi iv PREFACE. these include, practically, all the economic, political, social, and ethical forces of the age. As subjects of my analysis I treated the conditions of agriculture, mining, and industry, whether free or saddled with hereditary burdens, and other charges contributing to price-making, under the headings of Wages, Profit-rates, Expense of distribution. Taxation and tariffs, Interest and capital, Transportation, Monopolies, and Currency. The views on prices and the cost of production which I held then, and which I have briefly stated above, have been confirmed by the varied studies which I had excep- tional opportunities to pursue in my business career and under a special appointment of the Secretary of State, Mr. Bayard. In 1885 I gave expression to the same ideas in my book. The Industrial Situation. The question of " the appre- ciation of gold " and " the depreciation of silver " had then begun to be agitated. The decline of prices was by writers of international fame attributed to resulting monetary changes. I contradicted this theory, and gave expression to the views already stated. In my earlier opinions I was .still under the influence of the theory that the money-quantities in circulation affect prices. From this theory I had emancipated myself by 1885. I stated that prices were of the composite nature illustrated, and that the quantities of gold and silver in circulation had little to do with this rise and fall. PREFACE. V As was to be expected, my position was severely criti- cized. It was so radically opposed to the tenets of ortho- dox political economy that it reeded more than even the broadest and firmest foundation of general facts to prove its correctness and have it take the place of the old, time- honored belief. The acute phase into which the question has since entered has caused me to examine the prices of the period anterior, to the discovery of the American silver mines, and to carry the comparison down to the present time, for the purpose of determining by this exact pro- PRICES IN THE PAST ... 285-309 The many burdens on trade and industry considered. The armed convoys required to conduct trading fleets. Money carried on men-of-war. The expense considered. The high rate of profit necessary to cover the risks. The Dutch as the principal carriers on the high seas during the seventeenth century. Their grasping and monopolizing tendencies. An object of jealousy and hate ......... 285-291 Monopoly of trading companies ' crush individual competition. Early profits succeeded by heavy losses to stockholders. Wastefulness in the absence of individual responsibility. Extra length of voyage. Monopoly on land. Degeneracy of the guilds. Become a source of grinding taxation and. exaction by government. Effect on cost of production. Limitations of right to exercise a craft. Granting the right to work a pre- rogative of the crown. In Germany legal limitations extend to within recent years. Preventing progress and spread of CONTENTS. XVU PAGE manufacture. Taxes and dues. Made purchasable offices. Trade regulations very onerous. Influence of the " Econo- mists " on freeing trade and industry ..... 291-299 Duties and taxes. Custom's taxes. At first for revenue. Later for protection. Hovif they grevir. Effect of gradual abolition on prices. Effect on prices in America of removing wool tariff. Examples from recent tariff history. Low prices the effect of the removal of burdens on trade, commerce, and transportation, and of giving full sway to the agencies set in motion by enlightenment and liberal laws .... 300-309 Appendix A . 311-323 A Summary of the Price History of England, France, and Germany, giving in parallel columns grain-prices and wages, with their purchasing power in bushels of grain, notably wheat and barley, from A.D. 1351 to 1882. Appendix B 324-344 Introductory letter to the author's report on Technical Edu- cation to the Secretary of State, separately published under the title "Influences Bearing on Production" by the De- partment of State. Index . 345-352 FIRST PART. A CRITICAL REVIEW OF PRICE THEORIES AND MONETARY CONDITIONS. CHAPTER I. The Erroneous Premises upon which the Prevalent Price Theory Rests. The prices of commodities and the quantities of money in circulation have been so closely linked together in the thoughts of the people, through the teachings of a purely deductive political economy, that it has become almost an axiom, not to be touched by doubting inquiry, that a rise or a fall of prices is to be ascribed to an in- creasing or a decreasing supply of money, and that any sudden change in this supply must, necessarily, be fol- lowed by sympathetic changes in prices. Several instances of monetary changes bringing about changes, though nominal only, in prices, lend seeming support to this view. It would be futile to deny that a rise of prices would follow sudden expansion of a certain kind in the currency of a country. The people of the United States have it only too vividly in their recollection, to need reminding of the fact, that the paper circulation of the war period brought on an era of price inflation, that values for a time were doubled and trebled by the mere fact of the change in the currency. But this fact proves rather that the purchasing power of the money had decreased, be- cause the people doubted the ability of the government to exchange its own money at par into the money of the world, t. e., full-valued coin, then gold and silver. The 4 MONEY AND PRICES. money supply was by no means excessive at the time when the government paper stood lowest compared to what it is at the present time, when the circulation is about two to one of the amount prior to the time of the resumption of specie payment by the government. The value of the money came to parity only when it became a certainty that the government would redeem its pledges. It may with justice be said that a government promise to pay is not money, no more than the promissory note of a commercial firm. But it is as good as money so long as the credit of the firm is undoubted. If it should come about that more bills come on the market than the charac- ter of the house would warrant, the bills would become discredited very soon. Governments have to submit to the same rules of commercial ethics as private firms. The world is even justified in exercising greater caution with government issues. An extra-legal position is created for the government by being the law-making power, and examples are not wanting of its availing itself of its oppor- tunities. Indeed, history does so abound with examples of the abuse of this easy " new way of paying old debts," that it is hardly necessary to do more than make passing allusion to the most prominent instances and to the dis- astrous results. Our own Continental money* and the Confederacy's money furnish the necessary reminders for * In the early part of 1776 an English general reported to his government : " The Congress paper is in the highest credit ; though before the year closed paper money in the northern section of the country was struck with a mortal blight." — Alberts. BoUes, The Financial History of the United States, v A. i., p. 119. At the close of the same year it was that General Putnam, in command at Philadelphia, issued an order : " Should any of the inhabitants be so lost to public virtue and the welfare of the country to presume to refuse the cur- rency of the American States in payment for any commodities they may GOVERNMENT ISSUES. 5 this side of the Atlantic Ocean of the possibly worst out- come of honest intentions and " safe beginnings." Neither of these issues was ever redeemed. The latter issue for the vahd reason that the authorities which had issued the money went out of existence. The Continental government, however, though terminating the war suc- cessfully, never honored its promises, undoubtedly as sacred when made as the promises, under equal stress, at the time of our late war. These are even yet awaiting re- demption. They do not share the fate of their forerun- ners, because no one doubts the ability of the government to finally redeem its pledges. have for sale, the goods shall be forfeited, and the person or persons so re- fusing, committed to close confinement." (December 12, 1776.) But in matters of trade sentiment plays a small part. The threats and proclamations of the authorities seem to have had little damaging effect on the traders. They converted their cash fast enough into merchandise. The poorer people, wage-earners and salaried men, suffered most from the rapid depreciation. Toward the close of 1 777 the inclination to barter had be- come general, " and as general an aversion to dealing in paper money of any kind," as John Adams wrote to General Gerry. In 1779 twenty paper dollars were given for one silver dollar. Depreciation of the currency was by this time everywhere acknowledged, except by Congress, which still refused to recognize the fact. During the year depreciation had increased to forty-one dollars and a half for one in silver. But the next year (.March, 1780,) the bill was passed, the famous " forty for one " bill, which destroyed the cobwebs, declaring forty dollars in paper equivalent to one in specie. But even these repudiation dollars, scaled down to 2^ cents in silver, suffered in that very year a decline to one half their face value, until finally they became entirely worthless. Josiah Quincy, writing to Washington, November 27, 17S0, said : " Our new paper money, issued by recommendation of Congress, no sooner began to circulate than two dollars of it were given for onehard one '' ; and added : " I am firmly of the opinion, and think it entirely defensible that there never was a paper pound, a paper dollar, or a paper promise of any kind, that ever yet obtained a general currency, but by force or fraud — generally by both." 6 MONEY AND PRICES. The " money " with which Mr. Law's name is indis- solubly associated has given him that kind of immortality which Herostratos aimed at. With the difference, how- ever, that Mr. Law undoubtedly thought seriously of his ability to extricate the French finances by his scheme from the chaos in which Louis XIV. had bequeathed them to the Regent. The French assignats had the same history. Beginning on a seemingly safe basis, the value of the confiscated lands, they were yet, by the momentum of the forces set loose, soon swept from their moorings into the tossing sea of utter bankruptcy and disaster. No less than 45,5/8 millions of francs of these " moneys " were issued. The story is ever the same. Lured into issue after issue by the easy way of disposing of first issues, when credit is yet unimpaired, governments are soon compelled by the growing difficulties, which were to be remedied by these stratagems, to meet them by ever increasing supplies of paper promises. Draconian laws, imprisonment and the guillotine, were invoked to enforce acceptance at par value. " Patriotism," however, power- ful as it may be to fire the heart in other directions, seems to lose its power when it is to make men give up their possessions for a scrip which has no other value behind it than the promise of a discredited or doubted issuer. Under the regime of thi_s " money " prices did rise in a phenomenal manner. Although maximum prices were prescribed under threat of execution, one franc in silver became worth from 800 to looo in paper. The American Congress declared everybody, who refused to take its money at par with silver, an enemy of his country, and subject to the confiscation of his goods. But this did not prevent a silver dollar being worth $100 in paper in 1781. Finally these issues became worthless MEANING OF MONEY. 7 and were not taken at all. Before the final extinction of the assignats society had fallen back upon payment in kind, upon barter, the starting-point of civilization. The French Constitution of 179S made the pay of a member of the Directory 50,000 myriogrammes of wheat.* In America it was easier to fall back upon this makeshift, as the country had hardly emerged from that state of civili- zation of which barter and payment in kind are the char- acteristic features. The lesson was not lost upon students of history, and Daniel Webster's words, " Of all contrivances for cheating mankind none has been more effectual than that which deludes them with paper money," will readily find en- dorsement. We leave these " moneys " out of consideration as we enter upon our inquiry into the influence of the quantities of money in circulation upon prices. The question here first arising is, What is Money ? The word is derived from " Moneta," a surname of Juno, in whose temple money was coined. The standard coins and measures were originally deposited in temples, as afterwards in the churches of the middle ages. They were under the protection of the celestial powers. The German word " Geld " is most direct in its meaning. It is derived from " gelten," to be valid, to be of full value. In this sense alone must we take the word, when we discuss the influence of money-supply upon prices ; this alone is meant when the question agitating the public mind for the last dozen years is taken up. Broadly stated by the advocates of the theory the case is this : A decline of prices having taken place, incontest- *See Wilhelm Roscher, Handbook of Political Economy, vol. iii., §§ 52, 54. (One myriogramme = 22 lbs. avoirdupois.) 8 MONEY AND PRICES. ably, and dating from the time of the closing of the mints of the Latin Union and the resumption of specie pay- ments by the United States, it is evident that this price decline is due to the appreciation of gold consequent upon the demonetization of the " sister-metal," silven The moneys of the world cut in two could no longer perform the functions which they performed before the link was broken, it is averred, and the consequence is apparent in the prices. Hinc illce lacrimce. The Question of Evidence. Before going into an argument upon the soundness of the reasoning, we have to examine the evidence presented by bimetallists, the general decline of prices as proved by the " Index Numbers " of statistical societies, the London Economist, and other statistical authorities. But here it is plainly shown that what is commonly accepted as the most substantial support of economic deductions, the world's trade statistics, is, by the use made of them, placed on such a footing that it rather misleads than guides, and opens the door to much of the loose reasoning which so often lands us in a quagmire. In these " Index Numbers," figures representing ever so many different species of merchandise are brought to- gether in long columns footed up, and the results are made the basis of comparisons. They are treated in solid masses. They are not analyzed so that the parts may be given their proper representation in the totals, or that an article of minor utility may be reduced to its proper posi- tion in the expense budget of the individual or the nation. Nor is the fact borne in mind that the prices of 22 com- modities, as in the Economist numbers, 28 of the Statisti- UNCERTAIN EVIDENCE. 9 cal Society, 40 of Mulhall, 60 or 100 of Mr. Sauerbeck and Mr. Soetbeer, never rise and fall at the same time, or even rise or fall in equal proportion. The fall of one would balance the rise of another. Wheat may rise 6 points, corn 4 points, and pork 4 points, in all 14 points. Pepper, sugar, indigo, and salt may aggregate a fall of an equal number of points, in which case the same average price ratio would appear. If the fall of the last named four articles indicated a greater number than 14 points, a general price reduction would appear from comparing the " index numbers " of the two years. But what a differ- ence to the poor, (or to the rich in the effect upon their own fortunes, too, if these important commodities in the household of the laboring classes should be subjected to a rise,) compared to the advantage of a fall in commodities, important enough in a commercial sense, but most insig- nificant when held against the great staples which com- pose the food of the millions. How the most unequal price notations and violent fluctuations still bring out equal index numbers, can be seen from a return taken from the Economist. To explain the construction of the table I will say in that paper's own words {^Economist, February 18, 1888), that " the basis of 100 represents the average prices of the six years 1845- 50, and all the subsequent figures are calculated from that datum line. Thus as regards coffee (col. i), the price of 1st July, 1857 was equal to 151, or 50 per cent, above the average price of 1845-50. In order to ascertain \hz per- centage rise or fall between one date and another — as, for example, coffee — comparing 1st of July, 1857, when the figure was 151, with 1st January, 1866, when the figure was 179, or a difference of 28, the rise per cent, has to be measured with the quantity 151, and gives, of course, a lO MONEY AND PRICES. result of 19 per cent, as the real advance." Of course, the reader will understand this well enough, as also that if 100 represents the price of coffee at 44r. per cwt., 8oj. per cwt. in 1878 stands in the index numbers for that year as 182. I will now give the index numbers of years which approach closely the numbers for 1845-50, though widely separated in time : VARIATION OF PRICES AND APPROXIMATING TOTALS OF INDEX NUMBERS. 1. Coffee 2. Sugar 3- Tea 4. Tobacco 5. Wheat ■6. Butcher's meat 7. Cotton 8. Raw silk 9. Flax and hemp 10. Sheep's wool 11. Indigo 12. Oils 13." Timber 14. Tallow 15. Leather 16. Copper 17. Iron 18. Lead 19. Tin 20. Cotton, Pemambuco, 21. Cotton yarn 22. Cotton cloth Totals of index numbers. . . Price of Silver per ounce. . . 1845-50 1879 1884 100 143 106 100 55 54 100 III 92 100 156 200 100 75 73 100 127 123 100 73 92 100 113 117 ICO 80 76 TOO 107 98 100 164 151 100 104 no 100 "5 100 100 83 113 100 146 139 100 72 71 ICO 77 69 100 84 70 100 77 104 100 71 74 100 88 99 100 81 88 2200 2202 2221 bo^d. 49f<^- SK^. 1888 166 49 64 244 58 108 90 "7 66 III 129 74 80 73 133 91 67 90 173 70 90 87 2230 44K VIOLENT PRICE CHANGES. II The fallacy of general averages is plainly apparent when •such violent price variations can be shown in the 22 com- modities as against one another and each one of them by itself, in the comparative columns, while they foot up a nearly equal total with the normal average of lOO for 1845-50. Still, upon such loose evidence is based the argument that the prices of a certain period have risen or fallen. Now it cannot be denied that during the last forty years ■we have lived through high-price periods and low-price periods. The high-price periods show a higher total in the index numbers than the low-price periods, though the variations are not less marked. It is evident that times of great activity make their imprint upon prices as well as times of depression, and it is equally evident that such greater activity should be apparent in the total of any set of index numbers. This being actually the case, the fact is made use of by the adherents of certain political or economic theories to bolster up the claims of their schools with utter disregard of the inherent causes that gave rise to the changed price facts of the years put in comparison. A decline of prices has taken place dating from a stated period, and as the decline in the price of silver, as com- pared with gold, is shown to have had its beginning 'at about the same time, it has become the almost unanimous opinion among the advocates of bimetallism or silver- monometallism that the decline in the price of silver is the cause of the decline in the price of commodities. The co-existence, or rather the consecution of facts is made to prove that one is cause and the other effect. To obtain clearness as to the truth or falsity of this claim is ■of paramount importance at this juncture. To prove the falsity of this claim it is necessary, as a 12 MONEY AND PRICES. first step, to show the erroneous methods which gave sa much plausible support to the prevailing price theories. The decline in prices has lent weight to the argument of the silver men. But even in this their position is not- correct. Here the times chosen for comparison are alL important. To prove their case, the decade of 1866 to 1875 for the period of parity of silver and of high prices, and the year 1885 for silver decline and low prices, stand well together. And here it is where so much error pro- ceeds from otherwise willingly accepted data. The times for comparison conveniently chosen, almost anything can be proven from " Index Numbers," which in them- selves are so full of error as has been shown. Here chance has done the work for silver which no amount of fore- thought could have improved on. In economic deduction, however, everything depends on the sifting of data and taking like and like for comparison. The importance is far-reaching. Property, wages, and the well-being of all classes depend on legislation on finance and taxation. The legislator depends solely on what he understands to be facts. If these facts are spurious, what else can be expected but ill-advised and dangerous legislation ? Now let us see what these comparisons of prices on which this silver agitation rests actually show. The prices which I introduce are, of course, English prices. Prices of American commodities are unsuitable. For 1866 to 1875 they have the double inflation of the gold premium and the war tariff. But even in England the two price- periods are by no means equivalents, a fact constantly ignored by bimetallists the world over. The inflation of all prices during the decade of 1866 to 1875 by extraneous, causes was greater than even during the preceding ten years, which had the inflating influence of the Crimean. H^AX PERIODS AND PRICES. 1 3 Twar and the American war to carry. The decade from "which bimetallists draw their conclusions bore the effects, not only of inflation and speculation left over from the American war, but also from the Franco-German war of 1870, with the intense commercial and industrial activity following the destruction of property in France and the gift of the Pandora box of five milliards to Germany.* The price of pig-iron in 1871 averaged 58^. \\d. accord- ing to the returns of the Board of Trade ; in 1872 it averaged lou. \od.\ in 1873, 117^-. 3^.; in 1874, 87^. 6ar.; in 1886, it was back again to the old price, of the year 1 87 1, to wit : 58J. 6d. Bar iron, in 1871, £'j, 12s, 6d, was £11 in 1872 ; in 1873, £^'2 lO-^- o^-; '" 1874, i^'io 5^. od., and in 1876 it had gone back to £7 5j. od. the price of 1871. Now suppose you have noted down in the one ten-year period: Cotton 148^., tobacco 104, pig-iron 125, bar iron 235, coal 21, to name a few articles chiefly affected by the two causes of war and speculation, and put opposite for 1885 : Cotton 585'., tobacco 6/\s., pig-iron 425'. (28J. for Cleveland iron), bar iron 89^., coal gs., and you can well * The extraordinary fluctuations of prices taken from the same totals of " Index Numbers " during this period of parity can be seen from the follow- ing abstract (given in round numbers up to 1870) along with the current price of silver given in pence per ounce : Index Numbers. Price of Silver. 1845-50 2200 S9i<^- 1857 3000 6iio^d. 1871 2590 io^d. 1872 2835 6oiV- 1873 2947 59 ^- 1874 2891 58Arf. 1875 2778 56,^. 