m ^^'' J :-<'««,- ,^S> ■WMMTi^ S ^i v°-Tl b";«\ ^'*^ i^^;?'?#yr >^A 'fi ••:% -■-i^^*; ^^^ ,%**-■ ''^Kj "f-"® Seft2 •*fi^ 55fj ifyr'«k f^S WlC%: :->)? rs>] ■.scrag'. a^: is>::x3 ^^^ •f«:^Ai^^Kft\ The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030184711 GOLD AND SILVER COMMISSION. fu^MT r^^_ F I E 8 T R E P O E T OF THB ROYAI. COMMISSION APPOINTED TO INQUIRE INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS;. With Minutes of Evidence and Appendices. ^rttfnitti to fiot\)Mm^ of parliament ftp Commanli of ^tv iWaiesftp. LOjNDON: PRINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYRE AND SPOTTISWOODE, PKINTEKS TO THE QUEEN'S MOST EXCELLENT MAJESTY. And to be purchased, either directly or through any Bookseller, from EYRE AND SPOTTISWOODE, East Haeding Street, Fleet Stbeet, E.O., and 32, Abingdon Steeet, 'Westminsteu, S.W. ; or . ADAM AND CHARLES BLACK;, 6, Noeth Bridge, Edinburgh ; or HODGES, FIGGIS, & Co., 104, Grafton Street, Dublin. 1887. [C— 5099.] Price is. -id. GOLD AND SILVER COMMISSION. FIRST REPORT OP THE W4-fi^^-R0TAL COMMISSION APPOINTED TO INQUIRE INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS ; With Minutes of Evidence and Appendices. ^vt^mteli to Iiotj^ |@ou!»£0 of ^avliammt tr* ^ommavHi of ^ev Mamtv* LONDON: PRINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYRE AND SPOTTISWOODE, PRINTEES TO THE QUEEN'S MOST EXCELLENT MAJESTY. And to be purchased, either directly or through any Bookseller, from EYRE AND SPOTTISWOODE, East Haeding Steeet, Fleet Stbeet, E.G., and 32, Abingdon Steeet, Westminster, S.W. ; or ADAM AND CHARLES BLACK, 6, North Beidge, Edinbuegh; or HODGES, PIGGrlS, & Co., 104, Grafton Street, Dublin. 1887. " [0.— 5099.] Price 4«. Ad. ^ TABLE OF CONTENTS. EOTAL COMMISSIONS - " I | « r-, ' • ; V ii„J tDu u/i S" FIRST EEPORT - - - Xi— _i___^ LIST OF WITNESSES EXAMINED viii NOTES OF EVIDENCE 1 LIST OF APPENDICES 305 APPENDICES - 306 ANALYSIS OF EVIDENCE 360 ROYAL C ]\1 M I S S I N S. VICTORIA R. Victoria, by the Grace of God of the United Kingdom of Great Britain and Ireland Queen, Defender of the Faith. Cj3 Our right trusty and well-beloved Councillor Arthur James Balfour, Our Secretary for Scotland ; Our right trusty and well-beloved Councillor Joseph Chamber- lain ; Our trusty and well-beloved Charles William Fremantle, Esquire, Companion of Our Most Honourable Order of the Bath (commonly called the Honourable Charles William Fremantle) ; Our trusty and well-beloved Sir John Lubbock, Baronet ; Our trusty and well-beloved Sir Thomas Henry Farrer, Baronet ; Our trusty and well- beloved James Richard BuUen Smith, Esquire, Companion of Our Most Exalted Order of the Star of India ; Our trusty and well-beloved David Miller Barbour, Esquire ; Our trusty and well-beloved John William Birch, Esquire ; Our trusty and well- beloved Lionel Louis Cohen, Esquire; Our trusty and well-beloved Leonard Henry Courtney, Esquire ; and Our trusty and well-beloved William Henry Houldsworth, Esquire, greeting. 2128bf rtas« it has been represented unto Us that it is expedient that a Commission should forthwith issue to inquire into the recent changes in the relative values of the precious metals shown by the decrease in the gold price of silver. ^Ohj fettOU) pe, that We, reposing great trust and confidence in your knowledge and ability, do by these Presents authorise and appoint you the said Arthur James Balfour ; Joseph Chamberlain ; Charles William Fremantle (commonly called the Honourable Charles William Fremantle) ; Sir John Lubbock ; Sir Thomas Henry Farrer ; James Richard BuUen Smith ; David Miller Barbour ; John William Birch ; Lionel Louis Cohen ; Leonard Henry Courtney ; and William Henry Houldsworth to be Our Commissioners for the purposes of the said inquiry. ^nlJ We do hereby enjoin you, or any five or more of you, to investigate the causes of the said' recent changes in the relative values of the precious metals, and especially to inquire whether the said changes are due — (1 .) To the depreciation of silver ; or (2.) To the appreciation. of gold ; or (3.) To both these, causes. 5f you should find the said changes to be due to the depreciation of silver, you will then inquire whether such depreciation arises from increase of supply or diminu- tion of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. Jf you should find the changes to be due to the appreciation of gold, you will inquire whether the appreciation arises from the diminution of supply or from increase of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. l^abUtQ; regard to these different causes and their respective effects, you will next inquire what has been the bearing of the changes in the value of the precious metals on the following matters of practical business : — I. India: (a.) Upon the remittances of the Government of India : (1.) For payments on old or fixed contracts. ' (2.) For payments on new or current contracts. (b.) Upon the persons in India who have to make remittances home in gold, (c.) Upon the producers, merchants, and taxpayers of India. (d.) Upon merchants and manufacturers at home who trade with India. o 24358. Wt. 6586. a 2 IV COMMISSIONS. II. The United Kingdom : (a.) Upon tlie trade of the United Kingdom with other silver-using countries. (h.) Upon the foreign trade of the United Kingdom generally, (c.) Upon the internal trade and industry of the United Kingdom. 5f you should come to the conclusion that the aforesaid changes in the values of the precious metals are causing permanent or important evils or inconveniences to any of the interests above referred to, it will be your duty then to inquire whether it is possible to suggest any remedies within the power of .the Legislature or the Grovern- ment, by itself or in concert with other Powers, which would be effectual in removing or palliating the evils or inconveniences thus caused without injustice to other interests, and without causing other evils or inconveniences equally great. iCasStlp, if you are of opinion that this is possible, you will state the precise form which such remedies should take, and the manner in which they should be applied. 9iViii for the better effecting the purposes of this Our Commission, We do by these Presents give and grant unto you, or any five or more of you, full power to call before you such persons as you shall judge likely to afford you any information upon the subject of this Our Commission ; and also to call for, have access to, and examine all such books, documents, registers, and records as may afford you the fullest information on the subject ; and to inquire of and concerning the premises by all other lawful ways and means whatsoever. 9itttl We do further by these Presents authorise and empower you, or any five or more of you, to visit and personally inspect such places in Our United Kingdom as you may deem expedient for the more effectual carrying out of the purposes aforesaid. 9[nl( We do by these Presents will and ordain that this Our Commission shall continue in full force and virtue, and that you, Our said Commissioners, or any five or more of you, may from time to time proceed in the execution thereof, and of every matter and thing therein contained, although the same be not continued from time to time by adjournment. 9il\ii We do further ordain that you, or any five or more of you, have liberty to report your proceedings under this Our Commission from time to time, if you shall judge it expedient so to do. Slntr Our further will and pleasure is that you do, with as little delay as possible, report to Us, under your hands and seals, or under the hands and seals of any five or more of you, your opinion upon the several matters herein submitted for your consideration. SlnlJ for the purpose of aiding you in such matters, We hereby appoint Our trusty and well-beloved Greorge Herbert Murray, Esquire, to be Secretary to this Our Commission. Given at Our Court at St. James's, the Twentieth day of September one thousand eight hundred and eighty-six, in the Fiftieth year of Our Reign. By Her Majesty's Command. HENRY MATTHEWS. COMMISSIONS. V II. riGTOBIA R. ^Pl'cton'a, by the Grace of God of tte United Kingdom of Great Britain and Ireland Queen, Defender of the Faith. Co Our right trusty and well-beloved Councillor Farrer, Baron Herschell ; Our right trusty and well-beloved Councillor Joseph Chamberlain ; Our right trusty and weU-beloved Councillor Sir Louis Mallet, Knight, Companion of Our Most Honourable Order of the Bath ; Our right trusty and well-beloved Councillor Arthur James Balfour ; Our right trusty and well-beloved Councillor Henry Chaplin ; Our trusty and well-beloved Charles "William Fremantle, Esquire (commonly called the Honourable Charles William Fremantle), Companion of Our Most Honourable Order of the Bath ; Our trusty and well-beloved Sir John Lubbock, Baronet ; Our trusty and well-beloved Sir Thomas Henry Farrer, Baronet ; Our trusty and well-beloved David Miller Barbour, Esquire, Companion of Our Most Exalted Order of the Star of India ; Our trusty and well-beloved John William Birch, Esquire ; Our trusty and well-beloved Lionel Louis Cohen, Esquire ; Our trusty and well-beloved Leonard Henry Courtney, Esquire ; and Our trusty and well-beloved Williaim Henry Houldsworth, Esquire, greeting. W!Af)tVt^& We did, by Warrant under Our Royal Sign Manual, bearing date the twentieth day of September one thousand eight hundred and eighty-six, authorise and appoint Our i-ight trusty and well-beloved Councillor Arthur James Balfour, Our then Secretary for Scotland, together with the several gentlemen therein mentioned, or any five or more of them, to be Our Commissioners to inquire into the recent changes in the relative values of the precious metals shown by the decrease in the gold price of silver. ^OU) fenoh) pt, that We have revoked and determined, and do by these presents revoke and determine, the said Warrant, and every matter and thing therein contained. 9[nlJ whereas We have deemed it expedient that a new Commission should issue for the purposes specified in such WaiTant of the twentieth day of September one thousand eight hundred and eighty-six. Jfurtbf I' felioiu pt, that We, reposing great trust and confidence in your ability and discretion, have appointed, and do by these Presents nominate, constitute, and appoint, you the said Farrer, Baron Herschell ; Joseph Chamberlain ; Sir Louis Mallet ; Arthur James Balfour ; Henry Chaplin ; Charles William Fremantle (com- monly called the Honourable Charles William Fremantle) ; Sir John Lubbock ; Sir Thomas Henry Farrer ; David Miller Barbour ; John William Birch ; Lionel Louis Cohen; Leonard Henry Courtney; and William Henry Houldsworth to be Our Commissioners for the purposes of the said inquiry. 9inti We do hereby enjoin you, or any five or more of you, to investigate the causes of the said recent changes in the relative values of the precious metals, and especially to inquire whether the said changes are due — (1.) To the depreciation of silver ; or (2.) To the appreciation of gold ; or (3.) To both these causes. If you should find the said changes to be due to the depreciation of silver, you will then inquire whether such depreciation arises from increase of supply or diminution of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. 5f you should find the changes to be due to the appreciation of gold, you will inquire whether the appreciation arises from the diminution of supply or from increase of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. VI COMMISSIONS. I^abing regard to ttese different causes and their respective effects, you will next inquire what has been the bearing of the changes in the value of the precious metals on the following matters of practical business : — , I. India : {a.) Upon the remittances of the Government of India : (1.) For payments on old or fixed contracts. (2.) For payments on new or current contracts. (h.) Upon the persons in India who have to make remittances home in gold. (c.) Upon the producers, merchants, and taxpayers of India. {d.) Upon merchants and manufacturers at home who trade with India. II. The United Kingdom : (a.) Upon the trade of the United Kingdom with other silver-using countries. (b.) Upon the foreign trade of the United Kingdom generally. ^ (c.) Upon the internal trade and industry of the United Kingdom. . M you should come to the conclusion that the aforesaid changes in the values of the precious metals are causing permanent or important evils or inconveniences to any of the interests above referred to, it will be your duty then to inquire whether it is possible to suggest any remedies within the power of the Legislature or the Govern- ment, by itself or in concert with other Powers, which would be effectual in removing or palliating the evils or inconveniences thus caused without injustice to other interests, and without causing other evils or inconveniences equally great. iLaStlp., if you are of opinion that this is possible, you will state the precise form which such remedies should take, and the manner in which they should be applied. ^nlj for the better effecting the purposes of this Our Commission, "We do by these Presents give and grant unto you, or any five or more of you, full power to call before you sucli persons as you shall judge likely to afford you any information upon the subject of this .Our Commission ; and also to call for, have access to, and examine all such books, documents, registers, and records as may afford you the fullest information on the subject ; and to inquire of and concerning the premises by all other lawful ways and means whatsoever. 9[n3j We do further by these Presents authorise and empower you, or any five or more of you, to visit and personally inspect such places in Our United Kingdom as you may deem expedient for the more effectual carrying out of the purposes aforesaid. 9il\^ We do by these Presents will and ordain that this Our Commission shall continue in full force and virtue, and that you. Our said Commissioners, or any fi.ve or more of you, may from time to time proceed in the execution thereof, and of every matter and thing therein contained, although the same be not continued from time to time by adjournment. 