14 MONEY AND PRICES. imagine how easy it is to prove the case of a decline in price of commodities " due to the depreciation in the price of silver." The prices of other commodities were likewise affected^ though in a more moderate degree. We can see how apt we are to draw wrong conclusions when we do not apply- to statistical data the scrutiny which no business man would fail to employ in his own transactions, but which he may be sure to leave safely locked up in his office desk when he is perchance called upon to apply them tO' national or international affairs. The comparing of the highly inflated years with the depressed year gives, by taking the two examples cited above, 632 for the five articles named for the former period and 262 for the latter. The addition of a great number of articles of smaller fluctuations, of course, re- duces the final proportions in the aggregate of figures- usually taken by the different authorities for their " index numbers," and from which they prove the increase or decrease of prices. Now, if we go back a generation and take the prices of the same five articles for the year 1854,. we have cotton 54, tobacco 5 1 , pig-iron 79, bar iron 200,. coal 23, in all 407. These same articles show for i86or Cotton 60, tobacco 58, pig-iron 53, bar iron 130, coal 9,, in all 310. The methods of production were not very dif- ferent in 1854 and i860. But the price aggregate is much higher in 1854 than in i860, on account of the war demand for iron and coal. Cotton and tobacco, on the contrary, were lawer. This shows the different influences- operating on prices of different articles collected in the same columns, added up, averaged, and demonstrated on. On the whole, the year i860 would give the most normal basis for comparison. It was a year of peace and SLIGHT DIFFERENCES ONLY. 1 5 tranquillity and general business activity. It shows us 310 ^n the price aggregate, against 262 for 1885. Not a great difference, it must be admitted, to build a labored theory on. The difference between i860 and 1885 is only 48, on a basis of 310. If we take the year 1890, with high iron prices, we get 290, a difference of 20 only. I have taken articles of great magnitude in international commerce and in home consumption. Two are agricultural and three industrial products. A selection of 45 articles, food, textiles, minerals, and sundries (for which 1867-76 is taken, as 100) averages only 75 for 185 1 ; but for 1854, on the contrary, 102 ; for 1873, they show ill;, for 1881, they show 85, and for 1885, fall to 73. This is not much below the level of 1851, when silver was at a premium over gold, and few of the revolutionizing improvements in productive methods had been set in operation. Mr. A. Sauerbeck, whose compu- tation from the Statistical Society yournal serves in this instance, gives the average price level (taking as a basis 100 for 1867-76) for lo-year periods for 45 articles as follows : 1843 to 1852 82 1853 to 1862 99 1866 to 1875 loi 1876 to 1885 85 Whatever we may say of the method of obtaining them, the " index numbers " of the different compilers show the present price level to be not very different from that prevailing before the Crimean war. But what about that commodity which, according to all the schools is the chief price maker — labor ? Labor is the only commodity which has constantly been l6 MON'EY AND PRICES. rising. From 1850 to the present time the rise has been ■continuous, and has maintained itself all over the modern industrial world. Labor and Wages. Labor is higher to-day than in the sixties and seventies, with their level of high prices. It is certainly 50 per cent, over the low-priced period of 1850 in Germany, France, and England. It is 100 per cent, higher in the United States. If the fall in silver were the cause of the fall in prices, the rate of wages would have been affected likewise. A general cause must have a general effect. What is of greatest significance is the fact that wages have risen in so high a ratio only in the gold-paying countries. In the •countries adhering to the silver standard the rate of wages has been stagnant, or undergone but slight changes.* All this can be demonstrated to a certainty, from which I must abstain now from want of space. The matter, how- ever, has been so fully proved that the reader will not re- quire more detailed facts than what will be given in the progress of these pages for his orientation. The rise in wages is the absolute proof that the fall in the price of commodities is due to invention and science, to the most forcible application of mind to production the world has ever seen. This has made labor so productive that it can demand and obtain higher pay, and at the same time produce at greatly reduced cost. To show this con- clusively we must abandon " index numbers " and aver- ages and follow the safe road of comparison by concrete ■cases. * See chapter X. 1854 1889 1854 1889 s. d. s.d. cents. cents. 53-7 53-0 per lb. II.6 11-5 112. 103.0 (( it 24-3 22.3 25.0 19.0 " yard 6.1 4.6 34-0 25.0 " " 8.3 6.1 DECLINE IN LABOR COST. 17 To find a case calculated to cover all the elements in the discussion we have only to fall back upon cotton and cotton manufactures and show their price relations in the two periods mentioned ; Raw cotton per cwt. Cotton yam " " Cotton cloth, plain .... 100 yds. " printed. . " " The gold price of cotton is the same as before the war. The price of the goods made out of the cotton, i. e., the cost of the labor expended on turning the cotton into goods, shows the remarkable fall indicated above. The greater the proportion of labor to the value of the material, the greater the decline in the price. The raw cotton is equal in price. In the yarn we note a fall of 8 per cent. ; in the plain goods of 24 per cent ; and in the printed, of 27 per cent. The cotton is subject to the competition of countries which stand on a silver basis. India has been the chief competitor. The decline in the value of the rupee has haunted to no small degree the imagination of the cotton planter in America. If the fall in the price of silver were the cause of the fall in prices, then certainly cotton ought to have fallen correspondingly. Silver was over 6id. an ounce in 1854 ; it was only 42^. in 1889. The price of cotton, however, had not varied. No one can deny that the decline which has happened since 1889 is due exclusively to the two phenomenal crops of 1890 and 1891, which left an unconsumed surplus on hand, .after the low crop year of 1892, of nearly 3,500,000 bales. In the year 1892-93 when the crop was but an average crop, I8 MONEY AND PRICES. the price rose, at one time, to the high figure of lo^ cents,, though silver had had a further drop. Nothing plainer but that the over-supply is the cause of the great falling away of price in cotton, as seen again in the price decline following the large crop of 1894. But the labor and cost of turning the cotton into yarn, the yarn into cloth, the cloth into prints, is all added in gold-paying England, which regulates the price of manu- factures for all other exporting countries. If the theories which have been at the root of all this agitation were sound, then a rise ought to be manifest in that part of the prices which is added by labor, earning daily rates varying from 50 to 100 per cent, higher than in the early years of the fifties. No better proof need be given of the economic fallacies generated by blindly following statistical compilations than in this illustration of prices of cotton manufactures. This is further illustrated by holding the results of this examination of a concrete case against what I have shown as the usual statistical method, that of averaging prices of a large number of commodities entirely unrelated and dis- crepant in their importance as articles of consumption, and drawing comparisons from them without regard even to war and other extraordinary influences on prices. If experience must be the basis for all reasoning, facts must be the basis for economic deductions. But what are facts ? Mere statistical tabulations and the indiscriminate use made of them are not facts and certainly not very re- liable guides for legislators to follow. CHAPTER II. The Prevailing Money Theories — The Money-Metals — The Varying Rela- tions of Output between them — Does not Affect their Value Relations. Names of the highest authority have given weight to the doctrine that the quantity of the precious metals in existence determines the prices of commodities. Montes- quieu * formulated the theory that " prices are fixed in the ratio of the whole of the commodities to the whole of the signs " (gold and silver), " compounded with the ratio of the whole of the commodities in the channels of trade to the whole of the signs in these channels. The estab- lishment of prices depends always, fundamentally, upon the ratio of the total of commodities to the total of signs." This view is generally accepted. Montesquieu, how- ever, is not the originator of the theory. As far back as 1588 Davanzati in Lezione sulk Monete\ says: "All commodities which serve to satisfy the wants of man are by convention equal in value to all the gold, silver, and copper. The parts are subject to the same rule as the whole." Montanari, in Delia Moneta sets forth the same views, but adds the limitation "spendibile in commercio" (to be expended in commerce). Locke goes even so far as to say, there being now ten times as much silver in the world than at the time of the discovery * Montesquieu, Esfrit des Lois. f Quoted by Wilhelm Roscher, Grundlagen der National Oekonomie, Yol. i., §. 123, 2 1 St edition. 19 20 MONEY AND PRICES. of America, the value of every unit of silver is only one tenth as much as then compared with merchandise re- maining unchanged. He is of the opinion that with money the demand is always equally strong, always up to the supply, while with merchandise this is not the case. Wilhelm Roscher says of Hume * that he knows well enough that only the money in circulation and the mer- chandise in circulation have a bearing upon prices, but * Hume, the historian, contradicts the deductive essayist in a manner that I cannot refrain from quoting here his statements referring to price comparisons of his time and that of Elizabeth and James I. "The price of corn during this reign (James I.), and that of the other necessaries of life, was no lower, or was rather higher, than at present. By a proclamation of James, establishing public magazines, whenever wheat fell below thirty-two shillings a quarter, rye below eighteen, barley below sixteen, the commissioners were empowered to purchase cor-n for the magazines. These prices, then, are to be regarded as low, though they would rather pass as high by our present estimates. The usual bread of the poor was at this time made of barley. The best wool during the greater part of James's reign, was at thirty-three shillings a tod. At present it is not above two thirds of that value ; though it is to be presumed that our ex- ports in woollen goods are somewhat increased. The finer manufactures, too, by the progress of arts and industry, have rather diminished in price, notwithstanding the great increase of money. In Shakespeare, the hostess tells Falstaff that the shirts she bought him were Holland at eight shillings a yard ; a high price at this day, even supposing, what is not probable, that the best Holland at that time was equal in goodness to the best that can now be purchased. In like manner a yard of velvet about the middle of Elizabeth's reign was valued at two and twenty shillings." Referring to 177^ '^^ ^^ys in footnote ; "Money, too, we may observe was in most particulars of the same value in both periods ; she (Elizabeth) paid eightpence a day to every foot soldier." He makes the very wise deduction from the facts in explanation of the higher cost of living at his time : " The chief difference in expense between that age and the present, con- sists in the imaginary wants of men, which have since extremely multiplied. These are the principal reasons why James's revenue would go farther than the same money in our time ; though the difference is not near so great as is usually imagined." — Hume, History of England, vol. iv.. Appendix iii. FALLACY OF THEORIES. 21 " he does not strike the idea yet that the rapidity of cir- culation has to be considered." That the theory of money here reviewed and still current is untenable appears from the mere consideration of the sums of money and quantities of merchandise in existence at any one time. So it is pointed out by Mr. Michel Chevalier that the money quantities of France in existence in 185 1 were esti- mated at between 3J and 4 milliards of francs, while the value of real property alone amounted according to offi- cial valuation to 83 milliards of francs. The value of realty is, naturally, determined by the development of industrial production. But even the values of circulating merchandise, i. e. the annual product going into the chan- nels of commerce, bears no positive relation to the quan- tities of money in circulation. The money quantities in existence in the United States in 1880 are estimated at about $1,400,000,000. According to my calculation,* taking the salable value of the crops at the shipping ports and adding the additional value given to the raw material by the manufacturing indus- tries of the country, plus the distributing expenses and the profits of capital, the commercial value of the annual product in the consumers' hands was then $7,680,000,000. t Here the proportion of money to annually circulating merchandise is as one to five. But we have here a very important fact to chronicle which at once sets at naught all the arguments of the adherents of the mechanical price theory. * See J. Schoenhof, The Industrial Situation, ch. xii., p. 103. f This is below the prevalent estimates. But my estimates are based on an elimination of repetitions in values, and differ in this from the usually inflated American official statistics, in which an absence of critical acumen is frequently too manifest. 22 MONEY AND PRICES. The resumption of specie payments in 1878 had by 1880 added something like $600,000,000 to the paper forming the only currency, except the specie circulation on the Pacific Coast. The quality of the currency was improved by the resumption act, and notwithstanding the large increase in quantity of money, no changes in prices were perceptible, except in articles of merchandise in which the change can easily be traced to other causes still fresh in everybody's remembrance. I will show this by the prices of principal commodities in 1877 and 1880.* Names of Commodities. Prices. Com, bu Wheat " Wheat flour, bs Cotton, pd Leather " Bacon and hams, pd Lard, pd Pork " Beef, salted, pd Butter, pd Cheese " Eggs, doE Starch, pd Sugar, refined, pd Leal tobacco, pd Pig-iron, No. i, Anthracite, Phila., ton. Bar iron, ton Iron rails " Steel rails " , Cut nails, 100 lbs Anthracite coal, ton Bituminous coal, " Standard sheetings, yard Standard drilling, yard New York mills bleached shirting, yard.. Print cloths, 64 x 64, yard 0.543 1.25 5. 0.115 0.233 0.067 0.074 0.061 0.064 0.171 0.095 0.165 0.043 0.09 0.077 28.50 60.38 49-25 67-50 3.68 4.53 3-75 0.115 0.0851 0.1274 0.0451 * See Statistical Abstract of the United States^ i8gi. FLUCTUATION IN IRON. 23 If we were to foot up the twenty-six articles here named Ave should undoubtedly get a higher total for 1880 than for 1877. Those eager for proofs supporting the quantity theory would certainly find it in the " index numbers " based on the totals so obtained. But we see that the in- crease is solely derived from higher prices of iron, steel, and coal. These, as everybody knows, were suddenly raised in a phenomenal manner by the great boom in iron which in the fall of 1879 began its meteoric course, from the great depression following the panic of 1873. The boom, as will be remembered, led to the panic of 1884, following which came another four years of depression and a repetition of the same alternations in almost the same quadrennial or quinquennial periods. Iron, it must be noted here, is more influenced in this erratic manner than other commodities, because during long-continued depression iron furnaces are blown out to reduce the output. The deterioration of the plant, the time for repair and putting in blast when demand revives, is great enough to create a scarcity for a considerable length of time, which makes it almost certain that high prices follow in the wake of a period of stagnation. All articles of which pig-iron is the basis naturally follow in the same run of price inflation until the collapse, always certain to succeed extraordinary expansion, sets in again. Now if we take iron and connected branches, like coal, out of the columns, we find the prices of most of the other commodities to be essentially unchanged, while meat products are even considerably lower than in the year of the smaller money supply. If the theory were correct that an expansion of the money supply raises the prices of commodities, it would follow that the adoption of a paper currency driving the 24 MONEY AND PRICES. demonetized specie into neighboring countries would' raise the ordinary standard of prices there. But investi- gation has been unable to show that this was the case in similarly affected periods, as evidenced by Tooke and other writers,* neither can we find any trace of such an occurrence as the consequence of the American acts, regu- lating the money circulation of the years 1861 to 1875. The geometrical treatment of prices, equating a given bulk of money with a given bulk of merchandise is cer- tainly an easy method of solving a great problem. It need not surprise us that experts went to work to adduce proof by algebraic test so as to give an apparently mathe- matical basis of certainty to an array of otherwise unau- thenticated assumptions. Evidence to the contrary, however, has been brought forward by some of the most painstaking investigators, but the doctrine still holds full sway and certainly supplies a sort of " scientific " basis to- the agitation for the " rehabilitation of silver " and co-rela- tive demands. Arthur Young in 181 1 published his Inquiry into the Progressive Value of Money in England. In his intro- duction he speaks of the pains he took in the collection of his data. " I examined," he says, " a multitude of authorities from which I extracted a great variety of prices, carefully referring to every authority, quoting the volume and page, and combining them with all to be * ' ' That the markets of the world are not so easily put in perturbation by an increase of the circulating mediums is authenticated among other things by the facts how the enormous outflow of the French metal money in conse- quence of the paper emissions of 1716 to 1720 and again of 1790 met with declining prices on the surrounding corn markets. And yet the former has amounted to four hundred million francs and the latter at least to one thous- and million francs," — Wilhelm Roscher, Grundlagen der National Oeko- nomie^ vol. i., page 369, ARTHUR YOUNG AND TOOKE. 2$. found in the books cited by Sir George Shurkburgh, as well as with the details, more numerous than had before been published, given by Sir Frederic Eden in his Staie of the Poor. These prices I reduced with much labor to the standard of our present money. The investigation occupied myself, an amanuensis, and an accountant, with other occasional assistance, much the greater part of ten months and at no inconsiderable expense." According to this minute and careful investigation the whole advance in prices was not more than in the propor- tion of I to 3 from the fifteenth century to the year 1810. If we were to reduce the prices of 1810, inflated by war influences, to those ruling in the preceding period, the difference would not be more than in the proportion of i to 2. The increase in the stock of the precious metals, employed as money, however, was as i to 11. Adam Smith shows in his table of prices of wheat that the prices were lower in the first half of the eighteenth century than at the end of the sixteenth and during the seventeenth century. Tooke, in his examination as to the History of Prices covering the period from 1793 to 1839, comes to the con- clusion "that the alterations of prices originated and mainly proceeded from alterations in circumstances distinctly af- fecting commodities, and not in the quantity of money." An examination of the facts has always made the point clear enough. And it is not a very encouraging sign of the progress of economic thought that every generation has to fight the battle over again. We can combat these ever-recurring aberrations only by fixing the attention of the speculative mind upon the main facts, and this we can accomplish only by strictly pursuing the historic method, of inquiry. 26 MONEY AND PRICES. We shall therefore give a more exhaustive treatment to this part of our discourse later on, and examine first the claim that the fall in the price of silver is due to the change in the ratio of the outputs of gold and silver. The Relative Output of Gold and Silver. Much is made by the bimetallists of Europe and by the silver-men of America of the demonetization of silver by the commercial nations of the world. It is treated as an injury done to the common people. Reversely it is made to appear that, if remonetization could be accom- plished, it would work a miracle in curing the evils the body politic is suffering from. Manchester expects a never-ending demand for its cottons at highly remunera- tive prices. The territorial lords of Germany promise their tenants and the agriculturists prosperous times, high prices, good wages and (possibly) good crops. Our own advocates of " Free Coinage " expect and promise no less. But it seems that in the discussions concerning the alleged conspiracy of the " money power," against " the people," in which it is claimed that through the degra- dation of silver the people are discriminated against, the positions of the two money metals are not properly understood, or at least the inquiries neglect to exhaust the subject. The relative positions in different periods duly considered would demonstrate the correctness of what I have endeavored to show, namely : that the fall in the price of commodities is one thing and the fall in the price of silver quite another, and that the two stand in but very remote relation to each other. It is maintained that the decreased output of gold since 1875, as compared with silver, has caused the depreciation of silver. As in the question of the fall in prices so in the com- QUANTITY RELATIONS. 2/ parison of output of the two metals, the discussions barely touch a longer period than that covered by the last two decades. But in order to have a clear survey of the field, we have to go back to the position which the two metals held to each other up to 1 850, and then consider what it lias become since. We shall see then that the deprecia- tion of silver is due to natural and very powerful eco- nomic agencies, though different from those usually assumed. We find that in the whole period preceding 1850, the production of silver had in value constantly and ■continuously been far in excess of that of gold. It is esti- mated by competent authority that in the early years of the present century there were thirty-three tons of silver in the world to one of gold. If the price of silver were determined by ratio or quantity, the price ratio would have been in the neighborhood of 33 to i, instead of \^\ to I, the then existing ratio. As regards the production of the two metals, Alexan- der von Humboldt, who had good opportunities for gath- ering information on the spot, estimates the product of the American mines from their discovery down to the year 1803 at 51 times as much silver as gold. In- cluding all the known mines of the world gives the ratio of 45 to I. (See Humboldt, Essai Politique sur le Royaume de la Nouvelle Espagne) The quantities of gold to silver were from the time of the opening of the silver mines of Potosi, i.e., 1545, in proportion of about 3 gold to 97 of silver as the average of the 300 years. In the periods named here below the proportions average as follows in quantitative output : Gold, Silver. Per cent. Per cent. 1493-1600 2. 9 97.1 160I-17OO 2.4 97.6 1781-182O 2.1 97.9 1821-1840 3.2 98.6 28 MONEY AND PRICES. As can be seen this gives a ratio varying from 30 to 45 to I, if these great time divisions are taken into view. Within these wider divisions variations of far greater ex- tent occurred. At no time, however, did the quantity-relation deter- mine the value. From 1492 to 1520 the output averaged 5800 kilos gold and 47,000 kilos silver, which is about i to 8. The commercial ratio then was about i to 11. From 1 52 1 to 1544 the output was 7160 kilos gold to 90,200 silver, or a change to i to 12^, without changing the ratio of the commercial values of the two metals. The discovery of the mines of Potosi in 1545 and of Guanajuato in 1556, changed the quantity-relation to an extraordinary degree without at all affecting the value of silver for fifty years. ANNUAL AVERAGE OF OUTPUT OF GOLD AND SILVER IN KILOS, THE RATIO OF PRODUCTION, AND THE COMMERCIAL RATIO. Period, I492-1520 1521-1544 1545-I560 1 561-1580 1581-160O 1601-1620 1621-1640 164I-1660 1661-1680 1681-1700 1 701-1720 I 721-1760 I761-1780 1781-1820 1821-1840 1841-1850 185I-1860 1861-1870 1871-1875 1876-1880 1881-1885 Production of Gold. Kilos. 5,800 7,160 8,510 6,840 7,380 8,520 8,300 8,770 9,260 10,765 12,820 21,850 20,705 15,660 17.250 54,759 200,500 195,000 173,904 172,414 149,137 Production of Silver. Kilos. 47,000 90,200 311,600 299,500 418,900 422,900 393,600 366,300 337,000 341,900 355,600 482,000 652,740 771,000 528,000 780,415 895,000 1,220,000 1,969,425 2,450,252 2,861,700 — Proportion i Gold to — Silver, 8 12J 36I 44 56f 48I 47i 4if 36i 3if 28 22 3ii 49 30| I4i 44 "^^ I4i •9i Commercial Ratio.* 10.74 11.25 11.30 11.50 11.80 12.25 14. 14.50 15.00 15.00 15.20 15.00 14.60- 15.50 15.75 15.83 15.40 15.50 J5-97 17.81 >S.f,3 * From Soelbeer's Materialicti. QUANTITY NOT AFFECTING PRICES. 29 The annexed table shows more closely the variations in quantity-relations, and the steadiness of values during long periods. A great revolution in relative output is ushered in with "the discovery of the gold fields of America. The tables are suddenly reversed. In the thirty years following 1850 as much gold was produced as in the 357 years beginning with 1492, and enough in addition to nearly double the gold finds of the two first centuries after the discovery of America. The ratio by quantity for the decade 1851-60 was i gold to 4^ silver; for 1861-70 it was i to 6J ; and for 1871-80, when gold production receded again, it still averaged i to I2|, as against i to 33, and even i to 56 in the times previous to the large gold discoveries. Still the price relations of the two metals did not change perceptibly.* The ratio of value was nearly the same the beginning of the seventeenth century as at the end of the fifteenth, although the production of silver had risen from 8 (gold being i) to 56- This ratio decreased gradually and reached 22 (to i of gold) in 1760. But the price of silver, * The average London price ol silver in pence per ounce and the ratio of silver stood as follows under all these violent changes : Quantities. Price of Silver per ounce. Ratio. A verage. Gold. Silver. Per cent. Per cent. 1831 to 1840 59f 15-75 3-3 96.7 1841 to 1850 59tV 15.83 6.6 93-4 1851 to i860 61J 15.35 l8.3 81.7 i86l to 1865 6ii 15.40 14.4 85.6 1866 to 1870 6oi 15-55 12.7 87-3 1871 to 1875 S9A 15.97 8.1 91-9 1876 to 1880 52 1 17.81 6.6 93-4 l88l to 1885 50 18.63 5. 95- 30 MONEY AND PRICES, which had commenced to decline in the beginning of the seventeenth century, was not raised by this decrease. Quite the reverse. In 1600 about twelve ounces of silver were required to buy an ounce of gold ; in 1760 it took fifteen ounces. Neither does the rising ratio of produc- tion up to 1820 have much effect on the price. From 1780 to 1820 we have an annual average of 49 to i again. But the price does not change more than a fraction. We can get perhaps a better conception of the indiffer- ence of the price of silver to the quantitative changes in the two metals, which took place during the three decades succeeding the discovery of the California gold fields,, when we compare the output by values. Up to 1840 the output had been : In Gold. In Silver. ;f5go.ooo,ooo ;^i, 361, 000,000 In 1880 the totals stood : Relation of Gold to Silver — . I: 2.31 ;^I, 454, 000,000 ;£■!, 789,000,000 I: 1.23 There was but half as much silver in the world, in rela- tion to gold, when the decline in the price of silver became a prominent feature in the financial history of the world, as in the first half of the century. Since then the out- put has been : In Gold. In Silver. Relation of Gold, to Silver. From 1881-1888 " 1889-1894 148,000,000 176,000,000 154,000,000 205,000,000 1:1.04 1:1.16 " 1881-1894 Adding, up to 1880. . . . 324,000,000 1,454,000,000 359,000,000 1,789,000,000 1:1.10 1:1.20 Gives a grand total of. . As against 1850 of 1,778,000,000 667,000,000 2,148,000,000 1,428,000,900 1:2.14 Consequently 1850 to 1894, added 1, HI, 000,000 720,000,000 1:0.65 ALTERED RELATIONS. 3 1 In the last 45 years 166 per cent, has been added ta the gold product of 357 years and only 50 per cent, to the silver product, which was then, at the time of its highest value, more than twice as great in proportion to gold as now, the time of its lowest value. If the relative quantities of the two metals produced determined the value, then the price of silver ought now to be nearly double what it was worth in 1850. Being worth 6od. then, it ought to be worth 1 10^. now. But in fact, it had gone down to 38^. before the closing of the India mint, and had since this event further declined to a price less than 301/. the ounce. The Real Cause of the Decline in the Price of Silver. The question, Why has silver fallen so low in price ? finds answer by bimetallists in what they call, the conspiracy to demonetize silver, begun and directed by England, and now followed by all the leading commercial nations. They say : If all nations would agree to the free coinage of silver at a certain ratio, then silver would command the full value it held before the decline. Mr. de Cernuschi has even supplied the vocabulary with the necessary " scientific " terms. " Centripoise " and " centrivale " are to express the two values — the value determined by the economic conditions and the value given by the govern- ment stamp upon coin. And our own bimetallists go so far even as to say that America can give this higher value to a depreciated commodity single-handed, by saying this or that piece of silver is a dollar, when its real value in the markets of the world is but 60, 50, or 45 cents, as has been the case a short time ago. We may ask in return : Why do all other nations with- draw their support from silver? 32 MONEY AND PRICES. If the extreme changes in the rate of production (com- paring the time prior to the new gold finds, and the period ■of these great gold discoveries) did not change the value of ratio, it is safe to ask why should silver decline in price now when the proportionate production of silver is but even with that of gold, and the output of the latter" exceeds in quantity everything the world has ever seen. The answer is here. If we take the ratio of production to represent also the relative quantities in existence at the ■different periods named, then we have for 1850 for every ■dollar's worth of gold about two and one eighth dollars' worth of silver. Much of the silver produced up to then had become absorbed in the arts, sent to the East, or otherwise removed from use. But so had much of the gold. The amounts of gold and silver money actually in ■existence are estimated by competent authorities for 1800 as ;£■ 1 20,000,000 gold and .£'260,000,000 silver ; for 1848, as ;£■ 1 50,000,000 of gold and .£'280,000,000 silver. But in 1880, ;£ 700,000,000 of gold and .£"490,000,000 of silver were in existence, according to the best authorities. Neu- man-Spallart estimates the gold money for 1889 as about ;£8oo,ooo,ooo, and the silver money of about the same value. Since then little has changed in the relative posi- tions of supply in the two metals. We have nearly two •dollars of gold money in existence for every dollar of the two metals combined, circulating in 1848. In fact, silver was scarce as a money metal, relatively more :so even than gold, because of the more general demand for it. It was the circulating medium. Upon the conti- nent of Europe the idea of money was closely associated with silver, but not with gold. The French " argent " means silver and money. In German, " versilbern " is to the present day equivalent to " turning into cash." The INCREASING GOLD SUPPLY. 33 language of the people is the storeroom of history. Silver was the circulating medium, and the standard. The poorer and the more backward the nations, the bulkier the substance of their circulating medium. Even copper coin was an important element with the people of Con- tinental Europe in the earlier part of this century, but Silver was the Money used in business transactions. The Southern German states had no gold coins of their own before the forma- tion of the new Empire. From 1831 to 1840 only £2%,- 000,000 of gold was produced and ;i^52,ooo,ooo of silver. This is still nearly two to one of silver to gold. But from 1850 to 1880 the very opposite current ap- peared in regard to production. The world produced more than two dollars' worth of gold for every dollar's worth of silver. The increasing output of silver for a time, seemed to change the general relations. But now for several years again the output of gold is in value considerably above that of silver, if we take the commercial value. The new gold finds, the introduction of deep mining, and the ap- plication of capitalistic and, therefore, scientific methods, where formerly only crude, individualistic exploitation prevailed, seem to readily fill the demand. The world's output of 1894 in gold is estimated at $175,000,000, the highest average on record. The quinquennial period of 1851-1860 gives only an annual average of $140,000,000. The " Witwatersrand " mines in South Africa have developed from 494,869 ounces in 1890, as follows : 1891 729,238 ounces. 1892 1,210,868 " 1893 1,478,473 " 1894 2,024.159 " 3 34 MONEY AND PRICES. as reported by the Economist of January 12, 1895. The last year's figure is equal to two thirds of the American annual average for 1851-55. Gold production has added to the supplies of the world in the precious metals since 1850 the sum of ;£'i,iii,ooo,ocx). Silver production only ;£'720,ooo,ooo (silver taken at the coinage rate of 15^ to i). Silver, being relatively scarcer than gold, would easily maintain its former higher price, were its serviceability as great in the coinages of the world as in the past. But it is not the relatively greater or smaller quantity of the white metal in existence which has cast it from its position, but the abundance of gold brought into use since 1848. In spite of all the endeavors to prove the contrary, there seems to be enough gold in existence to answer the purposes of exchange. True, there is always a very strenuous endeavor to obtain an increase in the stocks of gold. But gold seems never to be wanting, except in times of scare and waning confidence in the stability of financial conditions, such as produced the panic of 1893. But here come other factors in view. The use of money is not as great as it has been in trade. Of the thousand million dollars of coined money (gold and silver), very little appears in trade in America. With the progress of civilization and its concomitants, industrial progress and international confidence and good-will, the importance of metallic money as a means of payment is becoming smaller and smaller. Metal money is gradually being superseded by less expensive substitutes. In the ad- vanced countries silver has outrun its usefulness. The mere fact of its cumbersome nature would declare against it as the standard money of the commercial world. PRIMITIVE CONDITIONS. 35 The History of the Standards of Value. The history of the development of commerce among nations, from the ancient to the present world, shows that the changes of standard of value mark the progress from a lower state of civilization to a higher one. For the Germanic nations as well as for the Romans, we have it recorded in the name that their earliest measure of value was cattle. " Fee," " feoh," " vieh," the same as " pecus," means " pecunia," money (it is used so in old German chronicles), as " peculia," means peculiar, individual prop- erty, as distinguished from landed property, which among all primitive nations is property of the community.* This is true not alone among the Indo-Germanic races, but among nations of the most varied types. The hold- ing and cultivation of land in common was found among the American Indians, among the Malays, among the ar- chaic'races which occupied Italy before the Roman period, as well as among the Slavs, the Chinese, and Hindoos.! * How deep the commonalty of land and its cultivation in common was rooted in the German people is proved by the fact that even in the towns the lands were so held by the burghers. The free towns, the great commer- cial emporiums of the middle ages, held large tracts of land, and a large part of their population, in many the larger part, obtained their living from the land. In Frankfort-on-the-Main the burghers had common rights not alone in the grazing lands and forests but also in the fields, which, as we read in an ordinance of the town council of the year 1504, had to lie fallow every third year. " But not alone concerning the common mark, but also concerning private holdings in many towns, the town councils ordered how to cultivate the land, how to plow and to till, how to cultivate the fallow, to plant trees, cut, tie, and trim the vines, prop them, and the like.'' See G. L. von Maurer, Geschichte des Staedte Verfassung in Deutschland ; also Johannes Janssen, Geschichte des deutschen Volkes bei dem Ausgang des Mii- ielaliers, vol. I. \ See, for full particulars, 6mile de Laveleye's important work, De la Propri^td et des ses Formes Primitives, Also the works of Sir Henry Maine, Village Communities, Ancient Law, etc. 36 MONEY AND PRICES. The traces of this common property in land are found to the present day in Germany and in Switzerland, in the still existing " Gemeindeacker," " Gemeindeweide," and " Gemeindeforst " (the communal acre, the communal pasture, and the communal forest). In this the present writer remembers from his boyhood the burghers of his own town (Oppenheim on the Rhine) to have had their allot- ments. The existence of a peculium implies that a step forward has been made in civilization. It implies that trade of a certain kind is possible, that interchangeable values and commodities are created. Now it is quite evident that animals of the size and value even of the inferior kinds bred on the grazing lands and in the forests of ancient Germany or other undeveloped countries * are not a sort of money taken to fairs and markets to be ex- changed for whatever could be had from the conflux of itinerant or post traders of the Roman settlements.f But from the records in the ancient laws we can easily see that this " pecunia " was used as a money of account to compute values by and effect settlements on. When the migration of nations had merged into a set- tled state on the territories which the European nations now occupy, the conquerors adopted the garb of the * We know that cattle were used in the same sense as money, or as stand- ard of payment by the old Persians, by the Homeric Greeks, and the fact that the picture of an ox is found on the coins of pre-Solonic Athens is a sure indication that tradition still connected the idea of money with cattle. " Fe " (the same as " Vieh," the German for cattle) is still to-day in Iceland the expression equivalent with property or money. f Commerce goes back to the very earliest periods. Traces of an active trade are found in places where no Roman settlements were ever made. Important contributions to our knowledge on this subject are made by Pro- fessor Dr. J. Schneider, from his own personal examinations, Die alien Heer- und Handelswege der Germanen, Roemer und Franken im deulschen Reiche. MONETARY SYSTEM OF THE FRANKS. 37 civilization which they had overthrown, and, of course, the monetary system as part of it. That the Salian Franks, who had conquered Gaul had in use the Roman monetary system is proved by the many gold coins in our collections, bearing the Merovingian stamp, which, in grain and fineness, as well as in general type, fully correspond with the contemporary imperial solidus. " As the Roman pound of gold weighed about 327 grammes, the metal contained in the solidus was 4^ grammes." * The pound was 72 solidi of the exact weight of 4.55 grammes each, making the pound 327 grammes. The German nations on the right bank of the Rhine, as evidenced by the Ripuarian, Bajuvarian, and other Ger- man Codici, and later on, the Capitularies of the Carlo- vingian kings, adopted the Prankish money standard at a period quite too undeveloped to allow us to suppose that an actual monetary trafific could have existed. " The importance of the monetary system of that time does not lie in its employment as a means of payment and exchange, but in its application to the calculation of the values of marketable commodities." ' ' At least with the tribes of interior Germany, money was certainly for a long period only money of account, explained by the fact that commercial transactions, which require metal money, were of too rare an occurrence to call forth an active demand for coins. By this almost exclusive use of money as an accounting medium, the peculiar system of determining values which we find among the Germans becomes comprehensible." \ Trading was done in kind, as up to a comparatively re- cent period, taxes, rents, and feudal dues were paid in produce. Cattle formed the basis for computation. The " Wergeld," the compensation for murder, theft, or other injuries, is stipulated in heads of cattle in the codes of the * See Inama-Sternegg, Deutsche Wirthschaftsgeschichte bis zum Schluss der Karolingerzeit, vol. i. f Inama-Sternegg, Ibid. 38 MONEY AND PRICES. more ancient times. Only after contact with the Prank- ish monarchies, the Roman money takes the place of cat- tle in legal computations. Till we come to a regular commercial trading system, in which money becomes the means of payment, a money economy, many a century has.to elapse from the time we are speaking of here. In the periods of transition from a system of barter and payment in kind to a money economy, the cheaper, more common metals, are used. Their use denotes a low state of commercial and industrial development. The iron money of Sparta, the copper as of Rome, the copper cur- rencies of the middle-age period (this comprises very re- cent periods, so far as the smaller traffic and wage-pay- ments go) of modern Europe, all denote a similar state of development, or rather undevelopment. The silver stand- ard took the place of copper with the rise and extension of trade. Rome's copper currency seems to have held itself till the middle of the third century B.C., as long as Rome contented itself with extending its dominion over Italy. It put into its treasury from the triumph over the Samnites (293 B.C.) 2,000,000 pounds of copper ; in silver, only 1330 pounds. In 194 B.C., shortly before the first Punic war, it adopted the silver standard. But with the beginning of the imperium under Caesar and Pompey, the gold standard appears. With the great rise of power, practically extending over the civilized world, directing the world's economic and political pulsation, the more efficient gold standard had to take the place of the cumbersome white metal. The solidus replaces the de- narius, just as the denarius replaced the as, all in their proper time and when their mission had been fulfilled. Good enough for a provincial or even an isolated national existence, silver was found insufficient for a world-empire. PROGRESSIVE MONEY METALS. 39 And what is trade but man grasping the poles in his am- bition ! Macedonia began coining gold as soon as its ambition reached beyond its own confines. And, in fact, we find this the case with all the ancient monarchies. The wide circulation of gold coins makes it imperative to preserve not alone this standard, but also the efifigy of the ruler whose name has gone farthest among the civil- ized and semi-civilized nations reached by commerce. The Persian Darius and the Macedonian Philip and Alex- ander pieces circulated centuries after the periods of these great rulers, and were found far beyond the limits of their •empires, an advantage not shared by coins subject to frequent changes. Stability in fineness, weight, shape, and device is essential to a commodity which, as money, is to circulate without question among heterogeneous peoples. Egypt and the Saracen states in the middle ages, in the period of their greatest power, had the gold standard., The circulation of their coins seems to have extended pretty far over Europe, as is attested by the fact {see Falke, Geschichte des deutschen Handels) * that the Numismatic Cabinet at Stockholm contains 20,000 Arabic gold coins. And gold coins were not circulated so much as they were hoarded among the barbarous nations ■of Europe, even after trade and industry had developed. 'Copper and silver were with them the paying mediums, sufficient for their stage of civilization. It is no idle fancy that ascribed magic qualities to gold in the middle ages. The magic lay in the difficulty of realization, of posses- sion. He who could make gold, possessed the elixir of life : the elixir of life of trade. It is therefore natural that ■what nations had found this elixir, took to a gold cur- * See Roscher, Grundlagen der National Oekonomie, vol. iii., §. 47. 40 MONEY AND PRICES. rency because none other possessed the quality of insuring a continuous flow of life to the trade extending over the countries of the world. You cannot carry silver from Bagdad to Paris or Lyons, or from Cordova to Hydera- bad, or from Florence to Novgorod, or from Bruges to Constantinople, in quantities sufficient to make a trade worth the trouble, or to use it whenever you have to make money payment. The bulk is sufficient to forbid large transactions, especially in periods like the middle ages, with roads and means of travel alike defective and full of risk to life and property. Well adapted for provincial and interior trading, silver becomes an awkward medium to do service in the markets of the world. Wherever and whenever it was the standard of payment, it marks a period of " medio evo," a middle age, a period of unripeness, of exclusive provincialism and separateness. When the Italian cities had grown to independence and thrown off the yoke of feudalism, they quickly stepped in to take the reins of the world's trade from the fading Califate and decaying Byzantium, and followed their lead in adopting the gold standard. Venice, Genoa, Florence, coined gold and made their payments on the gold standard as far back as the thirteenth century. The gold florin, the coin of Florence, soon became the com- mercial money of Europe,* on account of its widely known * Sismondi is authority for the statement that the gold florin of Florence, dating from the year 1252, never changed its coin^e weight, while the sil- ver lira underwent very great changes. It was coined at first especially for the Mohammedan countries, but soon became the standard money for inter- national trading. The same can be said of the gold coins of other countries, which were hardly used at home, but circulated abroad, as the French gold coins up to 1748 in Switzerland, Germany, and Italy, and the Dutch ducats. No foreign coins could circulate unless they had acquired and maintained a high reputation for honesty and the veracity of the legend. Unchallenged, circulation in foreign countries is the best test of the full value of coins. SILVER HIGHLY VALUED. 