9[ntl We do further ordain that you, or any five or more of you, have liberty to report your proceedings under this Our Commission from time to time, if you shall judge it expedient so to do. ^Ulj Our further will and pleasure is that you do, with as little delay as possible, report to Us, under your hands and seals, or under the hands and seals of any five or more of you, your opinion upon the several matters herein submitted for your consideration. ^nlJ for the purpose of aiding you in such matters. We hereby appoint Our trusty and well-beloved George Herbert Murray, Esquire, to be Secretary to this Our Commission. ' Given at Our Court at St. James's, the Sixth day of May one thousand eight hundred and eighty-seven, in the Fiftieth year of Our Reign. By Her Majesty's Command. HBNEY MATTHEWS. aOLD AND SILVEE COMMISSION. FIRST REPORT. TO THE QUEEN'S MOST EXCELLENT MAJESTY. May it please Your Majesty, We, the undersigned Commissioners appointed to inquire into the recent changes in the relative values of the precious mefcals, desire humbly to submit to Your Majesty the following Repoi-t of the steps which have been taken up to the present date to prose- cute the inquiry entrusted to us. Twenty-four meetings have been held, and twenty witnesses have been examined, notes of whose evidence, with other information i^lating thereto, are appended. Following the line of inquiry indicated in the terms of our reference, the investiga- tion was commenced by obtaining such information as was available with regard to the supply of, and the deniand for, the precious metals. The Commission then proceeded to consider how far the conclusions which might be drawn from these statistics were supported by other indirect evidence, such as the prices of commodities. These two branches of the inquiry occupy the first seven days of the accompanying notes of evidence. Representations were next invited from those whose interests were said to have been adversely affected by the recent changes in the relative values of the precious metals, or who desired to suggest remedies for the evils alleged to exist. Their evidence falls under the following heads : — (a.) The position of the Groverntnent and people of India ; (&.) The interests of merchants trading with India, China, and other silver-using countries ; (c.) The effect upon the general trade and industry of the United Kingdom ; and (d.) The remedies which have been proposed. We have not completed our inquiry into any of the matters specified above ; and it will be observed that a large portion of the evidence already taken represents opinion on one side only of the questions at issue. This is more particularly the case with regard to those witnesses who have appeared before us to suggest remedies. We shall endeavour at an early date to obtain the evidence of competent witnesses who take an opposite view ; and we may find it necessary to take further evidence on some or all of the points above mentioned. But we have, nevertheless, thought it desirable to submit this preliminary report of our proceedings so far as we have been able to carry them at present. All which we humbly submit for Your Majesty's gracious consideration. (Signed) HERSCHELL. D. BARBOUR. J. CHAMBERLAIN. J. W. BIRCH. LOUIS MALLET. LIONEL L. COHEN. ARTHUR JAMES BALFOUR. LEONARD COURTNEY. HENRY CHAPLIN. W. H. HO ULDS WORTH. C. W. FREMANTLE. T. H. FARRER. JOHN LUBBOCK. 10th June 1887. GEO. H. MURRAY, Secretary. Vlll LIST OF WITNESSES. Date. Name. Page. Date. Name. Page. 1886. 1887. November 19 Mr. R. H. Inglis Pal- 1 February 15 Mr. H. Wateefield, C.B. 122 » 25 GEAVE, F.E.S. Mr. S. PiXLEY 8 j> 18 Mr. P. F. TiDMAN, C.M.G. 137 )j >» Sir Hector Hat - 13 )) 25 Mr. H. H. GiBBS 147 ?) 26 Mr. E, GiPFEN 19 » 28 Mr. A. D. Peovand, M.P. 159 December 3 j> )> " 34 March 4 Mr. H. H. GiBBS 171 » 8 Mr. A. Sauekbeck 47 April 26 }> n 183 !> J) Mr. D. M. Bakeode, C.S.I. 57 >' 29 Professor J. Shield Ni- 193 ?? 9 Professor Roberts Aus- TEi^, F.R.S. 62 May 6 cholson. » Mr. H. R. Geenfell 213 >5 » Mr. J. W. Birch 67 5> 9 Mr. H. H. Gibes 228 3J 13 Mr. Samuel Smith, M.P. 241 1887. February » 1 4 8 Mr. S. Montagu, M.P. - Mr. H. Wateefield, C.B. Mr. J. K. Btthbll 71 77 92 !J 91 9) 16 » 20 Mr. David McLean Mr. H. H. Gibbs Professor J. Shield Ni- cholson. 257 261 275 )j 11 Mr. J. Talboys Wheelee 108 ?J 23 Mr. H. H. Gibbs 293 » J) Mr. RoBEET Barclay 110 )> J) Mr. Samuel Smith, M.P. 300 NAMES OP WITNESSES IN ALPHABETICAL ORDER. * Page Page Professor Roberts Austen, F.R.S. - - 62 Mr. S. Montagu, M.P. - 71 Mr. D. M. Barbour, C.S.I. - 57 Professor J. S. Nicholson 198, 275 Mr. Robert Barclay - 110 Mr. R. H. Inglis Pai.geave, F.R.S. 1 Mr. J. W. BiECH - 67 Mr. S. PixLEY 8 Mr. J. K. Bythell - - - - 92 Mr. A. D. Peovand, M.P. - - 159 Mr. H. H. Gibbs - 147, 171, 183, 228, 261, 293 Mr. A. Saueeeeok - 47 Mr. R. GiFPEN 19, 34 Mr. Samuel Smith, M.P. 241, 300 Mr. H. R. Geenfell - - - - 213 Mr. P. F. TiDMAN - - 137 Sir Hectoe Hay - 13 Mr. H. Wateefield, C.B. 77, 122 Mr. D. McLean - 257 Mr. J. Talboys Wheeler - 108 MINUTES OF EVIDENCE TAKEN BEKOBE TH^ ROYAL COMMISSION ON GOLD AND SILYEE. At 8, Richmond Terrace, Whitehall, London, S.W. Friday, November 19th, 1886. PRESENT : The Right Hon. A. J. BALFOUR, M.P., the Chairman, presiding. Mr. D. M. Barbour. Mb. J. W. Birch. Mr. Lionel L. Cohen, M.P. Sir T. H. Pabrer, Baet. Mr. C. W. Fbemantle, C.B. Me. W. H. Houldsworth, M.P. Me. J. R. BuLLEN Smith,, C.S.T. Mb. Geo. H. Murray, Secretary. Mr. R. H. Inglis Palgrave, F.R.S., examined. 1. (^Chairman.) The Commission propose to ask you some questions with regard to that part of the memorandum -which you laid before the Commission on Trade which relates to the supply of the precious metals. Could you inform us of the circumstances under which you prepared the memorandum, and more especially that portion of the memorandum ? — The memorandum was prepared at the request of a sub- committee of the Commission on Depression of Trade which was appointed to consider the currency question. They recommended to the Commission that I should prepare this memorandum, and it was formally accepted and endorsed by the Commission and by Lord Iddes- leigh, the Chairman of it. 2. Could you tell us the steps you took to prepare it ? — A considerable part of the information contained in it is derived from a recent work by Dr. Soetbeer. I received a great deal of assistance from Mr. Fre- mantle and others for the portion which refers to England ; from the India Office ; from M. Leon Say and M. de Foville for the portion referring to France. The names of those from whom the information is derived are mentioned in the memorandum. 3. Then perhaps you could explain more particu- larly to the Commission the ground which il is intended to cover, and the lines of inquiry which in your opinion it opens out ?— It was intended to be a ground work to show the lines upon which such an inquiry should be founded. It was not intended to be a complete inquiry in itself, but simply to point out the lines upon which the inquiry should be made. 4. Then could you tell us to what lines of inquiry you'think it specially points for further investigation ? —Particularly as to the effect on prices of the altera- tion in the use of the gold standard throughout Europe and in America. I think that is the next point for inquiry. o 24358. ' 5. You mean that having determined the supply of the precious metals, the next point we shall have to determine will be the effect on prices j" — The first point I considered I had to determine was whether there had been a drop in prices or not, and for that purpose I arranged various index numbers. Those index numbers showed that there had been a drop in prices both in Europe and in America. A further question is how far that drop in prices is attributable to the alteration in the use of the gold standard^ and how far it is referable to other causes. In my opinion it is only a comparatively small part of the drop in prices which is attributable to the appreciation of the standard, 6. Without going into the questiou of prices, which we thought we would defer till a later stage of our inquiry, could you explain a passage in sub-section 7, at the bottom of page 323. It would appear from that subsection 7 that after the year 1640 the amount of gold and silver in existence largely increased, but that that increase was only adequate and not more than adequate to maintain prices at their former level? — Yes. That fact is shown by the price of wheat remaining nearly uniform, on an average, throughout the 17th and 18th centuries. Yom- question is now, how the equilibrium came to be altered ? 7. No, before getting to that, is it not an interesting fact that while the supply of the precious metals largely increased during that time, prices notwithstanding were not affected, ifou would consider that that is a fact proved with reference to the price of wheat more espe- cially, but also with reference to other commodities ? — I cannot speak of other commodities. 8. Would you consider the price of wheat a fairly sufficient indication of the equilibrium in prices ? — Yes, I think so at that period. A Mr. R. a. Inglis Pal- grave, F.H.S. 19 Nov. 1886. ROYAL COMMISSION ON GOLD AND SILVER: Mr. U. IT. 9. How is tiie fact accounted for that in spite of Ingiis Pal- the increase of precious metals, the prices did not rise ? grave, F.E.S. — That is partly to be accounted for, I presume, owing to the annual loss by abrasion, the export of gold and 1 9 Nov. 188 6. .jjj^gj.^ chiefly silver, to India, the consumption of gold and silver in use and ornament. 10. But is it not your opinion that the head 3 mentioned in that subsection is probably the most important one to be borne in mind in explaining the fact that while the currency increased prices did not alter ? — I think it was the opinion of Mr. Nevy march, who wrote the paragraph to which you refer, that at that period the consumption of the precious metals nearly balanced the production of them, which would account for the circumstance. 1 1 . Then, in your opinion, the head 3 in that sub- section was not very material in maintaining the equili- brium ? — I think head 3 mainly refers to the supply of silver. 12. It does not refer to silver alone, I think ? — It mainly refers to silver. The supply of gold at that time, I think, was not very large. I am now speaking from memory, but there was no rise of prices till the year 1570. 13. But I am talking of the period subsequent to 1640 ? — The statement is that by 1640 there had been a rise of prices of 200 per cent., and that the increase in gold and silver in that time, as compared with the stock known to be in existence when America was discovered, was about 600 per cent. 14. {Mr. Cohen.) You would not consider now that wheat is a sufficient indication of the equilibrium in prices ? — I think the price of wheat would be, taken over a series of years, as fair an indication of the purchasing power of the standard of value in England, and also to a great extent in France, as can be obtained from observing the price of a single article. Of course, the efEect of the Customs duties on prices must also be considered. 15. {Chairman.) Taking those two paragraphs of your memorandum together, (namely, subsections 6 and 7 at the foot of page 323), you will observe that we have the fact that the average annual supply of gold and silver was after 1640 twice as great as the average annual supply before 1640, but that, nevertheless, while before 1640 prices rose rapidly, after 1640, in spite of this increased supply, prices remained steady for upwards of a century. That is the fact that is brought out by those two paragraphs taken together, and what I want you to give to the Commission is your opinion as to the inference, if any, which may be drawn from them ?^The inference which I draw from them is this, that you cannot clearly connect in an absolute proportion an increase of the stock of the precious metals with an alteration in prices. As I mentioned, the increase in gold and silver had been 600 per cent., but the rise in prices had been only 200. The whole state of commerce and of the world was so different at that period from what it is now, that I do not think that it is any use trying to gather information from what occurred then, which would be of service at the present time. 16. But as prices owing chiefly to the increase of commerce and of population, only maintained their equilibrium in the face of an enormous augmentation of the supply of metals for more than a century, is not the inference that at any other period, when commerce and population are increasing, unless the supply of pre- cious metals undergoes great augmentation, you will have a fall in prices. I do not know if I have put that clearly, but that is an inference that might be drawn from those two paragraphs ? — Yes, it might be drawn. At the same time you have to remember that the credit system and the use of book credits did not exist at that period. When I say did not exist I mean that they existed only in a very modified form at that period, and therefore the increase in the stock of the precious metals would have a totally difierent effect upon prices from what it would have at a time when such a system was in full operation. 17. But my question is, must not the precious metals go on rapidly increasing, judging from those instances, if you are to keep prices in equilibrium? — Yes, but then there are a great many other things that have to come into consideration, such as the rapidity of the turnover of the money used. ly. Do you think it possible that the machinery of exchange may be so far improved in the future as to make up the deficiency .-' Could you give a conjecture as to the possibility of making up any deficiency in the supply of precious metals from mines ? — I am always averse to attempting to prophesy in such matters. I could imagine such a thing possible. 19. {Mr. Cohen.) One question in coimexion with the export of gold to India. • I should like to ask whether you are aware of any of your figures in that respect having been challenged, as to the absorption of gold in India ? — I am not aware of it. They were the Indian official figures. 