4 1 high character ; and the Florentine traders became the bankers of the world. Without a gold currency they would have remained the provincial traders which the de- scendants of the Medici, the Pazzi, the Arid!, became again after the spirit that built the cities on the Arno and the Po had taken its flight. Another reason of the great preference given to gold, beside its smaller bulk, i. e., higher value, is, that the coins cannot so easily be tam- pered with. Without a staple currency trading communi- ties cannot maintain their positions. As far back as the fourteenth century, the commercial cities of Germany made bills payable in gold, and in the seventeenth cen- tury the rule had wellnigh been universally adopted all over Europe. The saying of the elder Mirabeau in La Monarchie Prussienne, " One can not gain, one can only steal, a profit from the coinage," is very appropriate when we regard the different games that were at different times played with the currencies of Europe. It is superfluous to explain in words why gold is less subject to the invidi- ous attempts. It suffices to say that it has at all times been the safe basis upon which the world's commerce has rested, and therefore this brief historic sketch may not be without its useful application to the conditions now sur- rounding us. It may also be of use to call attention to the fact that the high valuation of silver, as compared with gold, has been usual with countries in a backward state, and that, reversely, a lower valuation is the sign of a more advanced civilization. This, to a very large extent, is owing to the fact that, in undeveloped countries, silver is the chief cur- rency, and therefore in constant demand, on account of the limited monetary transactions. It is the economic 42 MONEY AND PRICES. and industrial condition which governs the demand, and not the fiat of legislators and rulers. Tacitus says that the German people had neither silver nor gold previous to their contact with Rome. Of those who had entered into relations with the Roman settle- ments he adds : " They aim more after silver than gold, not from preference, but because a number of silver pieces ■are more convenient in making a trade in promiscuous and inferior articles of merchandise." (Tacitus, Germa- nia, ch., v.) According to Roscher, in the time of Nadir Shah (1750), the Kurds gave weight for weight, silver for gold. In India, at the time of Alexander's invasion, silver to gold was valued as i to 2. But in consequence of the widening of commerce, brought on by it, the ratio soon reached i to 5 or 6.* In Athens, when she was at the zenith of her glory and power, the ratio, according to Herodotus, was 13 to i. The Rome of the undeveloped era, in 189 B.C., left it optional with the .(Eolians to pay their tribute in silver or gold, at the weight ratio of 10 to I. In the middle ages silver had a much higher value * " When Vasco da Gama rounded the Cape, the new-comers first plundered the coasts ; but finding that their brigandage aroused sufficient resistance to render it dangerous, they began to trade, at first by exchanging their stolen silver for gold at the Indian ratio of 6 to 8 for i. In Bombay, in 1774, the legal ratio was nearly 15 to i ; in 1800 = 15 to i. " In Kordofan, between Darfoor and the Nile, thirty years ago, the trade in gold was monopolized by the Pasha, but gold was sold clandestinely at the rate of $8 in silver for 430 grains of fine gold. In Shoa, nine silver dollars were paid per ounce troy of fine gold." (The ounce of gold is worth nearly $20 in coinage value of silver.) — Alexander Del Mar, A History of Money. Quite in keeping with these facts may be quoted the statement from Ritter's Erdkunde that in Africa gold stands the lower, compared to silver, the farther the country is from contact with the civilized world. PRIMITIVE CIVILIZATIONS. 43 compared with gold than in the later centuries. In the ■Carlovingian period, the Roman ratio of 12 to i still pre- vailed. But this soon gave way to a higher value of silver. Besides this, the ratio varied yearly from one country to another. In England, from 1104 to 1227 A.D., according to Th. Rogers, the ratio was 9 to i ; in 1257 I find it quoted at 9.10 to i.* In 1292 it is quoted as 12.6 of silver to I of gold, f But it has to be remembered that this is the price paid for gold by the goldsmith. Gold had no •circulation as money. Henry III., in 1257, struck the first English gold coins, the gold pennies. He could not .get them into circulation despite his stringent ordinances that made them legal tenders. England's commerce was in too backward a state to require such costly currency. A hundred years later, in 1344, when England had be- come somewhat more progressive, Edward III. had no •difficulty in getting gold coins, the rose nobles, into circu- lation. In Florence the relation of silver to gold in the coinage was as 10^ and 11 to i, with some extreme variations in- terspersed, in the long period of 250 years, from 1252 to the end of the fifteenth century. In Germany, in the limited transactions in which gold and silver came into play, from the middle of the eleventh to the middle of the thirteenth century, the ratio touched .as low as 8 and ran as high as 11 and 12 to 1.% In the * See W. A. Shaw, The History of Currency. t In 1344 we find it again at 11.04 ; in 1346 at 11.50 ; in 1353 at 11. 15 ; in 1412 at 10.33, and in 1464 at II. 15. % Inama-Stemegg, Deutsche Wirthschaftsgeschichte, gives a number of payments made in gold and in silver as well as ordinances, making it com- pulsory to pay partly in gold and partly in silver. The transactions as well as the agreements are all based on weight, and, consequently, by stating the relative quantities we are informed how one metal was valued by another 44 MONEY AND PRICES. beginning of the seventeenth century the ratio was 12. i5 to I. In Flanders, however, it was 13.22, and in England 13.5 to I. No common ratio existed, and with one country's hand on the throat of another, each imagining its salvation depending on the spoiling of the other, none could very well exist. A common ratio means mutual confidence and good-will, and this was not a distinguishing feature of the statecraft of the time. These differences gave cause to very grave disturbances in the monetary situa- tion. The exportation of the undervalued metal was a natural consequence, endeavored to be prevented by summary laws. It availed little that the hangman occa- sionally exercised his office. The true remedy of an inter- national agreement or of a single standard was not even within the comprehension of the times. The frequent alterations in the coins and declarations of their values- were endeavors to find correctives for evils which were too patent not to be made the subject of remedial action. That these conditions resulted in curtailing the circulation still more than was occasioned by the general monetary situation of the times, is too evident to need more than passing mention. in different times and places. Occasionally the ratio of 12 to i is met with,, but generally the ratio of 10 to I is found in computations of the tenth, eleventh, and twelfth centuries, dealing with the two metals. CHAPTER III. The Demonetization of Silver a Result of Economic Development. — The Positions of the Two Metals : Past, Present, and Prospective. — The Real Standard of Payment not in Coins. — The Money of Account the Actual Measure of Payment. — Maintains itself Independently. Gold and Silver. Production and its Cost. Whatever the influence of the cost of production on the supply of a commodity in general, it cannot at all be said that it would be determining in regard to the produc- tion of silver and gold because of the generally overlooked quantity, the adventurous spirit in search after gain. The production of gold has, on the whole, hardly paid the average of wages ruling in Australia and in America. The fortunes made by the few are balanced by the disappoint- ment of by far the greater number. The hope of good luck keeps up the search even in the face of loss of savings brought from other occupations into the mining camp. Gold mining, which receives the greatest yield from in- dividual effort, keeps all the adventurous faculties keenly on the scent. It has been added to largely of late by deep mining. From these combined sources larger and larger yields are flowing, sufficient to keep the reserves increasingly supplied, without subjecting the value to very great changes. The gold of the South African regions is mostly obtained from deep mining. These mines, only lately added to 45 46 MONEY AND PRICES. the fields of productiveness, yield now about one fourth of the annual output. Capital has largely come into play as. a factor, superseding in a sense the adventuring gold- digger. Under capitalistic exploitation abandoned fields, are recovered, and in places where layers are suspected, shafts are sunk and gold is obtained in large and paying quantities. Under these conditions America is also yield- ing considerably increased quantities. The quantity for 1894 is estimated at 42 million dollars, while in 1893 the yield was but 36 millions. The last six years show the gold product of the world to have been : World's Product of Gold. Fine ounces. 1889 5,973,780 $123,489,200 1890 5,749,320 120,465,300 189I 6,320, 195 130,650,000 1892 7,077, 165 146,297,600 1893 7,605,904 157,228,100 1894* 8,420,000 174,000,000 The heaviest output of gold ever reached before this', new era was during the five years 1856-60. Then the annual average was 6,486,262 ounces, $135,000,000. The present output overtops this average by about 30 per cent. The average for the five years ending with 1894, is. larger by nearly 10 per cent, than that of the five years. 1856-60. It is impossible to say what the future of gold mining will be. One thing, however, is certain, that capital sunk in an enterprise cannot be withdrawn at will. A gold digger carries his capital on his back and his machinery on * Estimated, PROSPECT OF GOLD PRODUCTION. 47 his shoulders. He can transfer these easily to any locality, and, if the new field does not yield more than the one he abandoned, he can bury his disappointment in a change of occupation. But shafts have to remain where they are sunk, and only lead to further investment until the last ton of quartz is extracted and the last dollar is expended and the shares are extinguished, whatever the promises of the prospectus. The expectant Midas is gulled over and over again. But whether he falls with the thousands buried on the road of expectation or wins a prize in the great lottery, the gold itself shows no trace of the emo- tions that its birth evokes. It takes its place in the money- stocks of the world, whether the cost of production per ounce is ;^3 x^s. lod. (the mint price), £1, or £'/. From what we know of the European gold finds, we can ven- ture to say that rivers and valleys are by no means exhausted treasure stores. The best authorities hold that, ' ' By the disintegration and crumbling away of the rocks which contain the auriferous veins, the contents of these are swept down to lower levels, and the gold by its density always seeks the lowest places among the moving materials. The auriferous gravel deposits in alluvial formations, the golden sands of the rivers are thus produced, and have been gathering for long ages past, and forming deposits out of reach of such agencies. This process of disintegration has certainly been going on some hundreds of thousands of years, and the river beds and valleys have been depositories of gold from time immemorial. But the search after gold dates but a few thousand years back. The gold hunters never went deeper than the surface. As a fact, Germany and Austria, the oldest gold pro- ducing countries of Europe, furnish to-day not less than $3,000,000 of wash gold annually. This is not a very 48 MONEY AND PRICES. great sum compared with the present (1894) product of some $175,000,000. But it is an important figure when we consider that the annual average production from 1492 to 1520, according to Soetbeer, did not exceed the sum of $4,000,000. The average for the period beginning with 1521 and ending with the sixteenth century was but $5,000,000 a year. The greater part of this came from the New World. The auriferous rivers of Germany and Austria-Hungary produce therefore from three fourths to "three fifths as much gold at present as was supplied by the whole world (annually) more than a century after the discovery of America. More readily accessible and economically more produc- tive means may be found in the newer development in the gold-mining industry, but the existence of gold in inex- haustible quantities is more than conjecture. If man does not grow too wise to waste his energies on the finding of a symbol for wealth, and does not confine himself to providing the articles which diffuse comfort and well-being, settling accounts by means less wasteful than the present, the search for gold need not certainly be abandoned because of the exhaustion of the stores of mother earth. The Silver Product. Silver is not found in alluvial deposits. It can only be obtained by mining, and the investment of capital becomes therefore a necessity. The old process of separating the metal in the ore was by smelting. The Peruvians and Mexicans were acquainted with this method and employed portable furnaces. Scattered over a great surface on account of the difficulty in obtaining fuel, the fires blaz- SILVER PRODUCTION. 49 ing in Peru attracted the attention of the Spaniards and puzzled them. The discovery of the silver mines of Guanajuato and of Potosi would not have benefited the world much had it not been for the timely discovery by Medina in 1557 of the process of amalgamation. The difificulty of obtaining fuel at a convenient distance from the richer mines, mostly situated in high altitudes, would have made the employment of capital too hazardous. The easier supply of mercury at a reduced cost helped not a little in promoting the progressive yield of silver.* The cost of obtaining the metal even by the method ■of amalgamation was very high. The working system was as crude as it possibly could be. The description which Alexander von Humboldt gives, leaves it in doubt whether any progress had been made in the two hundred and fifty years from the opening of the mines to the time of his visit. An idea of the difference in cost of production, past and * The Almaden mines, mortgaged to and controlled by the Fuggers from 1525 to 1645, were more fully exploited and produced in greater abundance. Under free competition with the quicksilver from the Istrian mines a much lower price could have been obtained. But under the Spanish government few of nature's gifts were permitted to become unalloyed blessings. The court of Madrid as late as the end of the last century reserved to itself the exclusive right of selling mercury, made its own price, and allowed only a certain quantity of foreign mercury to be imported. Possibly to secure to himself a part of the profits from so promising a monopoly, " the minister, Don Antonio Valdes, conceived the whimsical and audacious project of regulating from Madrid the distribution of mercury among the different mines of Mexico " f ; and for the purpose of its execution he ordered the -viceroy in 1789 to draw up statistical tables of all the mines of New Spain, and to send to Europe specimens of the veins which were worked. Of course the project failed because the viceroy found in the slow Spanish method a safe ally. " Not a single specimen was ever sent to Madrid." % f Alexander von Humboldt, Essai Politique sur le Royaume de la Nouvelle Espa^e. ,t Ibid. 4 50 MONEY AND PRICES. present, may be formed when we notice the process by which the bulk of the product was obtained in the richest silver mines of the world, as found in operation by Alex- ander von Humboldt, and in operation up to our time in all mines except those operated by new capital companies. ' ' Subterranean geometry was entirely neglected and no plans were in existence of the works already executed. Two works in that labyrinth of cross galleries and interior shafts may happen to be very near one another, without its being possible to perceive it. Hence the impossibility of intro- ducing, in the actual state of most of the mines of Mexico, wheeling by means of barrows or dogs, and an economic disposition of the places of assemblage. A miner brought up in the mines of Freiberg, and accustomed to see so many ingenious means of conveyance practised, can hardly conceive that in the Spanish colonies, where the poverty of the ores is united to a great abundance of them, all the metal which is taken from the vein should be carried on the backs of men. The Indian tenateros, who may be con- sidered as the beasts of burden of the Mexican mines, remain loaded with a weight of from 225 to 350 pounds for a space of six hours. During this time they ascend and descend several thousand steps in pits of an inclination of 45°. In ascending the stairs they throw the body forward, supported on a staff, generally not more than three decimetres (about a foot) in length. They walk in a zigzag direction, because they have found from long experi- ence (as they affirm) that their respiration is less impeded when they traverse obliquely the current of air which enters the pits from without. '' Of no less crude a character was the system of draining- the mines. Instead of employing proper pumping appa- ratus they drew up the water in bags made of two cow hides sewed together, by ropes operated by horse or mule whimseys. The expense of all this was enormous, espe- cially as the bags, constantly rubbing against the shafts, had to be renewed every week. Speaking of the mine of the Count de Regla, Humboldt says that " the expense of these machines which drew up the water, not by means MODERN COST OF PRODUCTION. 51 of pumps, but by bags suspended on ropes, then amounted to more than 750,000 francs per annum." Equally wasteful was the system of extracting the sil- ver from the ore. More than half the mercury was found by Humboldt to be wasted in the crude process of amalga- mation employed. It is easy to estimate the difference in the cost of pro- duction between such barbarous working methods and those of the present time. It is not necessary to describe the difference. The reader is sufficiently familiarized with the progress constantly made in mining engineering. Drawing his attention to the methods of former times will be sufficient to prepare his mind for the great revo- lution in the price of silver caused by the changed methods of production. The Declining Cost of Production and Rising Output of Silver. Silver is largely found in connection with other metals in the silver-bearing ores. The by-product is of consider- able value and with the present low cost of reduction, frequently pays the expense of mining and leaves the silver a profit to the mine owner. In his statement to the Royal Commission appointed to inquire into the recent changes in the value of the pre- cious metals, Professor Roberts Austen, chemist to the Royal Mint, gave the available information from all the silver-mining countries. He classifies silver production by the nature of the ores and the processes for reducing the metals. The latter are (i) From refining of native gold ; (2) Desilverization of lead ; (3) Desilverization of copper and 52 MONEY AND PRICES. cupriferous products ; and (4) Treatment of silver ores proper. The products and corresponding cost for the year 1883-4 (the full data ready at that time), were as follows : c ^' Fine silver Cost per ounce S«"'°" in ounces. fine. 1 508,000 OS. 2j of crowns by English writers at the close of the seven- teenth century.* The whole amount of coin required to- pay the balances, it is said, could not possibly have ex- ceeded a quarter of a million. Examples could be multiplied ad infinitum, were it necessary to more than touch upon the fact that many methods were in existence at early epochs by which com- mercial transactions on a large scale were made possible through credits and credit payments. When nations have come to the state of maturity in which the civilizing ties of commerce are knit, they usually find methods by which they can conduct and settle their transactions. Money is of immense value in spreading and facilitating commerce. But it must not be forgotten that its employment is a means and not an end. Neither must it be overlooked that the introduction of money as a means of effecting payments does not change the nature of trade. It remains an exchange of commodities all the same, whether a woollen manufacturer sells his woollens to a wool merchant in exchange for his wool, or whether he sells his woollens to a third party, who pays over to him the amount in money, and he takes that money and pays it over to the wool merchant in payment for his wool. The fairs were well calculated to bring about a system * Doubtlessly a somewhat exaggerated statement, but it indicates the: magnitude of the transactions covered by clearings. VARIETY OF MONEYS. 6 1 ■of commercial usages by which money payments were ■easily dispensed with, and the most simple and effective methods of payments, by transfers of debits and credits, ■could be employed. It did not at all interfere with the price of merchandise that no money was needed in trans- actions covering many millions on one clearing day. Indeed, it is doubtful whether these large transactions and clearings could have been effected with money. Money payments, if they had been possible then, con- sidering the limited quantity of circulating mediums, would have been a most difficult task, on account of the monetary situation. All the nations of Europe congre- gated at the fairs. Each had different coinage. The coins were often debased, clipped, sweated, or in other ways de- prived of part of their original metal value or weight. To do the examining and figuring of the values of the moneys thus presented for settling an account going into the thousands would have consumed many hours of most valuable time. Germany alone, with its many dozens of assorted states and moneys, not of the highest reputation at their best, would have offered insuperable difficulties.* We know^ * From my own experience I can speak of the labor entailed by a remittance forty years ago in Germany. To send a money package of a few hundred florins from Carlsruhe or Baden-Baden (where the moneys were still more varied) to Saxony, for instance, required the conversion of florins, and of half a dozen of the subsidiary coins of the South German monetary system into thalers, the monetary standard of North Germany. Then came the Austrian florin, the German kleinthaler, the kronenthaler, the conventions- thaler, the Brabanter' thaler, all different from the Prussian thaler. The franc and the five-franc piece had quite a circulation in that part of Ger- many, as well as the money of Switzerland. They were all included in the different statements that had to accompany the remittance. But these were .only the larger silver coins. Many five- and ten-florin rolls had to be made up of three- and six-kreutzer pieces — two and four cents respectively. These 62 MONEY AND PRICES. what the position of the English coins was toward the close of the seventeenth century, when the system de- scribed above was under its fullest development. The character of the moneys all through the six centuries, from the revival of the trading spirit, was never a very high one. They were subject to the rapacity of all the thieves, crowned and uncrowned, who preyed upon commerce,, and who knew of no better means of cancelling obligations than cutting down the value of the coins. To this ques- tion I shall return again. Here I allude to it only on ac- count of the necessary mention of the remedy which trade at an early time called to its aid to save itself from the destructive consequences of the constant depreciations and variations of the coins. had to be carefully counted, sorted, and packed. Many a spurious piece was apt to steal in if not carefully watched. The Coburger Ernst was mean enough to steal out of the six-kreutzer pieces enough silver to make it worth only one half the value expressed on its face. The dreibaetzner (i2kreu- tzers = 8 cents) and the sechsbaetzner (24kreutzers = i6 cents), in rolls of ten and twenty florins, were not insignificant parts of these mail remittances. The gold coins had to be handled in the same way. There were the fred- eric d'or, the louis- or napoleon d'or, the ducat of Austria, the five- and ten-florin piece, and several other gold coins, which went all in to the gen- eral column, and had to come out in the final summary as so many thalers, if going to a thaler country, or as so many florins if to a florin country. It is easy to imagine that so kaleidoscopic a currency gave quite a good schooling to the commercial aspirant charged with the duty of reducing the hetero- geneous elements to uniformity. But this was nothing compared to con- ditions existing before the establishment of the North-German and South- German coinage unions, which chaotic conditions will be dwelt upon in another place. That, under such conditions, the money-changer had a very prominent and lucrative position in the republic of commerce can well be understood. Many of the great banking houses of Frankfurt and other places of the present day were known in my time either actually or tradition- ally by that name. THE MONEY OF ACCOUNT. 