20. {Mr. Birch.) With regard to the former question, I infer that you think the period named here can bear no comparison with what is happening in the present day ? — You can scarcely make any comparison ; the genei'al circumstances of trade and life are so different now from what they were then. 21. ( Chairman.) I come now to table 5, production of the precious metals. The table you have put in here is, I think, one compiled by Dr. Soetbeer ; is not that so ? — Yes. 22. What other estimates of the production of the precious metals besides Dr. Soetbeer's are there ?—. There are a great many. There is one prepared by Sir Hector Hay. Between that and Dr. Soetbeer's there are various differences. Dr. Soetbeer explains this by saying that Sir Hector Hay has under-estimated the production in South America and other countries, but as I understand the Commission will invite Sir Hector Hay to appear before them, he will doubtless explain to them upon what basis he formed his estimate. 23. Can you explain the principles on which Dr. Soetbeer and Sir Hector Hay have respectively based their estimates ? — I understand Dr. Soetbeer to have availed himself of the official estimates that are found in various countries. 24. {Mt'. Cohen.) I understood that there are no such data in any countries as to actual production ; that they can only measure it by the. export from those countries and the amount used in those coun- tries ? — I have no doubt that these estimates are all more or less matters of conjecture, so far as they refer to production and also to consumptioi}, except for the mere statistics of coinage, and not more than that. 25. {Chairman.) But estimates may be a matter of conjecture and yet the limit of error may be com- paratively so slight that conclusions may be legiti- mately founded upon the estimates. Can you tell us whether you think that Dr. Soetbeer's estimates are of that kind ? — I think Dr. Soetbeer's estimates of the production of the precious metals and of the use of the precious metals for coinage purposes may be depended on as far as such estimates can be. His estimate of the gold available for the supply of coinage has appeared to me to rest more on a conjectural basis than the estimates of the quantities produced and employed for coinage. Take Dr. Soetbeer's estimate of the supply available for coinage during recent quin- quennial periods. He estimates the supply for the years from 1851 to 1860 to be 22,780,000/.; that is annually From 1861 to 1870, 14,060,000/.; from 1871 to 1880 10,255,000/. ; from 1881 to 1884, 4,050,000/. These are the annual averages of the available supply given by Dr. Soetbeer when the weight of gold which ho mentions is reduced into sterling value. Considering that those figures were very small, I applied to Mr. Stewart Pixley, who furnished me with an estimate which, when it is reduced to the same form for quin- quennial periods, which in Mr. Pixley's case run from the year 1852 onwards, gives for the first period, 1852 to 1860, 27,600,000/. ; for the second, 1861 to 1870 17,600,000/. ; for the third, 1871 to 1880, 18,700,000/ ' and for the last, 1881 to 1885, 11,200,000/. MINOTES OP EVIDENCE. 26. Has Mr. Pixley followed a different method of investigation from that adopted by Dr. Soetbeer ? — As far MS I understand Mr. Pixley ho followed an identical method ; I mean, he had allowed for the same causes. 27. Does Mr. Pixley give any explanation of the difference of the conclusion which he has arrived at from tnat arrived at by Dr. Soetbeer ? — No, T have not obtained any explanation from him. 28. So that we have no means of determining or conjecturing which is the most trustworthy investiga- tion? — ^Well, my own opinion is that Mr. Pixley's is more liliely to be nearer the truth. 29. Perhaps you will put in Mr. l^ixley's ? — I will put in both the figures and an estimate of production and the exports to India in the same form. Estimate of Production of Gold, Dr. Soetbeer. Yearly average. Years. £ 1851-60 1861-70 1871-80 1881-84 - 28,650,000 - 26,600,000 - 23,000,000 - 19,500,000 Exports to India. Yearly average. Yeai-s. £ 1851-60 - 1861-70 - 1871-80 1881-84 - - 2,140,000 5,900,000 - 1,470,000 - 4,700,000 Gold available for the supply of Coin. Estimates of yearly average. Dr. Soetbeer. Years. 1857-60 - 1861-70 1871-80 1881-84 - £ 22,780,000 14,060,000 10,255,000 4,050,000 Gold available for the supply of Coin. Estimates of yearly average, Mr. Stewart Pixley. Years. 1852-60 - 1861-70 1871-80 - 1881^85 - £ 27,600,000 17,600,000 18,700,000 11,200,000 30. ( Chairman.) Have you any general conclusions other than those contained in your memorandum which you draw from the infornjation available with regard to the production of the two metals ?— I do not think there is anything further. The production of gold has distinctively been less, and of silver it has been more. 31. Then what interpretation do you place upon the fact which I think is brought out upon page 326, that while the stock of silver is less than it was in 1850, tiie price is low er, the consumption is in excess of the recorded supply, and the pi'oduction greater? — 1 sup- pose by consumption you mean the use for coinage. 32. The use for coinage ; but that of course makes the fact even more remarkable, because there are other modes of consumption .' — This statement of mine compares the coinage as against the production without making any de ascertain how much they have produced, it is to the interest of those mining companies to exaggerate their production a Uttle, whereas when they send their bullion by Messrs. Wells, Fargo, and Co., all the different mines would declare the actual values. ■ The minmg companies would not wish to pay freight on more than the actual value, and on the other hand they would notlike to declare a less sum because they are insured in the same way, and therefore I think that Wells, Fargo, & Co.'s estimate is more likely to be correct than that of the United States Mint Director. 300. Do you think that the figures of the Australian Mint are liable to the same source of error with the United States ? — I think not. 301. Why not ? Would not the mining companies have the same motive to ex^,ggerate their production as the United States ? — They would have, but I do not think that would be carried to the same extent as in America. 302. Then I understand the United States estimate is not an official one ; the Australian one is an ofiicial one ? — That is so. 303. Then Mexico, and South America ? — It is a very difiicult thing to say hovr that is arrived at. A great deal comes from the Director of the United States Mint, and .Dr. Soetbeer's reports, and from a number of other quarters. I have sent round to the Consuls of the different States, and got from some of them estimates, and from others none at all. I judge that my estimate as to Mexico and South America is pretty nearly correct, though not so large as that, of Dr. Soetbeer and of the Director of the United States Mint, for this reason, that I believe at least seven-eighths of the production of silver and gold in those countries, with the exception mentioned below, come to England; and on comparihg the amounts estimated by. Dr. Soetbeer and the United States Mint I find a great discrepancy. The excep- tion is that about half of the silver coinage of Mexico (which is almost equivalent to the production) goes to San Francisco, and, making allowance for that, I think the figures I have taken nearly represent the production of the mines. 304. One of your sources of information was the Report of the United States Director of the Mint ? — Yes;, the United States Government instructs its t^presentritives in different States to make inquiries, 14 ROYAL COMMISSION ON GOLD AND SILVER: Sir H. Hay. 25 Nov. 1886. and there are reports given by those consuls and ministers in different places. I have taken the figures they have given where the United States Mint Director has taken them. 305. The United States Mint Director simply makes an estimate from the same sources of information that you have open to you ? — In fact, the United States have better, because the United States Government commission their representatives in different States to make the inquiries. 306. The United States Mint has no direct interest in anything the mining companies may do ; the money does not come direct to it ? — Oh, no ; it inquires what is the production and the amount of the coinage. 307. Does your estimate differ materially from the United States Mint ? — Yes, it does. It is below. 308. Have you modified yours in accordance with the estimate of the United States Mint ? — I have to some extent, because in the first estimate that I made, I probably did not make sufiicient allowance for the smaller States in South America, the quantities they might have of silver or gold, and I have seen reason to increase the proportion in those tables. 309. I suppose your method of procedure has been to take facts from official sources in certain States where you could get them, and where you could not get them to make a guess, founded on the facts obtained from States from which you could get information ? — Ilcs, and also we have some idea of the amounts produced by the amounts brought to this country from those countries. That is to say, leaving Mexican dol- lars out of the question for a moment, seven-eighths of the silver produced in Mexico and South America come to this country, I can ascertain from the Board of Trade returns and otiier means the amount of gold and silver received here from those countries. 310. Do the Board of Trade returns distinguish the country from which the bullion comes?— They include Mexico and South America, with the exception of Brazil, in one amount. 311. Is that a large exception ? — ]S"o, it is very small comparatively, only about a quarter of a million ' a year in gold ; no silver. 312. (Mr. Birch.) There would be no difficulty by the ship's manifest in obtaining the information as to whence it comes ? — Oh, no, none whatever ; in fact, at the Custom House they have all those figures. 313. {The Chairman.) You have not thought it necessary to correct the Board of Trade returns; they are adequately trustworthy ? — As much so as any statistics can be. You can never make people declare the exact value. It is sometimes the interest of the shipper and consignee to declare under, and sometimes over, value. You cannot get that with any accuracy. If you are within a million in the year you may think yourself fortunate. 314. I understand your general method of procedure has been this : You have formed an estimate from official sources of what is produced in Mexico and South America ; you have corrected that by an entirely different calculation founded on the theory that seven- eighths of what is produced has come to this country ; you have further corrected your result by the figures given by the United States Mint, and those arrived at by Dr. Soetbeer, and this column 3 that we have shows the general conclusion at which you have arrived ? — That is so. 315. Is that above or below the estimate of Dr. Soetbeer? — Below. In point of fact. Dr. Soetbeer, to a great extent, goes entirely upon the United States Mint report. I think the figures are identical in a great many instances. 316. You think he has not made an independent inquiry in the manner that you have inade ? — No. 317. So that practically the United States Mint and Dr. Soetbeer do not come to us as two authorities but as one authority ? — I think so, except that in Dr. Soetbeer's book there are a great many things they have not in the United States Mint .Report. The coinage in the different countries he gives, but the United States Government does not. 318. Then your next column is Eussia. What is your source of information with regard to Russia ? — To some extent I think that was originally from the United States Mint, but I took means to compare it with other estimates, and I found in some work, which 1 cannot remember for the moment, what was the total amount of gold raised in Russia in a series of 10 years, 1868 to 1877, and took an average of those 10 years. Then for a more recent date I wrote to the Consul General for Eussia, and he sent me the official figures for, I think, two or three years up to 1882, and said that he had no other particulars ; he could not give anything later. / " 319. I see 1883, 1884, and 1885 you have put down 5,000,000Z. i" — ^An even sum, because I estimated that if it was between 4,500,O00Z. and 5,500,000/. we might take the average as being a fair estimate. 320. So that your figures for Eussia are partly an estimate founded on an average of years, are partly taken from the United States Mint report, and partly from some information which the Russian Consul General has furnished you ? — Yes, that is so. 321. The last column is " other countries." The amount is not very great ; could you tell us from what source you obtained it? — To a great extent from Dr. Soetbeer. Of course, with regard to Germany, for instance, we must assume that he is the best authority, and with regard to Austria also, and there is very little gold produced anywhere else except in those two. 322. There is some in India, is there not ? — Well, I do not think much of Indian gold mines. 323. You do not think that India has a future as a gold-producing country ? — I will not say that exactly, I have not much confidence in them. 324. You do not think that mines known of and already open largely increase the production ? — No. 325. Because one witness told us that good autho- rities anticipate a large increase in the production of gold in India and the Cape ? — ^Yes, I have no doubt about the Cape. I have never been in India, and I have no means of knowing. 326. He was not referring to mines undiscovered, but mines discovered ? — It is impossible to say what may be discovered, but one would imagine that they would have known something about them by this time. 327. Have you anything to say as to the production of Queensland ? — Queensland has greatly increased of late years, very largely indeed, otherwise the Australian report would be much less than it is, because New South Wales and Victoria have both fallen off in production. 328. I see you have put down the last four years under the head of other countries at a similar round sum, so I suppose it is very conjectural "i- — Very ; at the same time I have no doubt it is within a few hundred thousand pounds either way, and it is im- possible to go nearer, I think. 