63: The Money of Account. But merchants did not reckon by these debased coins,, but by the ideal money, /. e., the full value standard money, the money of account. Payments were made by computation of weight into the money of account. The price quotations of the past can be understood only on this well supported theory. This reduction of moneys to a common money of ac- count, and settling of accounts by transfers was first prac- tised in Europe by the Bank of Venice. Originated in 1 171, it was soon one of the great instruments of commerce of the Republic and of the trading world. Instead of money the bank used a substitute for money, the bank credit. Instead of the varying coins it had the constant money of account — the zecchino d'oro.* This was the standard of Venice, just as in the succeeding period the Florentine gold coin wast he standard of reckoning in all the money transactions of Europe. The fluctuations in the gold coins were slight, f but none at' all can occur in the uncoined money of account. It can easily be ima- gined what great advantage the system of paying in bank credits, at first forced upon the bank by circumstances, offered to the trading world of that time. The matter is of such importance at this juncture that I may be permitted to give a brief outline of the working * The zecchino, as well as the florin, follows the bezant, which again is the successor of the aureus of Rome. f Soetbeer, taking his information from a Florentine publication of 1765, gives the weight of the gold coin for 250 years as follows : 1252, 72 grains ; I2q6, 72 grains; 1324, 70J grains; 1345, 70J grains; 1375, yif grains; 1402, 68 grains; 1422, 7lf grains; 1460, 7if grains; 1462, 7if grains; 1464 to 1495, 72 grains (72 grains of Florence are equal to 53 grains English). •64 MONEY AND PRICES. ol this system of payment, from the pages of Mr. Stephen ■Colwell's volume, The Ways and Means of Payment (Philadelphia, i860): " It is worthy of remark that this very efficient mode of adjustment dis- covered and used largely at this early period in the history of commerce, was not dependent for its efficacy on the guarantee of the republic. The guaran- tee sprang out of the mode in which the bank originated : this convenient method of liquidation sprang from the use of this new substitute for money. " The coin in circulation in Venice was, in many respects, a nuisance of the most vexatious kind. It consisted not only of the variety which the mints of Italy at all times afforded, but of that vastly increased variety which ihad accumulated from the coinage of more than a century. Besides this multiplicity of the new and old coins of Italy, was the coinage of many coun- tries of the far East, with which Venice carried on a vast commerce. To make all the payments of the domestic and foreign trade of Venice in these ■coins, of different degrees of purity, and many of them much deteriorated by wear, required time, patience, and skill, which but few merchants could adequately command. The facilities offered by the government, through the tank, saved all this. The government took the coins one time for all, giv- ing therefor a corresponding credit in the bank ; and allowed the depositoi or lender to transfer this credit claim upon the republic in payment of his debt, in place of transferring or paying over the coin in cash payment. Whatever men can employ in payment of debts, they will be willing to receive in payment, and this independent of any legal compulsion. "Experience soon evinced the power and convenience of this mode of payment. The bank credits were divisible to every desirable degree, and they could be transferred with a readiness, speed, and safety, beyond all comparison, superior to any mode of paying in coin. The same sum or credit might be kept in such rapid circulation, as to effect an amount of pay- ments, in a specific time, far beyond any possible movement in coin. This rapidity became a great economy, for a much less sum of credit was made to effect a given amount of payments with far greater speed than could have heen attained with coin." The same writer in another place gives the following account of the superior character of this ideal money of the Republic as compared with the circulating mediums of payment, which in no country of Europe were so care- THE BANK OF VENICE. 65 fully guarded against debasement and adulteration as in the Republic of Venice. "In Venice, where the money of account was undisturbed for upwards of five hundred years, and was the medium in which the values stated in bills of exchange and bank credits were expressed, the chief payments during all that time were made in bank credits, bearing a premium of twenty per cent, over the precious metals. Any attempt by the Venetian government to debase the coin would have been futile and ineffectual, unless the bank had heen at the same time destroyed, and the money of account broken up. Many changes were made in the coins of Venice, but their true value, in every instance, was at once marked by their value in the bank money." * All the moneys, mutilated or sound, turned in by de- positors were weighed and assayed and accounted for at their true value, and not as the tale read on the face. This carries the proof, if one were needed, that wherever money debasement was a characteristic, that money was credited by the intrinsic value of weight, and not by the extrinsic character of tale. By this means everybody dealing with Venice was made sure at all times that his account would be squared in the full value of the money of account. The Venetians knew that trade follows sound money. The only money sure to be always of full value was, in one sense, not money at all. Hamburg adopted the same policy in creating the mark banco. The accounts were all made out and settled in this, the money of account, which was not coined. It was valued at about 25 per cent, more than the mark cur- rent — the coin in circulation. The Bank of Hamburg found it necessary for self- preservation to adopt the expedient. To guard against the continuation of losses arising from a debased coinage, the system of reckoning all moneys, turned in, by this * Article by Stephen Colwell in Bankers' Magazine, July, 1857. 5 (£ MONEY AND PRICES. newly adopted money of account was introduced. All moneys were assayed, weighed, and credited by this standard. The bank money thus established proved, of course, according to all authorities, the least variable of all Europe. In England, up to the coinage act of 1816, the money of account was something different from the money in circulation. The unit of account was the pound sterling. This was not coined money, but it represented a certain value in gold, and this value of gold was put into the sovereign, which henceforth stood as the coin representing the pound sterling. It was, therefore, the full value of the money of account which created the full value coin — i. e., as then determined : 5 pennyweights 3 171-623 grains of standard gold, and at the value of £2, 17s. lo^d. the fine ounce. From the reign of Charles II. until the year 1816, when the sovereign was coined, the pound sterling was not represented by any piece in the coinage. The guinea was intended to be of the value of a pound, but, not having been correctly adjusted, its greater value was at once shown by its greater price expressed in the money of account ; and the price of gold fluctuating, it varied cor- respondingly in price until the year 1717, when it was fixed by Sir Isaac Newton at twenty-one shillings. The guinea as a coin has disappeared, but as a money of account it still holds sway. You ask the price of a commodity of a somewhat large value, and it is named as so many guineas and half-guineas. Donations, subscriptions, and bets are made in guineas, and not in pounds or sovereigns. Fees of doctors, lawyers, and of professional men in general are accounted in guineas, as well as the clothing made by the fashionable merchant-tailor. FRENCH AND GERMAN EXAMPLES. 67 Though the " livre " was superseded by the " franc " in the coinage of France a hundred years ago, to this very day the word " livre " is employed to express value. People speak of so many " livres de rente " in stating a man's income. No one would say " cinquante mille francs de rente." The " pistole " was proscribed in France under Louis XIV., but the Norman peasants were found by Mr. d'A- venel at a country fair in 1892 to be still using the term " pistole " and " demi-pistole " in formulating the price of their cattle. I remember the " pistole " to have been frequently mentioned by visitors at Baden-Baden, but do not remember ever having seen one. The. louis d'or is still the unit mentioned in sportsmen's wagers all over France. Prices are made and people figure in moneys which have long since gone out of existence. The common people in Europe cling to the names of coins which have not been seen within the memory of the living genera- tion. In Carlsruhe I remember that eggs, butter, and certain minor agricultural products were sold by the " batzen." * No batzen existed. It had disappeared dozens of years before. But still everybody buying or selling farm pro- duce would have been troubled, had he had to change his reckoning suddenly from the uncoined money of account to the coined money which was of entirely different denominations. America figured in pounds and shillings when no such money was in existence. The Spanish shilling, the eighth part of a dollar, is still the money of account in small deal- ings in New York. * The batzen was four kreutzers, equal to 2.66 cents American money. 68 MONE Y AND PRICES. Innumerable examples could be added from the financial history of all nations. We all have something entirely- different in our mind when we trade or figure money values than the coin or money in circulation. We always think of a full value money of account, which the money in circulation seldom represents. Our silver dollar is cer- tainly a debased coin. The silver certificate and other paper currency are taken at the full value because of the implied government promise that they will be redeemed at the full value of our money of account, represented by 23.22 grains of fine gold and called one dollar. The idea of your money of account follows you into foreign countries. If you go to France you translate the francs, in England the shillings or pounds, in Germany the marks, into your dollars, your medium of payment — your own money of account — before you get the value of the commodity into your head. We get certain things and ideas so firmly fixed in our minds that we do not inquire into their genesis and true relations. We are not given to inquiry into relations of things that grow up with us and form a part of us. Erro- neous notions are often more apt to take hold of us than true ones, just because of our familiarity with the objects. Thus, if we speak of money, we are dealing in our minds with something quite different from what we see con- stantly before our eyes. Only we don't give the matter thought. We think the thing we see is the same as that we do not see, and do not analyze. SECOND PART. THE HISTORY OF PRICES FROM THE MIDDLE AGES TO THE PRESENT TIME. 69 CHAPTER IV. The Rising Prices and Expanding Trade in Germany Preceding the American Influx of Silver. The Wealth of the Trading Houses. From the middle of the fifteenth century down to the great upheaval of the Peasant War in 1525, we hear re- peated complaints and admonitions of Reichstag, provin- cial diets, town councils, princes, and popular agitators against high living and lavish expenditure on finery. The dress regulations were published in endless repetition, without, seemingly, making any impression on those for whose guidance they were intended. That they were directed mainly against the working and the middle classes it is needless to say. Burgher and peasant enjoyed an amount of well-being which was not to be seen any more from the days of the Reformation and its barbarizing wars until a new era was to dawn in the second half of the nineteenth century. With the destruction of the aspirations of the people centring in that social revolution, things soon began to change. Germany entered into that path of evil which led to the Thirty Years' War, a war that made a dreary waste of a country which for nearly a century had vied with the Italian city republics in leading Europe in civili- zation, developing art, industry, and commerce to a degree 71 72 MONEY AND PRICES. that gave it for a time the first rank in Europe. But in connection with this historical fact, it is important ta mark that, within this period of German ascendancy in industry and commerce, prices rose and hving became dear to a formerly unknown degree. The chief complaint was directed against the big trading houses and the large trading companies which the former established. These concerns were f orestallers in the worst sense. They bought up not alone the spices of India and the silk of Italy, cot- ton and sugar of Egypt, but, and this gave rise to deep resentment, the crops before they were harvested, the produce before it came to market. An Austrian ordinance says : " No company shall be permitted hereafter to buy up Hungarian or Austrian cattle in droves on pain of con- fiscation of the animals ; all buying up and driving away into other countries is prohibited." A company started to monopolize the trade in soap was by law enjoined from going into operation. It seems the " trusts " of our days had their prototypes some four hundred years ago in Ger- many, and met with the same popular indignation. The Jews had been driven out of Germany, but the Gentile soon found that his own flesh and blood was the worse leech. Geiler von Keysersberg, one of the foremost preachers of the time, says that they were " greater and far worse deceivers and oppressors of the people than the Jews have ever been ; they not alone gather into their monopolies the plunder of foreign merchandise, easily dis- pensed with, but also the commonest necessaries of life,, as corn, meat, wine, and the like, and screw up prices to satisfy their greed and avarice, and fatten on the toil of the poor." The Reichstag sitting at Cologne in ijiz saw itself compelled to take steps against the usurious, forestalling^ THE GREAT CAPITAL COMPANIES. 73. capitalistic companies. A very stringent anti-trust act was passed, in which it was ordained " that henceforth it shall be prohibited to carry on such injurious practices, whereby the Holy Empire and all the Estates have suffered considerable loss and damage." It was ordered that " if these merchant companies should dare to produce an un- seemly dearth, then all authorities shall with diligence and severity abolish such dearth and order honest and tolera- ble trading, and if they neglect this duty then the imperial fisc shall proceed and act as determined in the law." " Thou shalt not " has at all times been an easy expedient of the law-maker. The fathers, however, were not more successful with the execution of the law than the children are to-day. The money power had become stronger than the execu- tive power. Many members of the town councils were members of the great stock companies, the emperor's councillors were " in with the merchants with their money,, but in secret only " (" Doch nur im Gehaim "), as an old Augsburger, Lucas Rem, says in his diary. Of Ambrose Hochstetter, of Augsburg, a contemporary relates,* that he bought up whole lines of goods, and paid higher prices than their market value, to drive out other merchants, who could not afford it. " He then made a rise in the goods in all countries, and sold them just as he wished. No merchant with 5o,ocx) florins or 100,000 florins could stand against him, because he made profits as he chose. He bought up the quicksilver in all the kingdoms and countries dearer than the common price, and paid 8 florins the cwt.," so that he could press the other merchants by his foxiness. When he had brought all the quicksilver * Clemens Sender's, an Augsburger citizen's statement quoted by Johan- nes Janssen, Geschichte des deutschen Volkes, vol. i. 74 MONEY AND PRICES. into his hands, he sold it again for 14 florins the cwt. Pepper rose in the six years from 15 12 to 15 19 to three and four times its former price; sugar, in 15 16 at 11 florins, stood in 15 18 at 20 florins the cwt.; almonds rose from 8 florins to 12 ; nutmegs to seven times their old price within the same period.* Now, whatever the guilt of the merchant companies and the great trading houses in bringing about this rise of prices by forestalling, whatever help the speculators and great capitalists, the Fuggers,f the Welsers, the Hoch- stetters, and their kind may have derived in creating their great monopolies from the altered route of the trade of the East by the discovery of the passage to India around the Cape of Good Hope, it will not be contradicted that these high prices could not have been obtained, and ■certainly not maintained, had consumptive demand not become general, for what had been considered luxuries of the very rich but a generation previously. Of pepper alone some 30,000 cwts. were imported, annually, an article considered so precious at a former period that it was used as money in trade. The profits must have been enormous. Lucas Rem relates in his diary (on Augsburg's commercial history, 1491 to 1546) that Bartholomew Rem put 500 florins into the business of Ambrose Hochstetter on profit share. Money was put on deposit with Hochstetter by rich and poor, princes, counts, and knights, as well as peasants, servants, and laborers. He held as much as a million florins from * See Wm. Zimmermann, Allgemeine Geschichte des grossen Battemkriegs. \ The memory of the people is a long one. To the present day these quinto-cento private tax-gatherers, by what the people considered unfair means, are pilloried in the people's language. " Fuggern " (to Fugger) is in southern Germany, in my own memory, synonymous with cheating or taking undue advantage in a trade. PRECEDING THE NEW SILVER DISCOVERIES. 75 these various contributors on proiit sharing. Now, our friend Bartholomew Rem wanted an accounting, and his share of the profits on his investment of 500 florins for the six years from 151 1 to 15 17, and the court gave him 24,500 gold florins as his rightful due. The accumulations of these merchant princes reached fabulous sums for the times, and would make quite a respectable showing even in our days of rapid fortune making. The fortune of the Fuggers is stated by our authority, Lucas Rem, at 64 million florins in 1546, when a division was made by the members of the family. The Fuggers had risen from simple linen weavers. But in those days little was left of the old simplicity of the master craftsmen in the patrician merchant adventurer. The Hochstetters especially are reported as leading lives of excessive prodigality. Our informant, Lucas Rem, tells us that "his (Hochstetter's) son Joachim, and his son-in-law, Franz Baumgartner, spent on one banquet 5000, and on another 10,000 florins, and gambled away 10,000, 20,000, and 30,000 florins in one sitting." But they came to a bad end. The house of Ambrosius Hoch- stetter failed, and the head of the house ended his days in the debtors' prison. I give these facts at greater length, perhaps, than the narrow limits of this essay would otherwise warrant, be- cause this all happened long before any additions were to be made by the American silver mines to the circulating mediums of Europe. The mines of Potosi and of Mexico were not to open up their treasures for two generations from the time of these price revolutions, and of great changes and improvements in the mode of living of the more modest classes, of extravagance and lavishness among the patricians and great merchants of the free cities of the tot- 76 MONEY AND PRICES. tering Holy Empire. The stories accepted by most writers of the vast treasures sent to Europe by the discoverers and their followers are found, on investigation, to have been great exaggerations. Roscher says, from official docu- ments, that from 1522 to 1545 no more than 1,125,111 piasters in gold and silver were shipped by way of Vera Cruz to Spain. Soetbeer estimates the whole annual out- put of the precious metals for this period as 25,770,000 marks. L. von Ranke says that about the year 1525 not more than 2,000,000 franks a year were imported into Spain, and only after 1550 about four to six times this amount. Alexander von Humboldt, who examined very carefully the annals and records in America and in Spain, is cer- tainly the very best authority on the subject. After analyzing the reports of different authors of the time of the conquest, comparing them with one another and with the official records, he summarizes as follows for the period prior to the discovery of the mines of Potosi : Period. Average annual im- portation of gold and silver from America into Eu- rope. Remarks relative to the History of the Mines. I492-1500 Piasters. 250,000 Discovery of the West India Islands ; Gold- stream works of Cibas ; expedition of Alonzo Nino to the coast of Paria ; voy- age of Cabral. The fleets did not arrive every year in Spain, and that of Ovando- was considered immensely rich, though it was only laden with 2560 marcs of silver (about 20,000 ounces). 1500-1545 3,000,000 The Mexican Mines of Tasco, Tultepeque, and Pachuca wrought ; Peruvian mines of Porco, Caraugas, Andacava, Oruro, Ca- rabaya, and Chaquiapu (or la Paz) ; spoil at Tenochtitlan, and at Caxamarca, and Cuz- co ; conquest of Choco and Antioquia. CAPITALISTIC EXPLOITA TION. J J The piaster was changed at a period not well defined, and upon which Alexander von Humboldt was in doubt. The new piece is equal to our dollar ; while about one •dollar and seventy represents the value of the old piece. In the former case we have $250,000, and in the latter something over $400,000 for the period 1492-1500, and $3,000,000 or $5,000,000 for 1500 to 1545 as the annual average of specie shipments from the new world to Europe. True, the mines of Germany, under capitalistic ■exploitation, yielded greater sums than under the old system of mining by " Knappschaften." Much complaint is raised of the " Raubbau," the exhaustion of the lodes "which had given bread and sustenance to generations of sturdy men, of whom the father of Martin Luther is a fitting type. The Fuggers, the Hochstetters, and others are mentioned in the same terms as our own great mine operators are spoken of to-day. Doubtless this added largely to the available money stocks, but considering the expansion trade had taken, the greater absorption in the arts in consequence of the general growth of wealth, the amounts mentioned by the more moderate chroniclers would have been easily absorbed. The sums mentioned by most writers of the time, and eagerly fastened upon by more recent authorities, have, however, found considerable diminution, the same as the fabled quantities from the American discoverers, under the searching light turned on the archives and govern- ment records by competent investigators. The sums stand frequently discredited by their impos- sible dimensions. But they are permitted nevertheless by modern writers to form part of their argument. So when it is stated that the mines of Schneeberg in the Erzgebirge yielded for the first thirty years after their 78 MONEY AND PRICES. opening 325,000 cwts. of silver. This is equal to 11,000 cwts. per annum, or nearly 500,000 kilos. For 1487, we are told in another place, the yield for three months was- equal to two tons of gold, which is equal to 8000 kilos per annum.