329. Of course, you would admit that there are certain sources of error applying to all those tables, and therefore, to the total result ? — Yes. 330. Could you give us any conjecture as to the margin of error that there is likely to be ? — Well, supposing we were to say 10 per cent. 331. Would you say 10 per cent, was the outside? — I should think so. I have not considered the subject, but speaking ofi'-hand, I should say the error would not exceed 10 per cent. 332. This is all I want to ask you about the pro- duction of precious metals for the moment. Now, can you tell us anything with regard to the consump- tion ? — Yes, I have been making inquiry about that. You are speaking now of consumption for purposes other than coinage ? 333. Well, we might classify consumption under the heads of coinage, industrial purposes, wear and tear, and hoarding. Taking coinage first ? — Those are official figures. MINUTES OF EVIDENCE. 15 334. You have y^wen here the coinage in sovereigns IQ England and Australia. Those, I presume, are taken direct from official sources easily accessible ? — Yes. 335. Have you any similar facta with regard to other countries? — In continuation of the coinage columns you have the coinage of all the chief European countries. 336. The United States ? — That is from their own reports, from the Mint reports : that mugt be exact, ' because it gives the number of pieces. 337. Germany ? — That is from the official returns of the German Mint. 338. Russia ? — Well, that is not so certain ; I think I got those from Dr. SoetbcKr, but as a fact you will find tuat nearly the whole production of the mines of Russia is coined. There has been no export of gold to my knowledge in the last 40 years, I may say, of gold in any other shape than coin. 339. In the column with regard to France I see there are a good many places blank ? — No coinage, or so little that it did not come within one-tenth of a million. 340. Belgium the same ? — -Yes. 341. Italy, are those from official sources ? — Yes. Italy I got through Messrs. Hambro and Son. 342. Austria ? — Austria, I think I got from Dr. Soetbcer. 343. In these tables of coinage you omit all reference to Mexico and to China ? — Well, with regard to Mexico, the reason I did not put them in there is that nearly all their bullion is con^'erted into coin, the Mexican dollar and doubloons, and it goes away in the same form. You may withdraw it altogether — I am speaking of gold now — from the quantity of gold that remains to be coined. I mean to say the total production of Mexico is coined. 344. (^Mr. Birch.) No bars, or very little indeed ? — Every now and again we see a consignment of bars of Mexican silver, but I should say nineteen-twen- tieths come in the shape of Mexican dollars. 345. Formerly a great deal came from South America in bars ? — Not from Mexico ; from the West Coast. I have gone away from gold now, as you have asked the question. 34G. {The Chairman.) I understand you to say that we may simply take the column referring to Mexican production and turn that into coin, for the whole of it is used for coin and none for other pur- poses ? — Yes, very little. 347. Is it the same with regard to South America ? — No ; from South America we get bars. 348. You have not given us a column stating the production of Mexico as distinguished from South America ? — No. 349. And China ? — There is no coinage in China. 350. At what price is the silver valued at ? — At 5s. an oz., for this reason, that if you want to com- pare with the amounts stated in the previous estimate, many years ago, you must value it in that way. The actual value is much less now, but for comparison I have taken it at 5s. an ouncej which the former tables were taken at, or 4s. a dollar. 351. I suppose, generally speaking, all the observa- tions you have made with regard to gold apply to silver ? — Yes. 352. You stated that your estimate of gold was above that of Dr. Soetbeer ? — No, less. 353. Is the silver production also less ? — Yes. I think, generally speaking, he over-estimates the pro- duction. 354. Can you say oft-hand how great the difference is between your two estimates? — No, I should not like to do that. 355. But at all events it does not approach that 10 per cent, of which you spoke just now ? — Oh, no. 356. Now you have given us the coinage at any rate of a large part of the world. Do you believe it to be possible to form any estimate of how much of the annual' coinage is from metal fresh from the mines, or how much of it is from old coin re- .1 243.58. melted ? — I do not think it is possible. There is a Sir H. Hay. very large proportion of it from coin re-melted. As • j you will see, there is really a great deal more coined ' ° °^' than is produced every year. 357. And the same is true of silver ? — The same is true of silver, not to so great an extent. 358. The annual coinage largely exceeds the annual production ? — With regard to silver I am not sure that it is large, because the only coins as a rule that are re-melted are those of the South American States. Mexican dollars are not I'e-melted as a rule, but very seldom, because they generally commana u premium for China. 369. The coinage of gold is nearly one-third mora than the production, and the coinage of silver close to one half? — If the figures had been reversed I should have thought it wan nearer the mark, but of course I cannot be positive. 360. But that enormous discrepancy you regard as wholly accounted for by re-coinage ? — Certainly, and by the knowledge of the fact that we have in this country melted millions of United States }:old coin at limes ; and also millions of sovereigns have been sent to America and re-melted there. 361. But if I desire to tind out the actual amount of available coinage in the world, coinage statistics would appear to be nearly useless for that purpose ? — Not exactly, but they would not give you any certainty of the amount. 362. But an error or an uncertain element of at least one half in the ciise of gold ? — The un- certainty is not of that extent. Although the production of gold is probably not more than two- thirds the coinage, it does not follow that you would be all that out in your calculation in estimating the quantity of coin. 363. Then could you give us any idea of what correction, in your opinion, we ought to apply to the statistics of coinage to help us to the amount of coin annually added to the world from the mines ? — The only way in which you could do that would be to induce the Mints of the different countries to give you the statistics of what they have coined. The United States Mint does that. In their state- ment they give a yearly report, and they state there how much is fi'om native gold, how much from foreign coin, and how much from their own coin re-melted. 364. But I understand that when gold has been re- melted for the purpose of refining it is impossible to detect its origin ? — That is quite so, but as a rule the coin which is re-coined would not be refined first, because its quality is known, and it is simply used in that form. 365. {Mr. Birch.) In different countries they use different alloys, do they not ? — No, the alloy of gold is always copper, in these days at least. 3(56. ( The Chairman.) Then we may conclude from your last answer to me with reference to the con- clusions to be drawn from statistics of coinage, that until other Mints follow the example of the United States Mint, and distinguish the sources from which their bullion comes, we really can form no trust- worthy conclusions from any statistics as to the amount of re-coinage by the respective Mints ? — Nothing very close, certainly ni)t. 367. But can we form any conclusion? Is the error not so enormous owing to re-coinajie ? — I think, so. If you find you have a production of 20,000,OOOA, and a coinage of 30,000,000/., you may take it that 20,000,000/. is from new gold and the remainder from re-coining. 368. So that practically we may almost ignore Mint statistics altogether in this connexion ? — In everything except in the fact that they have coined so much money. You must take (heir figures there ; I do not see what else you are to do. 069. And practically we must chiefly rely upon the statistics of production ? — I think so. 370. We may assume that all the bullion produced at the mines is turned into coin, except that part of it which is used for industrir.l purposes ? — Sourer or later. D 16 KOYAI; COMMISSION ON GOLD AND SILVER ; Sir li. Hmj. 85 Nov. 1886. 371. So that- the chief corrections we have got to apply to statistics of production are statistics of the use in arts and manufactures. You have some facts to give us about that, have you not ?— I have made some inquiries. I have got an estimate made by one of the best authorities, I think, on that subject, with regard to the quantity of gold and silver used in the arts and manufactures in this country ; it is about If millions of new gold. When I say new gold, I mean gold that does not come from com. The' probability is that the total amount used may be 2i millions and that the remainder is from old gold re-melted. 372. But we rather come to the conclusion from answers you previously had given us, that the important thing to knovf is not how much comes direct from the mines, but how much is used altogether. We decided that Mint statistics were very little use, that what we had to consider was the total production, less the amount used in arts and manufactures ; therefore the important figure for us to know is the total amount used in arts and manufactures, whether it is from gold melted down, or bullion direct froni the mines ? — I think you can only estimate it in this way, that if there is so much new gold, gold produced from bars, and so on, used in arts and manu- factures, then there must be a certain proportion of other gold, because we know that there is coustantly a re-melting of watch cases and jewellery of all kinds. That is constantly going on, therefore if there is a million and three-quarters of gold from production the probabihty is that there is at any rate one-third part more frcm other sources. That would give a total of about 2,200,000/. in the United Kingdom. 373. (Mr. Cohen.') Where can you get that figure of one and three-quarter millions as a reliable estimate ? —Well, from the quantity of gold sold per week. 374. ( The Chairman.) To the manufacturers ? — To all sorts of people, by the people who themselves pre- pare gold for them. I asked Mr. Sellon, of Johnson, Matthey, & Co., metallurgists and refiners, to assist me in this matter, and after giving some time to the inquiry he said he should judge, by what they did themselves, and what other houses did in the same kind of trade, that the people who prepare gold for the trades, among them all, used about 8,000 ounces of fine gold per week. That is equal to 33,000Z. per week, or 1,720,000/. a year. 375. {Mr. Birch.') But what proportion of that is in fine gold, and what in coins ? — Nearly the whole is new gold. 376. {The Chairman.) Why is it necessary to pre- pare the gold for the manufacturer ? — Because the people who use the gold, small jewellers and so on, only want gold in certain forms and in certain quantities. Then such houses as Johnson, Mat- they, & Co. refine the gold coin, or whatever it may be, and prepare the gold in the way required for the difi'erent trades. That is to say, the watch trade, for instance, want a quantity of gold of 18 carats or whatever it is ; Johnson, Matthey, & Co., and people in their position, prepare the gold and sell it to them in that shape. Then, again, they make fine gold, grain gold, which they sell to people who use it, and who alloy it themselves as they may want, 377. Fine gold is finer than Mint standard ? — Yes, it is often as fine as yVA- 378. {Mr. Birch.) Is it not a fact that the greater portion of the jewellery in this country is made out of melted coin ? — No, it is not a fact. 379. Have you any information on the point ? — I put that question to Mr. Sellon, and he said he did not think I should be far wrong if I said it does not exceed 10 per cent, of what is used. The quantity of cut sovereigns used is a question that perhaps you can tell more about than I could if you could be asked. I fully intended, but I have not had time, to ascer- tain from the Bank of England how many light sovereigns they sell to the trade in the course of the year. 380. {The Chairman.) How do you get from your figure of 1,750,000/. to the figure 2,500,000/., the total amount used in arts ? — Well, I said that possibly one-third added would give the total amount. 381. Would that one - third be coin? — Yes, it might be ; it might or it might not. It might be a good deal of coin, but also old jewellery and old watches, &c. 382. I was trying to reconcile this 2,500,000/. with 10 per cent, which I understood, according to your authorities, is the amount of coin melted down ? — I think I must have been misunderstood. 383. Did you not say 10 per cent. ? — What I said was, that the quantity of coin would probably not exceed 10 per cent., that is 250,000/., out of the total consumption of 2,500,000/. 384. The difference between If and 2^ is a great deal more than 10 per cent. The whole of that would probably be old jewellery and coin ? — Yes. 385. {Mr. Fremantle.) But have your informants experience of what is done in other parts of England, such as Birmingham ? — They supply Birmingham, Sheffield, and nearly everywhere, because, after all, London is the seat of the trade in gold, the centre of it ; and nearly all the gold which is received in this country comes to London, and there it is prepared to go abroad or elsewhere. 386. Have they sufficient experience of what the practice of Birmingham is to say that only a very small per-centage of the work -done in Birmingham is made from coin?— I think so; no one is likely to know better, at any rate. 387. {The Chairman.) 