* Soetbeer's estimate of all the gold annually produced following the discovery of America, 1493 to 1520, is only 5800 kilos for the world ; and of all the sil- ver mines of the world, 47,000 kilos per annum. This is only one tenth the quantity said to have been the yield of one silver mine situated in the Duchy of Meissen, now part of the Kingdom of Saxony. The Great Quantities of the Precious Metals — Taken as Hoards and Money Reserves. The descriptions of the display of jewelry and of the quantities of plate in the possession of people of moderate means may seem to be somewhat exaggerated. The unanimity of writers on the economic condition of the Germany of that time does, however, admit of no ques- tion of the great quantities of the precious metals absorbed in plate, vessels, and ornaments, both sacred and secular. Aeneas Sylvio Piccolomini may have had an object in * The recklessness with which historians of repute copy these exaggerations of older, uncritical writers may be seen from the statement which is taken from Johannes Janssen, Geschickte des deulschen Volkes, vol. i., p. 354:. " Das zu Schneeberg im Erzgebirge im Jahre 1471 entdeckte Silberbergwerk war eines der reichhaltigsten in Deutschland. In den ersten dreissig Jahren warf es beinahe 325,000 Centner Silber ab." Another statement of his is r " Im Jahre 1478 betrug eine vierteljalhrige Ausbeute zwei Tonnen Goldes." Janssen is copied by other writers, as he copies the writers of the eighteenth century, and they again the uncritical writers of the sixteenth. The above statements are from F. E. Fischer, Geschichti des deutschen Handels, der Sckifffahrt, Erfindungen, Kuensie and Gewerbe. Hannover^ 1785-1794. PLATE AS MONEY RESERVES. 79, writing up in glowing colors the condition of Germany, so- as to give to his own countrymen the example of the thrift, progress, and general well-being of the German people, still in the enjoyment of their independence and liberty, at a time when the Italian republics of the Middle Ages were beginning to fall a prey to petty tyrants. But Froissart is not less emphatic in the praise of the condi- tions of the people of the empire. German writers of the time are unanimous in pointing to the wealth of the German burghers as illustrated by their rich possessions, of gold and silver plate. Wimpheling, one of the best known writers of the time, mentions that " the merchants eat off dishes of pure silver and gold, and I have myself dined in Cologne at such a table with eleven other guests." And we are told further that " German merchants in foreign countries frequently have sent from home gold and silver ware weighing from thirty to fifty, and even one hundred and fifty pounds, and make considerable display with their plate and drinking vessels, especially when strangers are present." When we take into account this general authentication of the extensive use of the precious metals for other pur- poses than circulation, then it will be conceded that the increase in production is an insufificient explanation of the changes in prices that we read of. This greater absorption in plate and ornament, it must be remembered, marks periods where wealth loves display, and when the idea of wealth is associated with these visi- ble signs of it. With the enjoyment of display, however, is also connected the advantage of having property in such shape that it is easily concealed and transformed into whatever condition is made most profitable by the exi- gencies of the times. Gold and silver plate unites in an ^O MONEY AND PRICES. admirable manner the requirements for all these pur- poses. The great extent of its possession denotes a period of growing wealth, but is also significant of under-develop- ment and, as in this instance, of uncertainty as to the stability of the value of the coins. Private hoarding in this form is the natural consequence of such a state as ■existed in the Middle Ages and up to comparatively recent times. The period of law which subjects the State to the same code of ethics that governs the individual does away with it and finds a safer repository in banks and in transferable signs of real or personal property. The period we are dealing with was eminently not of this nature. The coins of the time, of which we shall presently hear more, were not of such character that a prudent merchant would care to lay in a very heavy stock. Plate, however, was sure not to be tampered with. It was money, or could be turned into money at its full weight value at all times. In England, up to very recently, it was given the government stamp, and frequently made use of in payments. The custom throughout the Middle Ages was to weigh to the smith the metal purchased or delivered from the treasure-box, and to pay for the work separately. Thorold Rogers in his researches has found this to have been the custom in England. And the same rule prevailed in Germany and other countries. Stephan Beissel, in his very valuable contribution, Geld- werth und Arbeitslohn im Mittelalter, gives a number of examples from the records of the Chapter of St. Victor at Xanten. The holdings in plate by people of wealth were there- fore, in times such as those we are treating of, something of which the present has little conception. Lord Bur- THE CAUSE OF CHANCE JN PRICES. 8 1 leigh, according to Hume, left at his death between 14,- ^000 and 15,000 pounds weight in silver plate, and this was worth nearly as much as all his other possessions. For a man in his position this was considered very moderate. According to Giustiniani, Cardinal Woolsey possessed .silver plate to the value of 150,000 ducats. Excessive as these amounts may appear, they are quite within credi- bility and mark a general condition in keeping with the theory advanced above. The treasure stores then, were as the banks, the bonds, and mortgages of the rich to-day ; the trinkets and ornaments were the savings banks of the poor. But though never so easily turned into money in times of need, it is equally certain that as long as they were kept in their form and in their concealment, they were non-existent as circulation. It is, therefore, safe to assert that what silver had been added to the world's hoards up to the time of this expansion in trade and rise in prices in Germany, was only to a very limited extent turned into money, and that whatever additional money was coined, was so necessary, and complying so fully with an •eager demand for it, that it could have had no possible influence on prices. The True Cause of the Change in Prices at That Period. Now in treating of prices we have here again to take exception to the rule of lumping different commodities and making a general price for thqm as indicating the price unit of a period. Even in the general awakening ■of the fifteenth and first part of the sixteenth century we ■do not find that all commodities were affected. The rise is chiefly observed in whatever goods came from far distant 6 82 MONE Y AND PRICES. countries, principally from the East. This, as has been observed, was largely due to a greater demand, but, prin- cipally, to the altered trade-routes which made Lisbon for the time being the great emporium for the Indies, Venice and Genoa had been the chief markets for the Levantine and Eastern trafiSc before the discovery of the new route to India. They were easily accessible to the German trader. Venice lay at the very doors of the Em- pire, while the other Italian cities were still considered as members of it. Men of small means could engage in di- rect trade and keep up an active competition, and so keep prices within accustomed proportions. All this was changed when the chief port for the India trade was transferred beyond the Pillars of Hercules and the pack horse had to give way to the trading galleon that plied between Lisbon and Ghent and Antwerp. The Flemish and Rhenish towns, but chiefly the Niirnberg and Augs- burg merchants, were not slow to take advantage of these altered conditions. In fact, the latter are entitled to part of the glory of the discoveries. Peuerbach and Regio- montanus * had so far extended and solidified the mathe- matical and astronomical knowledge of the time that the navigation of the oceans had become something more than a matter of prowess and of chance. Regiomontanus published a thirty-three years' calendar, the first of its kind published in Europe, and the Ephemerides were considered of priceless value by navigators. His improved astrolabe had a wide distribution in the East, and is said to have been bought by the Venetians for its weight in * Regiomontanus was bom in the year 1436 and died in 1476. His real name was Johannes Mueller. Born near Koenigsberg in Franconia his honest German name was, in the manner of his time, changed into the adopted latinization of his native place. fox WARD STATE OF GERMAN TOWNS. 83 gold. The German mathematicians thus became the guides of the pathfinders to the new ocean routes. The men of Nuremberg and Augsburg took foremost rank among the adventurers and helped intellectually, and what is here of importance to mention, financially, in the opening of the gates to commerce by hitherto un- known paths. Nuremberg, an interior town of Germany, became the seat of manufacture of the best nautical instruments, com- passes, maps, and mathematical tables. Regiomontanus made his lasting home at Nuremberg, because, as he wrote to a friend : " I find there readily the instruments indis- pensable for astronomical observations, and can with ease enter into communication with the men of science of all countries, as one may regard that city, on account of the travels of its merchants, as the central point of Europe." Martin Behaim, the traveller and cosmographer, disciple and friend of Regiomontanus, showed the way to East India on his globe six years before Vasco da Gama made his famous voyage. The prominent position of the Niirnberger and Augs- burger is shown in the fact that in 1 504 the King gave all German merchants the right of separate jurisdiction. The Welsers obtained the privilege of sending their own trad- ing vessels with the royal fleet that sailed to India. Two of the three German ships which accompanied the squad- ron in 1505, are said to have been the biggest ever fitted out. These vessels returned in 1506, and though the equipment had cost the sum of 66,000 ducats, yet the en- terprising merchants made a clear profit of 175 per cent. So it will be seen that the change that came over the trading world by reason of the discoveries, threw double treasures into the lap of Augsburg and Nuremberg, first, 84 MONEY AND PRICES. by giving them a monopoly of the East India trade and enabling them to charge whatsoever they saw fit in excess of the old ruling prices ; and secondly, by giving them the wealth of Ormus and of Ind at first cost, without pay- ing toll to the middlemen on the Adria and on the Ligurian Gulf. Thus we can comprehend that the story of the great wealth mentioned above of the men whose names have become household words, even as that of the Rothschilds of to-day, was born of reality. They were the men to grasp the new spirit. Assisting in the scientific awaken- ing of the Renaissance they also understood to reap the golden harvest, which commerce had in store for the venturesome trader. That the expansion of trade in the fifteenth and sixteenth centuries, and the great revolutions in the commercial and economic world, which ushered in a new era, should have been possible without any greater addi- tions to the moneys of the world than what has been stated above, from authentic sources, must put the cur- rent money theories to a very serious test. That price increases could occur of the nature described, makes the strain more severe yet, if, indeed, it leaves these theories anything to stand upon. Corroborating Facts from the Italian City Republics. Besides this direct evidence of a formidable rise in prices occurring without an increase in money, and due solely to the greater demand and to changed conditions of so- ciety and of trade, we have the corroborating evidence in the prices ruling in the Middle Ages in the trading re- CORROBORATING PROOF FROM ITALY. 85 publics of Italy. There the change from mediaeval con- ditions of trade to the advanced mode of trading had taken place at a comparatively early period. Instead of being hoarded, money was put in rapid circulation, barter was replaced by money payments, and money economics, and the bank and the banker took charge of the circula- tion, keeping the moneys actively employed. The Lom- bards and the Florentines were the bankers of Europe. The wealth of the Medici of Florence,* the Pepoli of Bologna, whose income is stated by Sismondi -j- as amount- ing to one and one half millions of francs, and others, was analogous to that of the Welsers and Fuggers of the later period in Germany. The great losses which the Florentine bankers suffered by the bankruptcy of Edward III. are sufificient proof of their opulence.^ The houses of the Bardi and the Peruzzi had to go under, as the pro- fligate king owed them 1,365,000 goldflorins; according to Cibrario, 28,000,000 francs. The goldflorin of 1 334-1 394 was worth, according to the best authorities, ten reichs- mark. In French money the goldflorin equals 12 francs, or about $2.40. The amount quoted by Cibrario would be, therefore, an overstatement and be equal to 16,380,000 francs only. Still quite a respectable sum for that time. But the price of wheat in Italy is said to have been three times that ruling in Paris in the period of 1289 to 1379, while the general dearth in the fifteenth century is attested by the complaints of the foreign ambassadors at * See Roscoe, History of Lorenzo il Magnifico. f Sismondi, Histoire des R^publiques Italiennes du Moy^n Age. \ In 1422 Florence had 72 banks ; in 1472 only 33 ; as Roscher says, probably in consequence of the more oligarchic concentration of wealth. The Florentine banks were so widely distributed that they were called, "il quinto clemento. " The Medici alone had 16 banking houses indifferent European cities. 86 MONEY AND PRICES. the Papal court (Raumer's Hist. Taschenbucfi). It is the opinion of an authority (Pagnini) that in Florence prices of commodities measured in silver rose but little, and not at all against gold from the fifteenth to the eighteenth century. CHAPTER V. Consideration of the Varying Factors in Connection with Prices. The Dis- tinctions Necessary to be Observed, The difficulties which meet us in making price com- parisons covering recent periods, of which I treated in the first two chapters of this essay, naturally increase the further back we trace our inquiry. Even if we eliminate the absurd combination of commodities to make up a price unit for comparison, it will be readily understood by students of economics that other almost insuperable obstacles meet us at every step. Unless we understand their nature and are prepared to give them thorough ex- amination, we shall fall short of a proper estimate of the question : " The influence of the money-quantities in circulation upon prices." I will class the different considerations we have to observe under a few general headings and give a brief explanatory statement concerning them : 1. The economic position of the period. 2. The nature of the money under which price quota- tions are given. 3. The character of commodities, a. Differing as articles of commerce, or b. Articles for home consumption or immediate use. 4. The changed relations of commodities in progressing periods. 87 88 MONEY AND PRICES. I. The Economic Positions. The remoter periods of the more advanced states of modern Europe had what is called in German " Natural- wirthschaft," "paying in kind." Taxes, rents, fines, mori- tariums, etc., were so paid, and trading was done on the basis of valuations according to a standard of account. At first this standard was the head of cattle ; later on the pound of silver, with its divisions, took its place. But this by no means implies trading through the medium of money, " Geldwirthschaft." It would therefore be falla- cious to make comparison with these early periods of de- velopments, which, however, are by no means extinct, and are found wherever conditions exist akin to those in which Germany, England, and France found themselves prior to the thirteenth century. We find in the monastic records a multitude of price notations in solidi and denarii, going as far back as the sixth century and becoming quite frequent in the eighth and ninth centuries. This may partly be on account of the greater number of settlements made in the interval, secular and ecclesiastic benefices, etc., which formed the great territorial tenures, but is undoubtedly, to a very large extent, due to progress in economic development. The price records are of high value in another sense, which will be dealt with later on. For regular comparative use they would not be more valid than prices of horses or cattle on the pampas of Argentina twenty years ago and to-day. European travellers may have been astonished to meet beggars on horseback in the streets of Buenos-Ayres * ; Americans know that in border settlements horseflesh is cheap enough for an impecunious man to own a horse. The * Burmeister, Reise durck die La Plata Staaten. THE TEACHERS OF EUROPE. 89 means of a mere living are easily obtained. But without a horse a man would be a hermit or an outcast. Trafficking in kind has been too long a marked con- dition in the United States, reaching down even to present times, to need any extended exposition tO/ American readers. The Beginnings of a Money Economy in Christian Europe. The change in Europe's economic condition was pre- pared by a foreign civilization. The Caliphate and the Saracen kingdoms were, by unity of religion and language, well fitted to take up and spread the civilization of the classic world. The commerce of the world as well as the money of the world was attracted by them. When the power of the Caliphs had given way to effeminacy and was finally shattered by the Mongol invasion, the seeds sown in Spain had long been giving fruit, and Europe was beginning to turn to the Peninsula for light and guidance out of the darkness. The services of the Arab to mankind in preserving and extending the stores of knowledge in geography, medicine, algebra, and chemis- try, and introducing the use of the mariner's compass, the pendulum, and the decimal system of numbers were in themselves enough to make the centuries following their dominion their lasting debtors. Without their work the era of European progress could not have opened as it did from the time following the Crusades. By this strange phenomenon the Christian nations were brought in con- tact with a higher civilization, and a new vision was opened out before them. Soon the Adriatic and Ligurian cities became the heirs of the fading Moslem empires, although up to the fifteenth •go MONEY AND PRICES. ■century Egypt still held high rank among the trading peoples of the Mediterranean. The North gradually fell in line. From Italy through the medium of the empire up the Rhine to Flanders, and over the Alps along the Danube, civilizing and liberalizing tendencies became manifest. The free cities all along these trading routes soon became the centres of trade, poetry, and art, and the strongholds of freedom. In the same way, only somewhat earlier, the cities of Pro- vence and up the Rhone had benefited from the Hispano- Arabic teachers, chiefly through the instrumentality of the Jews. Thus the great sleep was broken. Again com- merce and trade could pave the way for industry and art to spread and create conditions analogous to those in which •civilized communities in all ages have moved. 2. The Nature of the Money under which Price Quotations are Noted. Henceforth money was not alone a measure of account, but became a means of payment. Gold and silver coins were first employed in real commerce, while home-trading .still adhered to barter. Whatever the nature of the deal- ings, however, it is most important to know the kind of money in which these payments were effected, or by which the reckonings were made. Without such knowl- edge the history of prices is an unintelligible jumble of figures. The early coins, as pointed out above, were the coins of imperial Rome. The Merovingian and Carlovingian kings naturally adopted the coinage and monetary divi- sions of the empire whose prefects they styled themselves, until Charlemagne put the imperial crown upon his head. As the kings of the Franks did not overthrow the empire,, MONEYS AND PRICE QUOTATIONS. 9 1 but did assume its prerogatives and powers, they continued to use the administrative machinery they found, having nothing to put in its place. Moneys, weights, and meas- ures being necessary adjuncts of civilization, had, as a matter of course, to be borrowed from the conquered. "With the decline of the Carlovingian house the moneys "begin to fall in value. Charlemagne still held the coining of money as a prerogative of the crown. But with Louis the Debonnair the practice is introduced of giving the privilege over to certain bishoprics and towns, Pruem and Corvey being the first named and others following in quick succession.* But at first the right of coinage is given reluctantly and sparingly, with reservation of the royal power to regulate and supervise. But even this changed with the extinction of the dynasty. The separa- tion of the kingdoms severed the coinage relations pre- viously existing. In the Trans-Rhenan division the separate coining, gradually becoming the privilege of the towns, of the bishops, and of the rising dynastic houses, marks an economic progress, although we note a continu- ous diminution in the value of the coins. The increased demand for money denotes the change in the trade condi- tions noted above. This demand could not possibly have been met by the central power, even had its weak constitu- tion permitted the exercise of a prerogative which, in the low development of society, would have taxed the me- chanical and administrative skill of the time quite beyond its powers. The pound of silver, the original uhit of value, divided into 20 shillings (solidi), each of 12 pence (denarii), in the * See Inama-Sternegg, Deutsche Wirthschafts-Geschichtedes loten bis izten Jahrhunderts, Louis the German to Worms and Strassburg ; Arnulf to Hamburg ; Louis the Child to Eichstaedt, Osnabrueck, etc., etc. 92 MONEY AND PRICES. course of time was made to yield two and three times as many pieces of the same denominations. The gold solidus, or aureus, of the Roman Empire was. the unity of account in the German part of the Frankish monarchy at this earlier period. This solidus contained 3.88 grams, which is about equal to $2.54 of our money. The denarius, the twelfth part, of the solidus, was worth, therefore, in our gold value 21 cents. Some of the ex- tant imperial denarii of that time show a gram weight of 3.23, which is equal to that price, if silver and gold are rated as i to 9, the relation of the time, according to the recorded transactions and agreements allowing substi- tution of one metal for another or of purchases at this- ratio. But the silver denarius in this comparison and part of the later silver money of account (240 of which make a £ sterling, a pound or livre of France and the Pfund Heller of Germany) in the best Carlovingian coinage was 1.7 grams of silver, and was worth about 12 cents gold value of our time.* It was not long, however, before it was found that there was a source of gain in the privilege of coining money,, and the spiritual and territorial magnates of the empire did not hesitate long to turn it to advantage. The best Carlovingian denarius is unalloyed — in the 12th century 8 per cent, of alloy is found in the money. But the chief" depreciation is in the reduction in metal which gradually reduced the moneys to a fraction of their original weight,. * The gram = 15.12 grains, and at 1.7 grams this denarius weighed 25.7 grains of silver. Silver had a higher value and counting the ratio of g to i against 16 to i, the American coinage value, makes the 25.7 grains equal to 45.68 grains in to-day's coinage. The dollar is 371.25 grains ; 45.68 grains, are therefore 12.33 cents. At the ratio of 15.50 to I the value is 12.72 cents.. REGOINAGE_ VERY FREQUENT. 93 SO that the English penny of to-day is but an eighth part ;of the imperial denarius. The cause of this reduction is, to a large extent, the .■eagerness of the bishops and members of the empire to take advantage of the seigniorage, the charge for coinage. They retained at first a certain proportionate number of pieces in payment of mint charges. This was soon extended into the right of making the weight of the coins lighter and increasing the number minted from a given weight of silver. The advantage derived from the exercise of the mint privilege was rapidly improved upon. The privilege was turned to account by the members of the empire, at their accession to their respective governments. Even this arrangement does not seem to have sufificed, and frequently recoinage was undertaken on the slightest pretext. With increasing multiplication of the coins, extension of trading, and the doubtful character of much of the money in cir- culation, it frequently became necessary to recoin the foreign pieces and give them the territorial stamp to make them more easily recognizable.* * We must, however, not forget that the debasement of the coins was not entirely in the nature of \i, forced loan which is never returned, or the kind of robbery practised by the Valois Kings and the English Henry VIII. The .lowering of the standard in Germany and in France, proceeding from the 12th and 13th centuries, was largely in obedience to popular demand. So was the multiplication of the coinages and the exercise of the minting privilege by the bishop towns, the territorial lords, and the commercial free towns. The heavy coins of the original standard were entirely unsuitable as a cir- /culating medium. They could not possibly have served in local trading and could only have been used in payment in other than ordinary daily transac- tions. Their very nature and high vqlue prove the absence of a money economy, and that payment in kind was the well-nigh universal rule. The smallest coin, the silverpenny, the denarius, often more than a day's ■ wages, was of too inconveniently high a value to be used in ordinary dealings. We can imagine a state of society out West with dollars as the smallest de- 94 MONEY AND PRICES. Up to a late period the imperial coins were of higher value than those of the states, bishops, dukes, counts,, princes, lords, and towns of the empire, all of whom had gradually acquired the privilege of minting. The chaos became as great in the coinage as in the political condition of the Holy Roman Empire. The commercial towns, however, had begun to emancipate themselves from the domination of their feudal lords. Some of them discov- ered at quite an early period the important economic law that trade clings to and follows sound money. Chief and first among them were Cologne on the Rhine and Ratisbon on the Danube. Cologne, the queen city of the Rhine, stuck to good money, while even the episcopal cities of Metz, Treves, and Mayence reduced the denarius, still weighing in the tenth century about 1.45 grams, to 0.6 grams, as in the case of Metz, and 0.7 grams in the case of Treves and Mayence, at the beginning of the thir- teenth century. The money of Cologne, in consequence, became the standard of payment for centuries for the traders of the Rhenish states, just as the money of Florence, the gold- florin, for the trade extending beyond state and national borders. nominations used in settling of accounts, when the daily dealings are not squared before a certain amount has accrued. But when the social organism becomes more flexible, when the state of mediaeval exclusion and territorial independence changes to a condition of commercial mobility and national and international communication, money economy gradually obtains the ascendency, and a demand for coins which will answer the daily requirements becomes more and more a necessity. The lowering of the value of the coins in the Middle Ages is therefore a sign of the revival of the trading spirit and of a step forward in civilization. The stability of the English coinage up to a very late period is sufficient proof, if no other existed (but of that there is abundance), of a much slower industrial and economic development. THE VARIATIONS IN THE COINS. 95 With the progress of the centuries we find further de- viations and variations in the coins. We find the stueber (stiver), the albus, the florin, the thaler, the grot, the obolus, the scutum, from which the ^cu is derived. In the chaos which characterizes the monetary situation from the early Middle Ages to recent times, and which would make it impossible to read the history of prices in Europe, the weight and fineness of the coins gives us a helping hand. It is either by the coins themselves, found and collected, or by comparative statements of contem- porary writers, that we can trace the value of moneys to a fixed standard. The mark of Cologne furnishes us this standard for Germany up to the reform of the coinage in 1873. As early as the end of the tenth century we meet the mark.* It weighs 8 ounces, = \ lb. of Cologne, equal to 234 grams, or 468 grams to the pound of 16 ounces, which is but slightly (not quite 4 per cent.) heavier than the English pound avoirdupois (453.54 grams). Gold was not coined in any of the mints. What gold coins, were used were of foreign mintage. Payments made in gold are usually by weight in plate or in bars. Even if not required in local trading, gold was at all times a more convenient treasure-hoard than the more cumbersome metal. It is only after the Crusades that the use of the gold coins, first of Byzantine and Saracen coinage, and later the coin of Florence, the florin, became more promi- nent in trade. The first German gold coins are said to * Inama-Sternegg, ii., p. 403. " 12 solidi = 12 denarii + 16 denarii for coin^e = 160 denarii is unit of coining weight ; the d. = 1.45 grs. In place of this, by the end of the tenth century already the designation ' Koelnische Mark ' appears, which consequently had a weight of 234 grams and proves itself the half of the old Poundweight of Cologne of 468 grams.'" •96 MONEY AND PRICES. -have been struck by Archbishop Walram of Cologne (1333 to 1349). In 1354 the three ecclesiastical Electors, May- il i. vJ * ^c^f/i^^'r^^r' I.•]^ in Mississippi, are quoted at $28.56 in Connecticut. But taking the highest MEDIEVAL PRICES OF WOOL. I09 prices for farm animals, as in the seaboard states, they are yet considerably lower than the prices ruling in England. Such are the price differences caused by the presence or absence of markets. 4. The Changed Character of Commodities in Pro- gressing Periods. In examining prices of different periods we have also to take into account the changes in the character of the ■commodities. If we notice the low price quotations of the Middle Ages, we are inclined to ascribe them to the scarcity of money, and nothing has given rise to the theory here under investigation, so much as these low prices. From what has been said we know that the standard weight of coins was originally very much higher than what it became subsequently through the frequent adulterations. We have shown that prices by no means moved uniformly from a low to a high numerical point. We shall show now that, measured by present value in gold, the price of a time when, on account of the scarcity of money, money transactions could barely have been general, were higher than in the present era with all its vast amount of moneys in circulation. Before entering into this comparison, I must mention, however, that one great item of difference is overlooked if we do not bear in mind that commodities have changed very materially from the Middle Ages to the present day. If we compare cattle, sheep, hogs, horses, and, in fact, all animals, we find quite a different breed in all of them. A wool-fell of to- day has 6 to 7 lbs. of wool. Hardly two centuries ago i^ lbs. was all it yielded. It is not necessary to go very far back to meet these wretched breeds which would not now be given shelter except in the most backward countries. no MONEY AND PRICES. In England the weight of an ox, about 1547, was in the neighborhood of 400 lbs. ;* under James I. it was 600 lbs. %. by the end of last century it had risen to 800 lbs. ; and now it is 1200 to 1 500 lbs. Sheep weighed about 45 Ibs^ in the sixteenth century ; by the end of the eighteenth,. 85 Ibs.f The weight of the meat alone was : Oxen. Calves. Sheep. 1710:^ 370 50 28 1845 |] 800 140 80 The older German writers take the weight of a cow as 400 lbs., while Koppe (1818) speaks of 500 to 550 lbs.; Pabst (1829) 600 to 800 lbs.; and present writers give 1000 lbs. as the normal weight. Nor was the quality equal to the present. " Wool,, judging from the existing specimens of cloth, was coarse, and the fibre was full of hair." § Woollen cloth made in England as well as the wool had become an extensive article of export. But the cloth was of a loosely twisted yarn, which required shrinking and shearing before it was fit for wear. Hence it became cus- tomary to line cloaks and outer garments with fur or other soft ihaterial. Thorold Rogers says : " A man in an English winter might as well have dressed himself with a hurdle as with English cloth." The finer cloths were all imported, chiefly from Flanders. When war broke out between Philip II. and the Low Countries, " and es- * " I have opened an account from the Public Record Office of the weight of 40 oxen purchased for the Navy in 1547. The average weight of the oxen is less than 400." — J. E. Thorold Rogers, History of Agriculture and Prices. \ Sir Frederic Eden, The State of the Poor. \ Davenant, quoted by Roscher. H Tooke and Newmarch. § J. E. Thorold Rogers, Hist, of Agr. and Prices. EARLY WOOLLEN MANUFACTURE. I IT pecially when the struggle became desperate, numerous, weavers from Flanders crossed over to England, and brought with them the art of manufacturing finer fabrics, in which England had been imperfectly skilled, especially such woollen stuffs as were formed from a tightly twisted yarn." J. E. Thorold Rogers, Hist, of Agr. and Prices. * The manufacture of finer stuffs took its rise from that time, f The distinctions here mentioned have to be borne in. mind when we examine prices. In farming implements, plows, and tools of all kinds they are especially note- worthy. * I have no doubt whatever that tightly twisted yams, made of combed wool, had their origin in Flanders. Flanders was the seat of a very early wool industry. This is made evident by the fact that we find in the list of articles cited by contemporary writers as tribute received in Rome, woollen cloths from Belgium (and linen from Germany). An active export trade was done at that remote time in these. But English cloths formed articles of commerce at quite an early period, too, as we find Cologne doing con- siderable trading in them in the thirteenth and fourteenth centuries. I find also in the same period " worsted" mentioned, as imported from England, in German records. See also on this subject Gustav Schmoller, Die Strass- burger Tucker- und Weberzanft. f England has always been very fortunate from the time of the Norman conquest in deriving benefit from the folly of her neighbors. There was never a lack of wars, persecutions, and proscriptions to send weavers and other skilled artisans to her hospitable shores, to refine the rather coarse- grained manufacturing skill. I have searched in vain for an alien labor law, making it s, the ounce, the ratio according to Ruding between the two metals being at 11. 2 to i at the time. Such a price is intelligible if the estimate is taken by weight, quite inconsistent with the facts if it is taken by tale. " 4. We are expressly told that the principal loss of the base which was put into circulation between 1543 and 1553 inclusive, and remained in circu- lation for nearly twenty years, fell on those who lived by wages. The mer- chant could weigh it and test it, indeed could not carry on his business unless he did,* and perhaps gain an advantage by his knowledge. But as * It was the practice among merchants in Germany to keep money scales, and touch stones up to a recent period. This is within my own recollection. PAYMENT MADE BY WEIGHT. IIS the issues were of very various degrees of baseness, the man who received his wages, even by weight, would find that one piece went further than another, owing to its being less alloyed, and' another was almost a dead loss. "5. The record of the restoration by Elizabeth is conclusive. The amount of base money which Henry and his son's guardians put into circula- tion was 631,950 lbs. in weight. The currency value was ;^638.II5,* the difference being no doubt seigniorage, or a charge for coining, to defray mint expenses. The amount of silver in it was 244,416 lbs., indicating a de- basement of near 60 per cent. But out of this silver Elizabeth coined by tale ;f 733,248. She said she lost by the process, though there seems a bal- ance to her advantage of ;^95,I33. Whether she spoke the literal truth is a question which some persons who have studied Elizabeth's utterances might very confidently answer. But she had to refine the wretched stuff, and the separation of copper from silver was in that day by no means an easy busi- ness, and we know that the adulteration was copper, from stories of the time. Then there was the charge of coining and the seigniorage. It is said that the slag was intractable, and was employed to mend the roads. " 6. There is no reason to believe that the Spanish occupation of Mexico and the discovery of Potosi were followed by any notable influx of silver into England. It is only by the foreign exchanges, i. e, by trade, that these ex- changes can operate, and in the sixteenth century English trade was exceed- ingly curtailed. Now the rise in the price of commodities between the date at which the new currency was reformed, and the period at which the new silver unquestionably began to modify English prices, is exactly, or almost exactly, the difference between the old Tower pound with the old prices by weight, and the new prices 2.75 to i." I have given in full the statement of facts, by which Thorold Rogers supports the theory of weight, because of the importance of a clear understanding of this point. Without the authoritative settlement and ready accept- ance of the fact, that mediaeval transactions were made by weight and not by tale, the price history of the past is unintelligible.f * Even for the England of that time a small amount of circulation. But the poor coins drive away the good coins. They are either exported or melted in. f I will show by an example the impossibility of any other assumption than that payments were by weight. ii6 MONE Y AND PSJCES. The uniformity of prices in England from 1261 to 1540 alone is proof of this fact. This would not tally with the gradual reduction of the silver value in the coins from Edward III. down to Henry VIII. had payments by tale been the rule. The uniformity of average prices here mentioned was, of course, interspersed with years of dearth and famine. The populations were decimated quite as frequently by famine as by the plague. Adam Smith states that " Fleet- wood gives us two prices of the quarter of wheat. The one is £4.16 of the money of those, times, equal to £i/^2> of that of the present ; the other is £6.?,, equal to £1^.4 of our present money." It does not follow that such extravagant prices were the rule for all parts of the kingdom. In undeveloped countries, the abundance in one county cannot be made available to allay the scarcity even in neighboring counties. The average price of one bushel of wheat, one bushel of barley, and one bushel of oats for the decade 1291 to 1300 amounted to 12s. li%d. The average for the same three bushels in 1351 to 1360 was 14J. Z^d., and in the decade 1 541 to 1550 the three bushels stood 20s. io}^d. Now the actual silver value of these three price quotations would have been if paid by tale as follows : Period. Price Quotarion. Relative Value of Coin. Equivalent Price in Silver. I2gl-I300 135 1-1360 1541-1550 12J. l-i%d. 14J. Z^d. 20s. io%d. 3. 2.50 I. 12S. ll%d. lis. lo^d. 6s. II Xd. Higher by 50 per cent, over prices of the thirteenth and fourteenth cen- turies, by weight of silver, prices of the middle of the sixteenth century would have been but one half those of two hundred years before, had they been taken by tale, which, of course, as everybody knows, is opposed by all the facts of history. DISTANCE ADDS TO PRICES. WJ We have the sad picture displayed before our own eyes in the famines of Russia, devastating whole provinces of the interior, while the surplus of other provinces cannot be brought to their relief, but goes by adjacent water routes to keep in plenty the teeming populations of Eng- land. Granting roads in good condition, as in the Eng- land of those days, in the opinion of Thorold Rogers, the frequent feuds of the nobles among themselves or their revolts against the kings would make it difficult to effec- tually assist in bringing relief. Prices are very variable within one and the same year, and between place and place. This is the case in England well up to modern times. From 1690 to 1700, the price of coal per chaldron is quoted for Bedford at 21s. ; Brecon, los. ; Brentford, 3IJ. 6d. ; Cambridge, 235. 4^. ; Falmouth, 20s. ; Guildford, 32J. ; London, 24J. ; Monmouth, 30J. ; Newcastle, \os. 6d. ; Norwich, 22s. ; Nottingham, 10s. ; Pembroke, 16s. ; Read- ing, 32J. ; Southampton, 43J. ; Oxford, 405. * Nearness to or distance from the mine made a greater difference to the consumer than it does in our days. Land- carriage of wheat over a hundred miles would have easily doubled the price. But taking out the several years of extraordinarily high prices and averaging the years of ex- treme cheapness with those of a generally higher level, we find this uniformity of price covering the long period of English history up to the period of the debasement of the currency by Henry VIIL to be an indisputable fact. This was the case not alone in wheat and other cereals, but in live stock, farm produce, metals, and manufactures as well as in southern and eastern produce. * Thorold Rogers, History of Agriculture and Prices in England, vol. vi. Il8 MONEY AND PRICES. There were two periods of a marked rise in the prices of all commodities. The first occurs after the great plague. It ushered in a social revolution. Death cut a wide swath. It made hands scarce and lands cheap. Land could be had for the asking and the tilling. The cloak of feudalism was lifted, and soon torn into shreds. The labor acts of Edward III. did not lower wages, and the broken word of Richard did not help the nobles to bring back the era of serfdom. The latter had outlived its usefulness. The social revolution was brought about by the economic revolutions that preceded it. Changes in economic conditions prepare and make the world's his- tory. As in. the cases of John Ball, Wat Tyler, and Jack Cade, it is necessary, frequently, to remind tarry- ing insistence on mouldy parchments that each generation must carve out its fortunes from the rock of time, with the tools its intellectual status has created for its hands. The rise in wages was general, the rise in prices only in articles of commerce, while farm produce was little affected. A consequent greater well-being of the working classes up to the time of Elizabeth was the result of it. This change in prices shows clearly that the cause lies entirely outside of the domain of money influences and fully proves again the positions heretofore explained in these pages. To make the reader grasp at a glance the price situa- tion, I will give in a collective statement the prices of the chief commodities, as gathered in the great work of Thorold Rogers, for the period beginning with 1261 down to 1582. I shall follow his division of the long space of time into four sections, «'. f., i. 1261 to 1350; 2. 1351 to 1400; 3. 1401 to 1540; and 4. 1 541 to 1582, the last period, the time of the great debasement of the currency, PRICES OF CEREALS. 119 and of Elizabeth's change of the coinage, which finally put the stamp of time on the change of i to 3. Not to bewilder the reader with too great an array of figures, I shall confine myself to a statement of the aver- ages for the periods named. The decennial averages of Thorold Rogers's price records vary but little from the general average for an entire period quoted. Where the price average is stated for the time from 1261 to 1400, without separation into the first and second division, the price averages in the decades of the period show no varia- tion sufficiently marked for distinction. I shall put a separate column against each price quotation, with three as a multiplier to bring the nominal price up to the present money price, * in conformity with the facts of the money history of the time. -PRICES OF GRAINS, PER QUARTER, IN THE DIFFERENT PERIODS NAMED, AND THEIR EQUIVALENTS IN MONEY OF TO-DAY. Wheat Barley Oats . . Rye .. Malt . Beans . Peas . . X261 to 1351. Price of the Period. s. d. 5-9^ 4.ii 2.4 4.6^ 4.8f 4.2 3-9i In Present Money. a. d. I7.3f I2.3I 7.0 I3.6I 14- 2i 12.6 II. 3f Price of the Period. s. d. 6.li 4.1 2.6f 4.2 4.6 3.8i In Present Money, s. d. i8.3f 12.3 7.8i 12.6 13-6 ii.of 1401 to 1540. Price of the Period. o. d. 3. 8f 2. 2J 4. 7f 4. I 3- 9i 3.10 In Present Money, I7.1U 11. 2j 6. 6| i3.iii 12. 3 II- 3f II. 6 1551 to 1580. Price of the Period. s. d. 15. O 9.iof 5.10J II. 5 II. II 10. o * The actual difference would be as 4J to I instead of 3 to i as the ratio of silver to gold was 10 to II to I , in the first two centuries of this com- parison, against 15^ to I of the present coining ratio. 120 MONEY AND PRICES. The first column in the last period (1551 to i58o)shows a rise in price over the average which ruled steadily for a period of 280 years almost equal to the changed money relations. The changed relations of the shilling of Edward I. and the shilling of Henry VIII. and of Eliza- beth alone are expressed in the price difference ; the price in weight of silver has not changed. In the debasement of the coins by Henry VIII. the adulterations had been practised for quite a while before price changes in domestic produce became very marked. Traders always know how to prevent loss and to protect themselves by taking the poor coins only for their value in silver. On the whole the change in the coinage did not show its full effect on prices until several decades after Eliza- beth's act. The people become used in a sense to price relations, and when the coinage is limited in quantity, debased coin will for a long time pass for much above its real value in a country whose commerce and industries are restricted, and which has but little communication with the outer world. The trading revolution of the century barely touched England. The ocean still imprisoned the island kingdom, and it was some time yet before it became England's high- road to power and wealth. What little of foreign com- merce there was had been in the hands of the Flemings and the Hansa up to quite a late period. Though Henry VII. and Henry VIII. were active promoters of England's commercial and maritime independence, yet the great up- rising under Elizabeth was required to give inspiration and direction to the activity of the country. The inner CHARACTER OF LIVE STOCK IN ENGLAND. 121 economy responded to these conditions in pretty nearly the same manner. Hence we shall observe the price relations here noted to continue for quite a time before the change is apparent in the prices collected by Thorold Rogers, and which cover the chief articles of commerce. In live stock the prices have gone up to the point marked by the new money conditions. In weight of silver they are not changed from what they were three hundred years earlier. I have stated the prices of oxen and of sheep separately. For these animals the weight is re- corded in the later quotations. For other animals the weight is not given. The weight recorded, we can follow the price changes in their true relations to the present period, and make quite important deductions. This is im- possible where the weight is not given. It is, however, evident that if the mediaeval sheep and ox weighed only one third as much as a sheep and ox weigh at present, cows, pigs, and boars were of equally poor breed and equally diminutive as compared to the present stately English herds. And from what we know of the improve- ment of breeds in subsequent periods, we must conclude that the horse stood, in this respect, on no higher level than his companions of the farmyard.