1 quite understand the sources of information you have in regard to the million and three quarters, but the sources of informa- tion that you have to bring you to the total of 2^ millions are very conjectural ? — I have none. 388. It is a guess ? — That is so. It may be of inte- rest to you in this relation to read this, which I copied out of the United States Mint Report. In the year 1 880, the Director of the United States Mint estimates the amount of gold used in arts and manufactures in the United States as 8,634,193 dollars ; that is to say 1,700,000/.; in 188], 10,086,723 dollars, that is to say 2,000,000/. sterling; in 1883-84 he reckons it at 14,500,000 dollars. I do not quite believe that. That is equal to 2,500,000/. in gold. In 1884-85 it amounts to as near as possible 1,000,000/. 389. {Sir T. Farrer.) There is a rise from 1,700,000/. to 2,500,000/., and then a sudden drop to 1,000,000/. ?— Yes. 390. Do you know from what source the United States Mint got those figures? — They give the actual figures as to the quantities withdrawn from the Mint, which they assume to be for these purposes. 391. But 1 suppose in the first place they cannot be sure that the gold is to be used in arts and manu- factures? — I think they cannot be sure, but they assume that. They give the detail of it. 392. And in the second place, they caanot be sure that the manufacturers do not get gold from other sources, a double source ? — ^They say that no doubt they do, but these are the facts that they know of. 393. It is a fact that the American Mint puts the gold into these merchantable forms in the same way as the refiners do in this country ? — Yes. 394. ( The Chairman.) They give you gold of any purity ? — They refine all the gold and make it quite fine. They make some gold into small bars of equal weight. Then, frequently, if people take out a large bar and want to divide it, they take their large bar to the Mint and get small bars of similar weight for it. 395. But will they give 18-carat gold to a watch- maker ? — No. 396. Is there any trade in America corresponding to Johnson, Matthey, and Co. ? — No doubt there is. 397. And judging by the English analogy, they would provide the American manufacturer with more than half the total amount produced ? — No, I think not, because the system is altogether different with regard to the gold at the Mint there. Most people send their gold to be refined to the Mint there. They MINUTES OF EVIDENCE. 17 do not employ private refiners. I suppose there are private refiners. 398. {Mr. Fremantle.) But the great bulk of the refining business, nineteen-twentieths of it, goes to the United States mint, and is there refined ? — Yes. 399. {The Chairman.) Have you any estimate of the total amount used in arts and manufactures in the United States ? — They give these figures as the total amount. In this particular year, 1883-84, when they estimate the amount used as 2-^ millions in the Mint report, if X remember right there is not much more than 11 millions given as being known to be for manufacturing purposes from the Mint. 400. Then, speakiag broadly, you would say that the United States and Great Britain use between them only 5,000,000/. of gold in arts and manufactures ? — Yes. 401. You would say that is a very rough guess ; but that probably it is not very much out. What margin of variation would you allow ? — I should not like to express an opinion on that point, 402. I do not wish to press you, but would you think that 20 per cent, would be a very unlikely amount of error i" — I think it would be very unlikely. 403. We may fairly calculate that the error is less Ihan 20 per cent. ? — Yes. I have found a paper which I copied from the report of the Director of the United States Mint some years ago in which the amount used in arts and manufactures from 1874 to 1879 is given, and it averages very nearly 1,000,000 A in these years. You see according to what I have said before the amount has greatly increased of late years, but for those six years the amount was under 1,000,000/. sterling. 404. {Mr. Birch.) But I think you said the last year you mentioned before was 1,000,000/. ? — Yes, 1884-85. 405. It has come uown again ? — ^Yes, but it had been very much larger in the interval. I also read, I am almost certain it was in one of the United States Mint Director's reports, that he estimated the con- sumption of gold throughout the world at that time at 11,000,000/. sterling. It struck me as being a greatly exaggerated figure. 406. {The Chairman) I think Mr. Soetbeer esti- mates it at 12,500,000/. Have you seen that esti- mate ? — No, 1 had not time to go through the book carefhlly. 407. {Mr. Houldsworth.) Does not the 1,000,000/. which you mentioned come after a very large year? What is the figure for the preceding year ? — 2\ miUions. 408. ( The Chairman.') Have you any figures with regard to the rest of the world — France, Germany ? — None whatever. 409. India ? — With regard to India there is this to be said, that the whole of the gold which goes into India, except the quantity of gold re-exported, has disappeared from the circulation of the world, that is to say, it is hoarded if you call it so. It is con- verted into ornaments and kept by the natives and wiU never appear again as gold in the world except as ornaments unless in the case of a famine ; we know that during the last great famine in India we received great quantities of gold from India which were clearly melted from ornaments. 410. Why do you say that the United States esti- mate, which in this instance is under Dr. Soetbeer's estimate, is too high ? — Because I think the proba- bility is that there is much more gold used in this country than in any other country, and if you count on your fingers the countries there are which are likely to spend large amounts in gold ornaments, you would say that certainly England would have pretty well one third part of it. I mean to say, that out of the whole amount of gold used for ornaments, it is extremely probable that England, would require at least one-third. 411. You do not base that on population ? — ^No, I base it on the wealth of the country entirely. 412. Is the wealth of the country so very much greater per head than the United States ? — I am not so sure about that. 413. {Sir T. Farrer.) Is the demand for gold ornament in proportion to the civilization and wealth of a country ? — Except in the case of India, yes. 414. {The Chairman.) But the population of the United Kingdom is, roughly speaking, 35,000,000 ; United States, 50,000,000; France, 36,000,000; Germany and Austria, 47,000,000; those are all countries of great wealth and civilization, and the pro- portion of the English population is very small to them ? — Yes, but on the whole in England, taking the amount spent on ornaments, the proportion would be greater than in any of those countries, except India. Besides England manufactures largely for exportation. 415. {Mr. Cohen.) The country that consumes most gold in ornaments in proportion to the population is Holland ? — I was not aware of that. 416. {The Chairman.) You base your view more on a general conjecture than any precise information ? — As I said, I have no authority for it at all. 417. Have you looked into the questions at all of loss by wear and tear ? — No, that is a matter for bankers, which I am not prepared to enter upon. 418. Have you any remarks to make about the consumption of silver in ornaments ? — 1 have a similar estimate with regard to that; probably 500,000/. a year is consumed in manufactures in one way or another in England. A very important part of it now is the conversion of silver into nitrate of silver for photographic purposes. 419. Have you any means of estimating the amount which is used for electro-plating and other manufac- tures ? — Not separately. 420. But you think the figure of 500,000/. may be broadly relied on within rather large limits of error ? — I had a letter this morning from a gentleman con- nected with Birmingham, from whom I asked the same question, and he estimates the quantity of silver used in Birmingham as from 800,000/. to 350,000/. a year. Now Birmingham is supposed to use about one half of all the silver and gold which is used in that manner, which rather confirms the estimate for the United Kingdom. It is a little greater than 500,000/., but still that is near enough. 421. You have no estimates as to other countries except England ? — Except the United States. Ac- cording to the Director of the Mint, during the year 1874-79 there was a much larger proportion of silver ornaments, the figures ran 881,000/., 847,000/., 762,000/., 755,000/., 1,042,000/., 1,195,000/. In 1880, 3,464,170 dollars, that is 700,000/. ; in 1881, about the same amount, 700,000/. ; in 1883-84, 1,100,000/. ; in 1884-85, 1,100,000/. 422. Have you any explanation of the fact that, while the silver in the United States almost equals the gold used in manufacture, in Great Britain it is only about one-fifth ? — No, I have no explanation of that. 423. Have you got any figures, or are there any figures, so far as you know, in existence, showing the stocks of the precious metals existing at different periods in the world ? — No, I have not. I think at the time of , or just after the German war, Mr. Seyd read a paper at the Society of Arts, in which he estimated the quantity of silver and gold in the world at various times, but I have not had time to refer to it ; but it is reported in the Journal of the Society of Arts of the time. 424. Are there any trustworthy figures showing the stocks of the precious metals existing at different periods, so that they could be compared with the statistics of trade, population, &c. ? — No. 426. You think no forecast can be attempted in regard to the future production of the precious metals ? - — I should think that probably it will go on very much in the same way that it has for the last 20 years, a little more one year and a little less another, but without any very great variation. 426. We have had estimates before us which point to the conclusion that silver is not likely to be pro- duced in large quantities at a lower price than 3s. 6d. Have you any facts bearing on that ? — ^No, we can D 2 Sir H. Haji. 25 Nov. 1886. 18 ROYAL COMMISSION ON GOLD AND SILVER: Sir H. Hati. 2.'i Nov. 1886, only say that some of the great mines, the two largest mines in Nevada, have given out altogether. They do not pay their way even at the present price of silver or even a higher one. I refer to the California and another mine, which produced enormous quantities of silver for some years, but which now do not pay their way, so I am told. 427. '{Mr. Cohen.) Is that owing to the mines having given out ? — The mines having given out, and the extraordinary depth they have had to follow the silver. 428. That is quite unconnected with the price of silver. If it went to &s. it would not pay them ? — They are carrying on the working of the mine even at a loss, in the hope that they may some day get a profit out of it. 429. It is a region probably rich in undiscovered silver mines ? — Yes. 430. You could make no speculative adventure on a conjecture of that kind ? — No, sir, I could not. I take it for granted that the most likely place for silver is in the western States of America still. 431. {Mr. Birch.) You were referring just now to the statistics of the United States as to the production of the precious metals. I believe those statistics are to be generally relied upon. The Government of the United States take a great deal of trouble to prepare them, much more than our Government ? — They take a very great deal of ti'ouble. I am not aware that our Government does at all. 432. You said just now that London was the principal place for the manufacture of jewellery. I thought it was Birmingham ? — Not for the manu- facture, for the preparation of gold for the manu- facturer. Of course there are refiners at Birmingham who do a large business, I have no doubt, and at Sheffield also, but I think the greater part of the gold which goes into the arts and manufactures is gold that goes through London houses. 433. Another statement of yours was that you calculated that 1,700,000/. of uncoined gold was used for the arts and manufactures, and only one-fifth of melted coin ? — What I said in regard to melted coin was that there was probably not more than 10 per cent, of coin used, — sovereigns I am speaking of now, used by manufacturers, — not more than 10 per cent, of the whole amount, but that probably one- third more than I iiave stated is got from other sources. 434. One-third of the new gold ? — That makes a total of about 2,200,000/. 435. {Sir T. Farrer.) And did you mean that the 10 per cent., of the total amount was coin ? — Yes. 436. {Mr. Birch.) That is not in accordance with the information which you wished to obtain ? — That is very likely, but it does not always follow that light gold taken from the Bank goes to manufacturers. I fully intended to have made inquiry, and would have been prepared for that, but I have not had time. 437. Then you said the gold sent to India is immediately hoarded, ^nd never sees light except in time of famine. We have heard just, now from another witness that small bars of gold are very currently used in the bazaars of India in paying for large amounts. Are you aware of that at all ? — 1 think it is extremely likely, but I do not know it. 438. {Mr. Cohen.) Have you any information as to the amount of gold and silver coin in circulation in this country ? — There is so good an authority at the table that I do not like to say. I have always been led to believe that it was 100,000,000/. in gold and 20,000,000/. in silver. 439. But you have no information on the subject, — these figures are what you have seen on the sub- ject ? — Nothing. 440. Well, have you any idea in your own mind whether the amount of gold or silver coin in circu- lation has increased or decreased within the last 10 years ? — I should not like to say, because altliough large amounts of sovereigns have been sent away, yet we have received large amounts of sovereigns from Australia, and I have not had an opportunity of com- paring the difference. 441. Have you any information as to whether any large amount of gold is locked up in the form of light gold by the country banks ? — I have no information, but I have great certainty about if. 442. Very large amounts of light gold ? They do not like to make loss upon it, and therefore they keep it in their own possession. Have you any idea of the amount of that ? — No. 443. It could be obtained .-' — I have no doubt the banks would give the information if they were asked. 444. {Sir T. Farrer.) I think you said all the gold sent to India, except such as might circulate in small bar.s, is either hoarded or turned into ornament.', which comes to the same thing .-* — With the exception of exports, and in that statement you will find that there is a (quantity imported and a quantity exported. 445. The difference is hoarded ? — You may call that hoarded safely. 446. And in ornaments it is hoarded ? — l''es. 447. That is the case in India. In a civilized country, is it not likely that some ornament hoarding might take place ? — It is probable, but I am not aware of any country that would absorb any large amount. 448. It was rather with reference to your sugges- tion, that England, being a highly civilized and wealthy country, used the largest quantity of gold for purposes other than coinage ; but does it not show us that a semi-civilized country may really absorb a larger quantity of gold for purposes other than coinage than a civilized country? Is it not the tendency of the earlier stage of mankind to be fond of using gold for ornament ? — Yes, when they get it ; but in India the population is so great that, after all, it is an infinitesimal sum per head if you come to put it in that way. 449. I was merely suggesting that as a possible explanation of Dr. Soetbeer's figures or the United States figures ? — His figures then would be too small if he included those. I am not sure if the figures there would show it, but I think probably there has been 3,000,000/. a year for some years past absorbed by India, so that, added to what I was thinking of for civilized countries, would make it even more than that. 450. {Mr. Fremnntle.) Is there any means of ascertaining, do you think, with accuracy, or even approximately, what number of sovereigns are used by jewellers and others ? — I should doubt the possibility of obtaining that. 451. Therefore you would be prepared to hear that a very large amount of coin is used in addition to the estimate that you gave us just now ? — A fair amount ; nothing very much, I should think. 452. {Mr. Barbour.) Atq you aware that there is a considerable use of gold in India for manufacturing purposes, where it is entirely lost, or almost entirely lost ? — That is the case in all manufactures, I think ; in all ornaments there is a great deal. 453. In ornaments it is partly lost, but it is not altogether lost ; but in the manufacture of cloth, gold thread through cloth, that is practically lost ? Yes. But a great deal of that is recovered, ultimately j because I have constantly seen large parcels of old lace and tassels and things of that kind sent to this country, in which there was probably one-tenth part of gold, the rest cotton. That was burned and the gold recovered. I do not think there is any very large amount lost, because it is recovered in that way. 454. {Mr. Fremantle.) It would be a question of per-centage, I suppose? — Yes. 455. {Mr. Barbour.) But if the holder of the cloth or lace thinks it worth his while to send it back for recovery it is recovered, but if he does not think it worth his while, well, then it is lost altogether ? As long as it remains in use it is not more lost than any other gold kept as hoarded. ^ 456. It is consumed in time ?— Well, it is worn out You cannot say ; there may be a certain loss there" but you may depend upon it there are people over Minutes of evidence. 19 there -who go about and buy up these old shawls for the purpose of getting the gold out of them. You may depend upou it they are quite wide enough awake not to actually lose what little gold there may be. It is like the old shops in London, where they will buy anything. 457. T was told by a gentleman in the Punjaub that he attempted to recover the gold from the gold lace used by the native officers in their uniforms, and that he found that it did not pay ? — That is possible. It did not pay him, especially if he had to pay for it. 458. {The Chairman.) Do you think that much gold passes between this country and other countries which is not taken note of in the general official returns ? — 1 should say not much ; there is some. 459. Is there not a certain amount smuggled between layers of silver ? — Sometimes a bag of gold is put into a box which contains silver, and is all reported to the Cugtom House as silver, but I do not i>ir U. Hay. think it is very general. 460. You think it is not a very important pro- ^^ "^ov. 1886. portion .' — No, I liave known people who have done " that kind of thing, but I do not tiaink it is a genera' thing. 461. {Mr. Birch.) I suppose a good deal of gold does pass that is not taken official notice of, I do not mean fraudulently .'' — A good deal does^ pass in the passengers' pockets. 462. {Mr. Barbour.) For instance, a case in point. I brought 65 sovereigns with me from India the other (lav which never appeared in any return ? — Multiply that by 100,000. 463. {Mr. Birch.) A great deal of gold went over to Paris in that way. A person paid his passage there and the simple freight on the gold would have been considerably larger than the passage money .^ — Oh, I have no doubt that has been the case. The witness withdrew. Adjourned till to-morrow. Third Day. Friday, 26th November 1886. PEESENT : The Eight Hon. A, J. BALFOUK, M.P., the Chaikman, presiding. Mr. D. M. Bakbouk. Mk. J. W. BlECH. Mr. L. L. Cohen, M.P. SirT. Farree. Mr. C. W. Fremantle. Mr. W. H. Hotjldsworth, M.P. Mr. Bullen Smith. Mr. Geo. H. Murray, Secretary. Mr. Robert Giffbn examined. 464. {Chairman.) Mr. Giffen, I think you were examined before the Parliamentary Committee appointed in 1876 to inquire into the depreciation of silver, and that you then gave some evidence upon the question of the production of the precious metals ; is that not so ? — At that time I gave some evidence with reference to the production of the precious metals, not with reference to the production of silver so much as with reference to the production of gold, and I gave various statements of different kinds on the subject that that Committee was inquiring about. 465. Can you give us any statement which would show the difFerence between the available information at that time and the available information at the present time ? — I think that since that time there has been a great improvement in the state of current information with regard to the subject of the precious metals, and with regard to other matters pertaining to this question. With regard to production, I found, in 1876, when I was about to give evidence, that there was no very good continuous statement with reference to the production of gold in existence. Very few people had taken the trouble to do much regarding it, and there were no statements such as that which Sir Hector Hay, for instance, put before the Com- mission, in existence generally with reference to the production of gold. There had been various scattered statements of different kmds. I had prepared myself for the "Economist," in 1872, not a statement of the production of gold, but a statement of certain particulars which would give people some idea of what the production would be. I stated quite candidly what the figures were which I gave, and these figures were intended to suggest to people what the general result of an investigation might be, and not themselves to be an estimate of the production of gold. That is all explained in the evidence at the time. The figures which I got I may say were practically official figures with reference to the pro- duction in Russia. As regards the United States, the figure which I took was the deposits of gold of domestic production at the United States mints. It was said to be a figure a good deal less than the absolute production, but, at any rate, it was a definite figure, as it was known what amount had been deposited at the mints. Then, with regard to Australia, the figures which I put together were those of the net exports of gold from all the Australian colonies put together, plus the estimated coinage of the Aus- tralian colonies. At the beginning of the period the coinage of the Australian colonies, not being legal tender in the United Kingdom, was mostly kept at home, so that the two things seemed to give an idea of what the total production of Australia might be considered to be. And these three things, the production of Russia, the production of the United States, and the production of Australia, being the principal matters, what I supposed in 1872 was that these figures would give some definite facts from which people could form tolerable estimates, there or thereabouts, as to what the production might be. That was the best thing I thought I could do readily in 1872, and I put that with the figures continued before the Committee of 1876. But it was not intended to be an estimate of the general production. Sir Hector Hay put before the Com- mittee an estimate of the production which he had drawn up, I think, in the previous year, with various amendments, and, as far as I know, that was the first Mr. R. Gijen. 26 Nov. 1886. 20 nOTAIi COMMISSION ON GOLD AND SILVER; Mr R Oiffer, general estimate, covering the whole period from ' _' '" 1851, of the production of gold and silver. I had 26 Nov. 1886. Only made an attempt relating to gold ; Sir Hector Hay's account related both to gold and silver. Since then the information has advanced a good deal, and Mr. Soetbeer published, in 1879, a most elaborate history of the production of the precious metals, — I have got the book here now, — from the beginning of time till the present, in which he investigated the whole subject at all the periods, and especially the modern period, and gave his notion of what the production was from time to time, and especially in the recent years. More lately, Mr. Soetbeer has' published another volume, and he has published a second edition of that volume this year, containing materials for the illustiation and decision upon the economic relations of the precious metals, and the question of the valuation, in which he continues the estimates of production which he made in 1879, and gives a great many more figures as to prices, as to bank reserves, as to circulation, as to the use of metals in arts, and various other matters — a systematic study of the question. And I have observed also, that there are various books, such as that of Mr. Ottomar Haupt, a well-known authority on the continent, and Mr, Laughlin, vyho has written a history of bi-metalism, in the United Slates, besides the reports of the various Commissions which have been sitting, all of which have added greatly to the information upon the subject since 1876. 4<66. So that you are of opinion that now we are in a very different position for forming an estimate of the production of the precious metals than we were in 1876? — I think, with regard to pi-oduction the matter is now \ery greatly simplified in this way. It is still quite true that the three chief places vrhich you have got to consider are those which I have named, Eussia, the United States, and Australia, for all of ■which there are now substantially official accounts. 467. {Sir T. Farrer.) That is as regards gold ? — With reference to gold ; and to some extent it is also true with reference iq silver, if you substitute the phrase North America for the United States. With regard to production in Russia you have practically an official figure, and I observe that, although, when it comes to be stated in values and weights there are slight dis- crepancies, they are only such discrepancies as would arise from people using substantially the same figure to begin with, and its getting translated in different ways into the weights of different countries and the money of different countries. Still, when you get to the bottom of it, it appears to be always nearly the same figure, or a figure almost exactly the same. 468. {Chairman.) So that all Russian estimates are based upon Russian official figures? — Practically so. I may add that I have endeavoured to find out the figure in Russian ofiicial books, but have not been successful. But in the mint report of the United States you do find these figures as to the weight of gold produced in Russia communicated officially by the Russian Government to the United States minister at St. Petersburgh. Then, with regard to Australia, instead of there being now much difficulty about the matter, you have got in the mint report of Mr. Fremantle an estimate of the production of Australia, based upon the official estimates of the different colonies themselves, and that figure which Mr. Fremantle gives is the figure which Mr. Soetbeer gives, so that it always comes round to the one official figure. I have not had an opportunity of comparing what Sir Hector Hay has done in the figures he gave you yesterday, but I assume that, practically, it would be the same thing. At any rate that figure is in the mint report. Then, with regard to the United States, the official figures have now come to be practically those of the United States Director of the Mint. The Mint authorities in the United States have taken the trouble to go into the subject, and they have made an estimate which has been continued for a great many years, and that is practically the figure which Mr. Soetbeer gives. Sir Hector Hay told you yesterday that his estimate is rather less, and that appears to be the case, not a great deal, I think it amounts to a difference of 10,000,000Z. sterling between 1851 and the present time, compared with what the official figures are, but I am inclined to think that on the whole the official figure is really the better estimate. 