* * In proof of this, take the following statement of Hume, being part of his remarks on the state of agriculture at the time of James I. . " Sir Ed- ward Harwood, in a memorial composed at the beginning of the subsequent reign, says that England was so unprovided with horses fit for war, that two thousand men could not possibly be mounted throughout the whole king- dom. At present the breed of horses is so much improved, that almost all those which are employed, either in the plough, wagon, or coach, would be fit for that purpose." — Hume, History of England, vol. iv., appendix iii.. 122 MONEY AND PRICES. II. PRICES OF OXEN AND SHEEP IN MONEY OF THE PERIODS NAMED, AND THEIR EQUIVALENTS IN MONEY OF TO-DAY, AND CORRESPONDING VALUE IN WEIGHT OF ANIMALS OF PRESENT TIME. (Oxen counted in 1st and 2d period as 400 lbs., 3d period 500 lbs., and at present time as 1200 lbs. Sheep at 40 to 50 lbs., 1st to 2d period, and 150 lbs. to-day.) 1ST AND 2D Periods. 3D Period. 4TH Period. 1261 TO 1400 1401 TO 1540. 1551 TO 1580. 1850. jj VI jn m R 1% ■^1 ^1 ^1 21 M f. d. i. d. s. d. ^. d. s. d. s. d. s. d. .r. d. s. d. Oxen . . 1.3- li 39- 4i IlS.qi 20.7 61.9 148.0 70. 7i 168.S 300.0 Sheep... 1-5 4.3 12.9 2.2| 6.8^ 20. of 6.4 19.0 40.0 IIL PRICES OF OTHER LIVE STOCK IN MONEY OF THE PERIOD AND ITS EQUIVALENT PRICE EXPRESSED IN PRESENT MONEY. Animals. Cows Cart horses. . . . Saddle horses . . Boars 'Geese 1261 TO 1350. s. d. 7.10 18.2 ■4.7* 0.3 J s. d. 23.6 54-6 i3.ioi o.io| 135 1 TO 1400. f. d. 10.7 21.5 4.7i 0.4J J. s. d. 0. 2| 1. 24 9- 4 2. 9f II- 3 10. I:J- 10. 64 26. 2f 4. 64 I. 2j 159- 2 29. 8 Here we notice the same relations of prices in the new money but about 100 per cent, higher, while the money MEDIAEVAL RATES OF WAGES. 125 represents only one third of the value of the old coin. The manufacturing skill of the nation had not increased nor were the tools improved. The smaller rise in prices than in the changed relations of money values between the two periods is primarily due to the fact that wages did not rise in the proportion that money had been de- based. Part, however, is due to the great quantities of building material which had come into the market from the spoil of the monasteries. VI.— DAILY AVERAGE RATE OF WAGES IN MONEY OF THE PERIOD AND IN ITS EQUIVALENT EXPRESSED IN PRESENT MONEY. Carpenter, highest rate do. average 'Mason Mason's laborer Sawyer Tiler or Slater Bricklayer Thatcher "Thatcher's laborer. . . . Plumber .Saddler 1261 to 13S0 1351 to 1400 1401 to 1540 1551 to ^ ^ B •s-g ^>. "S'S S>. " >. S-s 11 il £ J S'C l^pt _bS IJiPn ^S «* PjCL, d. d. d. d. d. d. d. 4i I2| is I7f 6| 20f 12 3 9f 4ff I3i 5^ 17^ loj 3 loi 5t Ibj 6 18 10 9i 4 12 3 9 54 I5l 6 18 3i 9f 6 18 6 5i 3i 18 i5t loi 7l 3 9, H l^ . H I9ir 10 3^ 10^ 5 15 The rate of wages in the last named period is practically the same as in the century preceding the great plague. The higher rate of wages dating from that event main- tained itself upon the same level, as already mentioned, ior nearly two hundred years. Though wages rose nomi- 126 MONEY AND PHICES. nally, the laborer received only two thirds as much in actual value, as before the debasement of the currency- chronicled above. As seen in Tables I., II., and III., the chief articles of sup- port for himself and his family, the corn for his bread, the malt for his beer — a very important item for mediaeval domestic economy, the beans and peas — partly used in his bread and in his porridge, and his meat, so far as he could indulge in it, these were all quickly up to the price made by the new money of 3 out of i. No wonder that his condition became more and more depressed, all due to what Thorold Rogers so justly stigma- tizes as the greatest crime ever committed by a tyrant against a patient and long-suffering people. The reader can understand from this fact why, in the face of inert manufacturing and trading conditions, prices of domestic industrial products did not respond to the changes in the moneys. The price changes are entirely in keeping with the change in the rate of wages. Iron, raw and wrought, ex- tremely high in the middle ages, as well as nails and articles manufactured from iron, responded even less tO' the changed money conditions than salt, lime, bricks, tiles, rope, and the like. Raw iron, in the period from 135 1 tO' 1401 averaging £2Z the ton expressed in the new mone- tary system, is worth but ;^i6 in 1401 to 1540, and ;£'lo6^j. in the actual money of 1560. Wrought iron, averaging £/^6 \2\s. from 1401 to 1540, is £2^^ 4.?., in the later period. Board nails and sixpenny nails, weighing 10 lbs. to the thousand, show little variation from the prices of the two- preceding centuries, hence have not at all responded ta the revolution in the currency. HIGH PRICES OF METALS. \2J But as these articles are quoted at higher prices in the succeeding period, it follows that much of what has been said above on the change taking gradual effect applies- also here. In the seventeenth century nails are quoted by the pound. In 1645 the price paid is S^-aT., in 1653 it is dd., more than six times the present price. Here I will only say that in the opinion of Thorold Rogers nails were less influenced by the price of iron than other articles wrought from this metal. "The article was in constant demand, was within the skill of every smith, was regularly kept in store by him (as I can well remember before the days of machine-made nails), was a bye-product of his craft when he was not engaged in any definite work, and was manufactured from scrap iron, the better for being^ old and worn." * This explains well enough the close ad- herence to the former nominal price, though the price- changes in all other commodities were extreme. In tex- tile fabrics much applies of what has been said concerning other industrial products. The price does not rise in pro- portion to the changed money relations. Nor does it rise in the next century, as we shall see later on, to the level of average prices of 1400-1540. The work was paid by the piece, and not by the day or week as in the other em- ployments of which I gave the price record in Table VI. We may assume, from analogy, that scattered cottagers and peasants are not more able to enforce their demands for better remuneration than day laborers and craftsmen in towns, who can combine to insist on increase of wages * See my volume The Destructive Influence of the Tariff, on the nail- makers of the Taunus Mountains in Germany. 128 MONEY AND PRICES. in conformity with the depreciation of money. It is not alone likely, nay, it is a well known fact, that piece workers employed in domestic industry partake more slowly of the advances due to changed conditions here delineated. I give here the prices of the principal textiles, which had become at an early epoch articles of purchase and sale, as gathered by Thorold Rogers from the records of Merton and Oriel Colleges, Oxford. VII.— PRICES OF TEXTILE FABRICS IN MONEY OF PERIOD AND ITS EQUIVALENT PRICE EXPRESSED IN PRESENT MONEY. THE Table linen, doz. ells Shirting " " Canvas " Sacking " Cloths, Piece of 24 Yards. 1st Quality 2d " 3d " 1 361 to 1350. 3-3 4. 1 J 2.6| 79.8 33- 2i 9.9 I2.3f 7.8J 239.0 99.6I 1351 to 1400, U hi ■C " PL, A. s. d. 6.7i 8.4 4.10J 83.2 46.6^ J. d. 19- 9f 25.4 14-71 249.6 i39-7i 1401 to 1540. id, j^. d. 6.9f 6.4 4.6 2.10 58.8i 48.0 34.1 *. d. 20. 5 J l8.4i 13-6 8.6 176.15 144.0 102.3 1551 to 1581. £0, J. d. 21.0 I3.I0J 7.7i 5.3| 161. o 85.0 75.0 In the prices of southern and eastern products brought to the English markets a multitude of causes operate and produce changes. The differences from 1350 to 1540 are so slight that we may call prices almost uniform. Sugar at I shiUing a pound, equal to 3 shillings in present PRICES OF TEXTILE MANUFACTURES. 1 29 money , pepper at is. '^d., or 4^. ^d. in the present coin- age ; currants at id. = gd. in the present coinage ; rice at i^d. to 2d. = 4^ to 6d. in the present coin- age ; high prices in the centuries previous to the change imputed to the influx of silver from the American mines, and declining prices for all of these commodities in the succeeding periods, prove almost anything except the geometrical price-theory of quantity of money covering quantity of merchandise. To this question, however, I shall return, with a retrospective view of the case, after having given descending prices down to our time ; and now only refer to prices up to 1582, which in the last named period show only an approximation to the new coin multiple of 3 in some of the items, while in others barely 2 is touched. Sugar is even lower in the new coins than in the full value coin in the second half of the fourteenth century. Pepper again is higher than the average of the preceding 200 years multiplied by three. Of rice, almonds, and some of the spices, other than pepper, the prices do not quite approach the full change. But in raisins and currants the prices are not even 50 per cent, higher than the old prices in the heavy coinage. That these variations are caused by changed and shift- ing sources of supply, differences in trade connections, and altered transportation routes could be easily proved. But it would lead to a more extensive treatment of the ques- tion under consideration than I have set out to give to this subject, were I to follow the causes of price variations for each article brought under review. I point this out, however, as part of a general effect on prices, with which we shall have to deal more in particular in the sequel. 130 MONE Y AND PRICES, VIII.— PRICES OF FOREIGN PRODUCE, NOW KNOWN UN- DER THE NAME OF COLONIAL PRODUCE, IN MONEY OF THE TIME AND ITS EQUIVALENT PRICE EX- PRESSED IN PRESENT MONEY. 1261 to 1350 1351 to 1400 1401 to 1540 I5SI to 158a •II 11 ft Sugar, doz, lbs. Pepper " " Saffron, lb... Cloves, " Cinnamon, lb. . Ginger, lb Almonds, cwt. Raisins, doz. lbs I. d. 10.6 13-6 8.5i i.t\ 18.8 1.0 f. d. 37.6 40.6 25- 5i 4.74 56.0 3.0 i. d. 19.0 16.9 14.2 i.7i 30.4 1.6 1. d. 57.0 50.3 42.6 4.104 91.0 4.6 s. d. 12.0 I7.I Il.llj 4-31 3-4 2.0 26.1l|^ i.gj 3.of I. II 4. d. 36.0 51.3 35-io| 12.11^ lO.O 6.0 80.11 5.31 9.2i 5.9 s. d. 12.10} 58.0 18.4 8.9} 6.4A 3.9J 70.10 2-5i 4.8 4-4 .. d. Currants, doz. lbs Rice, doz. lbs. England's Financial Condition. We have seen now that up to the year 1582 prices had not reached the old level if computed in the new coins. Money certainly should have begun by this time to circu- late somewhat more freely, though by no means so abun- dantly that it could have caused a price revolution. Now England was just about emerging from a mediaeval, agri- cultural state and beginning to take an interest in the affairs of the new era that had opened a century or two before in the advanced states of the continent. A greater amount of circulation under developing conditions in the last decade of the reign of Elizabeth would have been in the nature of things. The small amount of the recoinage of 1560 shows plainly that no extensive trading could CIRCULATION IN THE SEVENTEENTH CENTURY. 13I have been done unless all large transactions were based on weighing the silver instead of paying in the discredited coin. A large stock of uncoined silver, plate, etc., un- doubtedly came into the mint after the determination of Elizabeth not to allow any further cheating of the people by a tampering with the currency had become a settled fact. Still in all the forty-four years of her reign * she coined not more than .£'4,718,579 in silver and ;£79S,- 137 in gold. It is plain that this is not an excessive sup- ply for a people beginning to use money more freely in buying and selling than at any previous period of its his- tory. The home stocks of silver had to suffice. There could have been no foreign influx to explain the phe- nomenon as there was no extensive trading. In the twenty years of James ;£"i,64i,oo4 in silver and ;£3,666,- 389 in gold were coined, according to the same authority. Much of these sums, was obtained from recoinages and other melted-in money stocks. During the reign of Charles I. of twenty-four years, ;^8,'776,544 in silver and ^3>3I9>677 in gold were coined. The Commonwealth in eleven years coined ^^1,000,000 in silver and ;£iS4,5ii in gold. Charles II. reigned twenty-five years and coined ;£3, 722,180 in silver and ;£'4,i77,2S3 in gold. James II. in four years coined ;£5i8,3i6 in silver and yi, 596,799 in gold. The recoinage under William III., completed in 1699, must have covered nearly all the circulation in existence from the previous coinages.f Still the total coinage under * Ruding, History of the Mint. f No time shows such wide-going adulteration of coins by clipping and sweating, and other means of debasement as the seventeenth century. In Germany we have the Kippers and Wippers (the clippers and sweaters), competing with the mint authorities. The writers of the time compare 132 MONEY AND PRICES. this reign amounted to ;£^7,093,074 in silver and £}„i^i'i>,- 889 in gold. But England's position at the end of the seventeenth century was quite a different one from what it was at the beginning and in the middle of the century. Her trade and enterprise were beginning to give her rank among the first nations of Europe, while in the first half of the century up to the time of the Commonwealth we hear of Sweden and Holland as leading powers, but Eng- land is not mentioned and plays no greater part in the world's drama and in the navigation of the seas than Poland or Russia. During that period the circulation was in keeping with the general backwardness of the peo- ple. Estimated at about ;£'3,ooo,ooo in silver and gold at the time of Elizabeth's death and ;^4,ooo,000 at the end of the reign of James I. (Hume, History of England'), the middle of the seventeenth century certainly did not see the stock increased to -very large proportion beyond that them with the vilest scum, an^ express themselves in very drastic manner. "All the thieves," says one of them, "that were hanged in a hundred years, have not stolen as much as the Kippers. The Swedes boiled such fellows in molten metal, drowned them in boiling water, or hanged them on high trees. Oh, that such sharp execution would be done on some of these arch scoundrels to-day." This extract from one of the writers of the time gives an idea of the suffering created by the debasing of the coins, and of the feeling of universal hatred and execration created thereby against the perpe- trators of this cheating of the people. But this writer consoles himself in the expectation ' Sed nondum omnium dierum sol occidit,' the punishment can come yet later on." In France, complaints are not less emphatic and no less well founded. In England, by the time of the recoinage under William III., things had come to such a pass that serious troubles were apprehended and complaints could not be appeased any longer. No good coins were in existence, either being driven out of the country or thrown into the melting-pot. That such conditions do not create a plethora of money, such as under any circumstances could create a general rise of prices, ought to be plain to the dullest understanding. CIRCULATION IN THE SEVENTEENTH CENTURY. 1 33 sum, when the money supply is not more than what it is shown to have been under William III., according to the recoinage of all English moneys. The opening of trade relations with Scotland through the Union under the House of Stuart drew that country into the new order developing in England by opening a market for her pro- duce. This coupled with the more active English home trading under James I., would easily have absorbed all the surplus moneys coming into England under the limits set down above for the possible expansion of currency under the first two Stuarts. Under all the circumstances here recorded a price advance could not have been possi- ble on the money-quantity theory. CHAPTER VII. The Price-Changes during the Seventeenth Century and the Money-Re- lations. — The Natural Causes Contributing to the Rise in Grain-Prices. The advance in conformity with the change in the coinage, and not yet fully covered in the prices of the period closing with 1583, as shown above, is the only one observable at first. We see prices reach that point only in the last decade of the sixteenth century. From that time on prices advance steadily. But they begin to de- cline in most of the commodities treated here, to the dire disappointment of our quantity theorists, at a time when the growing importance of England in trade, industry, and colonial extension begins to pour the coveted treasures into her lap. In order to get a view of the price-changes we have to follow the same manner and sequence as in the preceding tables. Here I will set side by side in parallel columns (1) the prices of the period 1401 to 1540 computed in the new Elizabethan coinage for the assistance of the reader ; (2) the prices of the first decade of James I., i.e., 1603 to 1612 ; (3) the prices of the period of 1613 to 1652 ; (4) the prices of 1653 to 1702 ; and (5) the prices of 1693 to 1702, the decade in which occurred the recoinage of the cur- rency, frightfully debased by clipping, sweating, and shaving down of the coins. 134 CHANGE OF PRICES IN CEREALS. 135 I.— PRICES OF CEREALS, PER QUARTER, IN THE PERIODS NAMED, ^ROM THE BEGINNING OF THE SEVEN- TEENTH TO THE BEGINNING OF THE EIGHTEENTH CENTURY. 1401 to 1540. 1592 to z6o2. 1603 to i6z2. 16x3 to 1652. i6S3 '0 Z702. 1603 to Z702. "Wheat Barley. Oats.. Malt.. Beans . iPeas.. ... d. 17.11J II. 6. 6| 12. 3 II. 3f II. 6 J. d. 34.IOJ 19. 5" II. 5 22. 4f ig.io 19. 4 .>. d. 35. ^\ ig- 5 ii.iof 19.10 19. 2 17. 5^ .. d. 42. 8f 23. 4 14.11 24. 7 21. 10 22.11 •. d. 40. 5 21. 3 14.10 23. 5 24. 5 24. 6 *. d. 43- 2f 22. 4" 15. I 25- 3 27. 9 29. 9 Little besides the destruction of the Armada has hap- pened to give England access to the silver finds by which the sudden rise in prices, which we observe in the second column, is usually explained. True, some rich captures •were made. Elizabeth herself did not disdain partnership with the pirated fitted out from her shores. But the wealth gained by buccaneering and piracy is not of a lasting nature. Even the heavy contributions levied on the vanquished by the conquerors in our own days have but a fleeting effect. Prices do not rise permanently through such additions to the money stocks of a country. No other sources of increase of money are discernible in the financial history of the two decades following 1582, and yet prices of corn are nearly as high in the first decade as in the later period of the seventeenth century, when prices have reached their culminating point.* * The limited character of the foreign commerce of Great Britain in the ■early part of the seventeenth century can be estimated from the fact that in 1610 the imports and exports were ;^4,628,586. The customs collected were ;f 148,075, of which sum nearly three fourths were collected in Lon- don. Yet it is from foreign trading alone that an influx of specie could be 136 MONEY AND PRICES. There were, however, causes at work wjiich fully and satisfactorily explain the extraordinary rise in prices in the seventeenth century. The state of agriculture had not made any progress worth speaking of. With some notable exceptions in different parts of the kingdom, the people adhered closely to their old system of cultivation, and were as obdurate to the introduction of improve- ments as in the fifteenth and sixteenth centuries. Hart- lib, a Dutchman by birth, but settled in England, writing in the middle of the century, points out the defects of English husbandry. He says that old men in Surrey re- member the time when gardeners first came there and began to plant cabbages, cauliflowers, turnips, carrots, parsnips, early peas and rape, which up to that time were great rarities, but which were seen in England, having come from Flanders or Holland. The gardeners got land with difficulty, though they offered enormous rents for it,, the landowners imagining that the use of the spade would spoil the ground. " Even now," he goes on to say, " gar- dening and hoeing is scarcely known in the north and west of England, in which places a few gardeners might have saved the lives of many poor people, who have starved these dear years." (Here the writer refers to the five years, 1646 to 1650, in which a real famine prevailed.) Onions and hops were imported from Flanders, and " even plants which grow wild in our own hedgerows, but we are not at the pains to cultivate." Other writers, by the advice they give to farmers, show plainly enough the undeveloped state of agriculture and, in fact, of most of the industries of the country. England had made but slow progress in these, while commerce, trade, and bank- made available to bear on prices. See Thorold Rogers' History of Agri- culture and Prices in England, vol. v., p. 586. INCREASE OF TOWN POPULATION. 1 37 ing, along with stock-jobbing, began to attain a prominent position in the economic history of the country. By the end of the reign of James I. (1625) foreign commerce had grown to very nearly double what it was in 1604, if the increase in the revenue from customs is a proof.* The population, which, up to the middle of the reign of Elizabeth, had been rather stationary, grew rapidly. The towns, large consumers but not producers of food supplies, were extending in numbers and population. London, despite its extreme unhealthiness and filthiness, was rap- idly filling up. It had 500,000 inhabitants at the end of the century. The increase of population was especially noticeable in northern England. The emigration of religious exiles from Flanders and France made a con- siderable addition, and the development of the textile industries and the demand for English products .stimu- lated town population, and necessarily increased the demand for the products of agriculture. If to this be added the generally prevailing poor crop years,f inter- spersed with a number of years of actual dearth, and some of famine and plague, we have an explanation for the prevailing high prices, which is sufificient, and with which the monetary history of the century does not supply us. *" The customs in 1604 yielded ;^i27,ooo a year ; they rose to ^£'190,000 toward the end of the reign. The customs were supposed to amount to five per cent, of the value and vifere levied upon exports and imports." — Hume's History of England. f Hume, comparing his time with that of James I. , says : "The nation was still dependent on foreigners for their daily bread ; and though its ex- portation of grain now forms a considerable branch of its commerce, not- withstanding its considerable increase of people, there was, in that period a regular importation from the Baltic, as well as from France ; and if it ever stopped, the bad consequences were seriously felt by the nation. Sir Wal- ter Raleigh, in his Observations, computes that two millions went out at one time for corn." 138 MONEY AND PRICES. "We find a fair uniformity of average prices from about the year 1610 down to the beginning of the next century. In the prices of animals, meat, and farm products we see the same coincidence. II.— PRICES OF ANIMALS AND FARM-PRODUCTS FROM THE BEGINNING OF THE SEVENTEENTH TO THE BEGINNING OF THE EIGHTEENTH CENTURY. Oxen Sheep Saddle and coach-horses Boars Geese Farm Products, Wool, lb Cheese, lb Butter, lb Beef, stone, 14 pounds . . Tallow, cwt Eggs, per 120 Z40Z to 1540. 81 6. 176 25 I 0.8J o.i\ o.3| 1.6 .6f IS93 to 1602. s. d. 103.10 238.0 38.7 i.iii o.iof 0.8 0.2J 0.4 2.3 35-4i 3.7f 1603 to 1612. s. d. 129.8 9.10 236.2 40.9 24t 0.4 0.5 2.5f 3.3 x6z3 to 1652. J. d. 154.8 II. 5 298.0 53.0 2.3 I.O 3f 0.54 2.U 32.4 3.3 1653 s. d. 143-8 II. I 332.0 75-2 3-1 O.IO 0.3I 0.6 3.54 25.2 3-4 1693 to s. d. 166.8 II. o| 332.8 99.0 3-4 0.9 0.4J 0.6J 3-6 26.6i The rise in prices shown in this table is entirely in accord with the rise in the prices of animals, meat, and farm products with which our own people are familiar in sections of the country going through the same process of evolution as England was then passing through, and it is, indeed, entirely in keeping with the economic history of the world. The price of oxen in the first column is stated as 81 J. /^., instead of 6\s. gd., the price in the first table pre- sented by me, for the period 1401 to 1540. This is to bring the weight relation up to average weight of the STATIONARY PRICE OF WOOL. 1 39 beginning of the seventeenth century. The various state- ments as to the size of oxen in the former period and the abundance of testimony as to the size of the animals in the seventeenth century, fully explain this change of price, and show that the prices were nearly equal on the Taasis of weight. For the other animals quoted weights are not given. Hence, we have to make whatever mental