469. You do not lay much stress on the objection that Sir Hector Hay brought to the official figure — that it was the interest of the producers to give an exaggerated estimate to the United States mint of what their mines were producing ? — Well, the point which occurred to me when Sir Hector Hay was giving his evidence was that to some extent it is dis- cussed by Mr. Soetbeer himself, the same question. And there is another point with reference to the matter that it is not quite safe to take the figures from Messrs. Wells, Fargo, and Company in respect of one matter, and that is, that of late years especially it has been found that the United States produce gold and silver in one ; that is to say, the article produced is both gold and silver. It is caUed silver there, and would be entered by Messrs. Wells, Fargo, and Company as silver, but when it comes to London it is divided up into two things, part is gold and part is silver, and of late years the United States mint autho- rities have been taking care to make some allowance for the character of this particular article that is extracted from certain mines, and to credit so much to gold and so much to silver, which is not a thing I believe that would be done by Messrs. Wells, Fargo, and Company, and that is a reason for attaching rather more value to the Government statement than to the correction, I think, which Sir Hector Hay has made upon it. 470. But am I not right in saying that that would make the error the other way ? — Sir Hector Hay as regards gold is below the estimate, and it is with reference to gold I am speaking, and that would explain how in some way he might be below, and yet there was no reason for disbelieving the official estimate. At any rate the discrepancy in my view is not at all material in a question like this as regards the United States. 471. It is, perhaps, not worth pressing the point, but is it not true that Sir Hector Hay's estimate of silver was also below the United States mint ? — I believe that was the case. 472. And the source of error you have just men- tioned ought to have made it bigger ? — I am not quite sure about that, because to some extent the taking an account of all that metal that was considered silver and estimating the gold in it would not diminish the silver very much, because the weight bf the gold is hardly material, although the value is about equal. The weight of the gold would not make much deduction from the weight of the silver. I may say that, think- ing it would be of interest, I have brought with me here the statements of Mr. Soetbeer with reference to production, as it might be convenient to the Commis- sion to have these put in. Of course it would be easy to have them put in from Mr. Soetbeer's book them- selves, but I thought it would save trouble, perhaps, if I were to put them in now. One is a statement of the whole production of gold and silver for a long series of years, with the per-centage worked out of the proportion of gold to the proportion of silver ; and then the other is a more detailed statement, both in weight and value, of the production of both gold and silver at the present time, and I propose to put in these three statements. {See Appendix III.) 473. I see you have given the weight in kilo- grammes? — I have put it in exactly as Mr. Soetbeer gives it. Of course it could be translated and put in any form that may be thought desirable for the Com- mission, but there is no great difficulty in dealing with it, for this reason, that 1,000 kilogrammes are practically equal to an English ton, and that is a very convenient way of translating the one weight into the other. MINUTES OF EVIDENCE. 21 474. I see no great object in turning the kilo- grammes into pounds, or tons, but there might bo some convenience in turning the measure of value into English sovereigns ? — The mark is as near as possible an English shilling, so there is no great difficulty in working the values in that way. 475. You have now given us an account of the sources of information applying to the three great producing countries ; have you anything to say with regard to the sources of information as to the rest of the world ? — Well, with reference to the rest of the world, I may say that with regard to Mexico and South America, which Sir Hector Hay referred to yesterday, there was certainly some difference between Sir Hector Hay and Mr. Soetbeer upon that point, but if Mr. Soetbeer's book is looked at I think you will find that he has gone into the matter very care- fully indeed, and that he is quite aware of all the matters which Sir Hector Hay mentioned, especially he is aware of the fact that the chief produce of Mexico and South America is brought to the United Kingdom, because he not only mentions the fact, but he gives the actual figures of the imports into the United Kingdom from those countries, and he has evidently taken care to make some investigation of the subject. On the whole, I see no cause to reduce very much the estimate which Mr. Soetbeer has given upon that point. I find, however, that the chief difference between Mr. Soetbeer and Sir Hector Hay, as far as the statement which Sir Hector Hay put before the Committee in 1876 is concerned, arises with reference to what are called other countries, for which, as regards gold, Sir Hector Hay put down at that time the round figure of half a million sterling for many years, and of late years Mr. Soetbeer's figure is two and a half millions sterling. I think, on the whole, that there is some reason to believe that Mr. Soetbeer's estimate has some foundation. He has gone into the production of a great many small countries somewhat minutely, and, at any rate, he ex- plains pretty clearly in his book what he has really done, so that people can form their own judgment about it. But the point I wish to bring out now is, that the main difference between Mr. Soetbeer and Sir Hector Hay arises with reference to this small part of the production ; that substantially with refe- rence to Russia and North America and Australia they, practically, not only are in agreement, but to a large extent take the same figures which are official. 476. The rest of the world is more or less conjec- tural ? — I do not know that it is altogether conjec- tural ; if you are (iareful to look at all the special statements which are made from time to time, it will appear that there is something more than con- jecture. Part of the production in question is European production, especially silver. There is a considerable production of silver in Europe, and Mr. Soetbeer has taken the trouble to put all that together most minutely. Then, with reference to gold, a very considerable part of the miscellaneous produc- tion is from Africa and outlying countries. The one point which Mr. Soetbeer seems to have omitted, and it is mentioned by himself quite fairly — one of his great merits is, that he is perfectly candid with reference to all the information that lie gives — he omits giving any estimate for China which, I believe, is to some extent both a gold producing and a silver producing country, though, of course, no one one knows how much China really produces. 477. And nobody has been able to form even a rough estimate ? — I do not think that any attempt at an estimate has been made. If one reads the books of some travellers as I have done, you find reference a great deal to worked out mines of silver and gold in China, and you do not get so much evidence as to what is actually being done. But, I may say, that I have got here a statement with reference to the import and export of gold into and from China. The Chinese official figures are hardly sufficient to enable one to make a statement of this kind, in fact, they are very unsatisfactory on the subject of the imports and exports of bullion. But I have taken the trouble to Mr. R. Giffen. examine the statistics of the chief countries with which China trades, which 1 take to be the United 26 Nov. 1886. Kingdom, France, British India, and the United States, and by working the figures in the reverse way, I have obtained some idea as to the movement of bullion between China and those countries. I am speaking of gold at present. I have taken the trouble to work it out, and, according to this, it would seem that China exports on balance to the chief countries it trades with every year from about 1,000,000/. to 2,O00,OO0Z. sterling of gold. I think it is a little over 1,000,000/. sterling on the averaee for a great many years, going back to about 1864, the China exports of gold. 478. A million a year to all countries? — About 1,000,000/. a year, and this is a figure which Mr. Soetbeer does not take account of, as far as I can judge in his estimate of production, so that even if his esti- mates are an over estimate, there would be this element of China to be taken into account, which may or may not be material. Of course, one cannot tell whether China is exporting out of a very ancient store, or whether it may not get gold from some other country that we have not thought of, but it seems to me that, in fact, China may contribute to the general gold market of the world by a certain export. 479. I suppose an export of an even amount over a large number of years would imply that China pro- duced gold to that amount in excess of her own requirements ; it would indicate that ? — My own im- pression is that China does produce gold to some extent. Of course, how much, it would be very difficult to say. I propose to put in the statement for what it is worth. {See Appendix.) 480. {Mr. Barbour.) Is that prepared from the returns of the United Kingdom, France, and America, or the Chinese returns ? — The returns of the United Kingdom, France, British India, and the United States. 481. So that, if there was any large import or export of gold between China and the islands in the Indian Ocean it would not appear there ? — It would not appear there, but if there was a net balance coming from the islands in the Indian Ocean, it would be much the same thing, because we do not get any account of that productioB so fai- as I know, anywhere else. 482. {Chairman.) Then, having carefully consi- dered all Dr. Soetbeer's statements and tables, as a statistician, you are convinced that, on the whole, his estimate is the best we have to go upon, and may in that broad sense be relied on ? — I have no doubt that that is so, that you may take it as the work of a very able and sincere statistician, and that, at any rate, if you have any doubt about the matter, he supplies you with almost all the materials that would be necessary to form a judgment of your own. I mean, he is quite candid and sincere, and the book contains most valuable materials, whether you may differ from his judgment or not. 483. And, I suppose, you would be of opinion, that taking all the doubtful elements into consideration, the error in the total result cannot exceed 10 or 15 per cent. ? — I do not think it can exceed 10 per cent, with regard to production. 484. Have you any similar reriftirks to give us with regard to the production of silver ?^ — I have not followed the question of the production of silver at any time as I have followed the question of the pro- duction of gold. The reason for my knowing a little more about gold than about silver was the fact that I had to write a great deal about it in 1872, and I >> prepared a great many tables upon the subject with reference to gold. 485. That would exhaust all that you desire to tell us to-day on the subject of production ? —I think, if I might say so, with reference to the evidence which I gave in 1876, there is one point to which I may draw attention, as it was considered a subject of general interest at that time, and has been the subject of a good deal of observation in the writing upon 22 KOYAL COMMISSION ON GOLD AND SILVEK : Mr. R. Giffen. 26 Nov. 1886. the subject. It is this, that from about 1850 to 1870, the proportion of gold produced with reference to silver was abnormally large. If you go back to the earlier part of the century, you find that the pro- portion of gold to silver was — I really forget w>iat the exact figures were, but that the proportion of gold to silver was about one to three in the early part of the century. That is what it comes to. That is to say, gold was about one third of silver, taking them at the values at which they were represented. Later in the century, that is between 1820 and 1840, the proportion was about one to two in value. The figures are all stated in the evidence which I gave in 1876, and I wish now to use. The proportions also appear in the Table in Mr. Soetbeer's book I have referred to. 486. I see you stated in 1876 that the annual proportion for the whole world at the beginning of the century was very nearly three to one ? — Yes, three to one, that is, three of silver to one of gold down to about 1820 and then about two to one down to about 1840. After 1840 for about 10 years the production of the two, according to the current values then, was about equal. After that, however, the pro- duction of gold was abnormal for about 20 years. There was a great production of gold, and the iigures came to be practically very nearly four of gold to one of silver, and then three of gold to one of silver. 487. {Mr. Houldsworth.) What years were those ? — From 1851 down to about 1865. But since then the point which I am going to call attention to now is this, that the proportion of the production of gold to the production of silver has diminished as well as the amount of the production of gold, and I wish to mention the figures from that table of Mr. Soetbeer which I have given you. In 1866-70 the weight of gold produced, with reference to the weight of silver produced, was as follows : 12 '7 per cent, was the pro- duction of gold of the two together in weight. Then in 1871-75 the production of gold was 8' 1 per cent, in weight of the two. In 1876-80 it was 6' 6 per cent., and in 1881-85 it was 5 per cent, only of the total weight of gold and silver produced. And, of course, the effect of that is that when you come to estimate them in values, the proportion of gold to silver has also fallen back, and they are now prac- tically, according to Mr. Soetbeer's table, about equal again, but that, of course, is at the lower vahie of silver which he gives. 488. {Chairman.) They have reverted, in fact, to the condition in which they were between tlie years 1841-lS50?— Thatisso. 489. Turning now from the question of production to the question of the employment of the precious metals, could you give us bioadly your view of the increased demand which has been made for gold ? — The increased demand for gold as compared with what it was just before 1872 appears to ine to have consisted first of all of the German demand, next of the American demand, then a certain demand for Holland, and, perhaps, I should add along with that lor the Scandinavian countries as well, and then a demand for Italy, all of which, put together, I have rouglily estimated as about 200,000,000/. sterling, .inil it would be, perhaps, not very difficult to give some detail with reftt'ence to each. With reference to Germany then, the actual efiiux of gold to Germany commenced in the year 1871. Germany began to draw in gold with reference to its coinage, and eventually it coined about 96,000,000/. sterling in gold, of which about 5,000,000/. consisted of re- coinage of gold which had been in existence in Germany before that. I may state that there \\ as a very curious discrepancy between the estimates of the gold coinage of Germany, and what in fact the coinage of Germany turned otit to be, because the esti- mate had been that the coinage of gold for Germany before 1871 had been something like 27,000,000/. sterling, but when the gold was withdrawn and rlemotietised, the actual amount that was withdrawn and demonetised was under 5,000,000/. sterling. So that of the whole of the 96,000,000/. of gold which has been coined in Germany, you may say that upwards of 90,000,000/. was taken from other counti'ies. 49 ). What was the cause of the large discrepancy of which you speak ? — I do not say that it is exactly a discrepancy, but the fact was that it was known from mint records and otherwise what the coinage of the different States in Germany in gold had been, and that figure was something over 26,000,000/. sterling, but in point of fact, when you came to withdraw that coinage and to demonetise it, you only found that you had to operate upon 5,000,000/, sterling, which seems to show that the amount that has actually been coined is very little indication of what coin may really be in use in circulation or hoarded in a country. 491. That is a fact that was clearly shown, also by the circumstance that the amount of coinage greatly exceeds the amount of production ? — All that is also shown generally, but I thought I would call attention to that particular point in passing, as it i.s not often that there are such opportunities of observing as there was in this case, when all the money v/as withdrawn and demonetised. 492. Do you think it would be fair to take that as a guide to what happens in other countries, and to divide the total coinage by five, in order to ascertain the actual stock roughly ? — Oh, I cannot say that at all ; this is merely a particular instance. 493. (Mr. Fremantle.) Was there any special reason in Germany why the amount actually with- drawn was so small ? — I think one reason perhaps might be, that gold was not the standard money of Germany before ; that silver was the standard money, and gold was what was called monetary merchandise more than standard money itself. 494. (Mr. Birch.) The exchanges would probably have been against Germany, and thus the gold would have been exported ? — That might be so. 495. {Mr. Barbour.) Was there a fixed ratio between gold and silver ? — It is very difficult to say exactly, there were so many different States in Germany ; but I think there was no fixed ratio. Silver was the standard money. 496. And the ratio between silver and gold varied ? — And the ratio varied according to the market rate. I am not quite clear what was the market rate, but I know that people who were considered to be acquainted with the facts, always spoke of France as a bi-metallic country, and of Germany as a silver country. 497. {Chairman.) W^e may take it that 90,000,000/. is the amount which Germany has taken on balance out of other countries since 1871 ?— I may go on with reference to that, and say, that in point of fact Germany cannot be considered as having withdrawn on balance from other countries so large a .sum as 90,000,000/. sterling, because within three years after that coinage in Germany commenced, that is, before 1875, it had begun to be noticed that a certain amount of new gold was being exported. 498. Practically, then about 80,000,000/. sterling in all would be about what the demand for Germany has been for new gold from other countries, not neces- savil}-, of course, altogether for coinage, but that is the amount which Germany has taken on balance out of other countries since 1871 ? — Yes; that is about tho figure which is arrived at. I may say that the demand altogether was not merely in order to enable Germany to substitute gold for silver in its coinage ; but that there was a great banking reform going on at the same time, and part of that reform consisted in the extinction of notes of small denominations. The reform took place in the year 1875, and at the beginning of that year it was estimated that something like 27,000,000/. sterling of notes of small denominations, under 100 marks that is, were in circulation, and these were all extin- guished in the course of the year 1875, and my own calculation is that from 10,000,000/. to 20,000,000/. sterling of those notes must have been replaced by coin. The bank note circulation in Germany has MINUTES OP EVIDENCE. 23 never been quite so high as it was just before 1875. It was then about 70,000,000/. sterling, and I think, even how, it is about 55,000,000Z. sterUng, and it has been a good deal less. 499. {Sir T. Farrer.) Were they all replaced by gold, or some by silver ; some of them were very small? — Of course it is impossible to say whether they were all replaced by gold or by silver, but I looked into that point a little also, and the notes for 15s, and under were something less than 10,000,000?. sterling. The next denomination of notes was about 30«. sterling, and I should say that a considerable part of the notes extinguished must have been replaced by gold and not by silver, owing to the amounts for which they existed. At any rate, T think I may give the reference to the figures. They are in The Economist of the 20th February 1875. You will find a statement of the character of that 27,000,000?. which I have told you about, what the different denominations were. I remember writing about it myself at the time, and it would have some effect in making a demand for gold, and not simply for silver. 500. And you estimate that demand at about 20,000,000?. ?— From 10,000,000/. to 20,000,000/. Of coutse it added to the general demand for Germany. It was not merely the substitution of gold for silver in Germany, but the change with reference to the paper as well. 501. {Mr. Birch.) With regard to that 80,000,000/. of gold that was coined, have you any information as to what was re-exported of the new coinage. At one time we held a little, and there was a good deal at the Bank of France ? — I could go into detail if it was required. I believe the German figures on this head are not quite satisfactory as to imports and exports, partly because the German empire had some trouble in establishing a department of statistics for imports and exports after the empire was fornied, and it is not, I think, till about 1879 that the statistics of imports and exports became tolerably good. But there is no doubt a good deal was exported, and that was just one of the points I was mentioning. But I can only follow on this head the estimates of people like Mr. Soetbeer who have looked into the subject, and you will find a great deal about it in these books of his that I have referred you to. 502. ( Chairman.) Then you would summarise the demand of Germany in this way, that she engaged in two reforms at the same time, both of which reqilired gold, one a monetary reform, another a banking reform ; that from the total amount of gold required for those two purposes we should deduct in the first place the gold recoined, amounting to about 5,000,000/., and then the gold that was exported between 1872 and 1875 ?— Between 1872 and 1885 ; that goes down to the present time. 503. Making those two allowances, your general conclusion is that the demand that Germany made upon the gold stores of the world reached about 80,000,000/. ?— About 80,000,000/. in round figures is the sum which I have arrived at. 504. Then could you give us any particulars with regard to the demand of the United States ? — Then with regard to the United States I have looked into that subject at difierent times, and the conclusion to which I have come is, that starting from the year 1875,' which was about the time that the law for resuming specie payments in the United States was passed, down to the present time, the United States has taken gold to the extent in round figures I should calculate of about 100,000,000/. sterling. This has constituted an entirely new demand as compared with anything that was in existence before that. And I may say that there seems to be practically little doubt about this figure, and anyone could easily follow up the calculation in this way : If you take the production of the United States since the date I mentioned, since 1875, you find that it comes to about 75,000,000/. sterling, and then you find when you compare the imports and exports of gold bullion in the United o 24358, 26 Nov. 1886. States, that on balance since tliat date the United Mr. R. Giffen. States has imported from other countries from 30,000,000/. to 35,000,000/. sterling, or rather more. And these two things together come to about exactly 108,000,000/. sterling, which the United States would appear to have absorbed in that time. That is one mode of calculating. Then I observe that there are various estimates by the United States authorities themselves, the Mint authorities and others, with special reference to coin, and some of these would seem to show that about 100,000,000/. sterling has been added to the coin of the United States. I prefer myself to take the simple mode of calculating what the production has been in that time, and the balance of imports and exports, and that shows that the United States has absorbed certainly about 105,000,000/. to 110,000,000/. sterling, and this was an entirely new demand. 505. (Sir T. Farrer.) Had not some of that gold been previously exported from the United States at the time of their war and the suspension of specie payments ? — That is quite possible, but I am speaking with reference to a new demand as compared with the period just immediately before. And I may say that from 1862 or thereabouts down to 1875 the balance of imports and exports of the United States shows that the United States exported in that time, on balance I am speaking of, almost exactly the v»'hole amount of its production. There is no record as far as one can judge of any part of the production of that period having been retained in the United States. There is apparently an equal balance between the imports and exports, so that from 1875 onwards you have the United States, which previously sent away all the gold it produced, not only taking all the gold it produced, but taking something from the outside world as well. And I may say, as a matter of recollection, as a thing that was perfectly well known, that in several years after 1875, viz., 1877 and 1878, and 1 879, it was quite well known in London that America was taking large amounts of gold from both London and Paris. It was a familiar and a very prominent fact in the money market at that time. 506. {Chairman.) Your method of calculation would be partly invalidated, would it not, by any use that was made of the precious metals for purposes other than coinage in the United States ? — Yes ; and that is a point which seems to me of great importance in reference to this subject. It is very easy to calcu- late in the way that I have done what the demand for the United States has been in that time, but then I have tried to follow it up in this way, — where is the gold which has gone to the United States ? This is comparatively a new figure which we are dealing with, a new sum, and we know with tolerable certainty that the United States has consumed this amount in some form or other, but when you come to look into the figures again all that you can see of it, as far as -I can judge, is about 50,000,000/. sterling. You can see that the reserves in the United States Treasury and in the chief banks in the United States, the National banks, have increased about 50,000,000/. sterling. Before that they were about 25,000,000/. or 27,000,000/. sterling, and now they are about 75,000,000/. sterling, showing an absorption of 50,000,000/., but where the other 50,000,000/. have gone to, I confess I am quite unable to give you any idea. If you go to the United States — I do not know if Sir Thomas Farrer can tell you anything about it, but I was there two or three years ago, and found there was no gold coin in circulation at all. 507. {Sir T. Farrer.) I had one eagle given me. I was in a shop in New York, and I had it given me in change the last day I was there ?— I had the same experience ; I only had one gold piece all the time I was in the United States, and as far as I could see, in the eastern part of the United States there was no gold in circulation, so that if it was not in the banks, where was it ? Then I find that there are various estimates by the authorities in the United States as to what has been consumed in the arts, and one gentleman, a Mr. Miihlemann, of the United States Treasury, makes an E 24 ROYAL COMMISSION ON GOLD AND SILVER: Mr. R. Giffen. estimate in the appendix to this report of the Secre- ' t&ry to the Treasury to the effect that about 2f Nov. 1886. 30,000,000/. sterling had been consumed in the arts ■ — between 1873 and 1885. I think in about 12 years his exact figure is about 36,000,OOOZ. sterling, or as near as possible 3,000,000/. sterling per annum. And he says that that accounts for 30,000,000/. sterling of the difference, and that the whole amount of gold in circulation in the United States as distinguished from what is in the hands of the Treasury and the banks is about 20,000,000/. sterling; but whether it is 20,000,000/. sterling, or any other figure, I confess I am quite unable to say. .508, {Mr. Houldsworth.) There is one point I do not feel quite satisfied about. I think you stated that before 1875 the exports were 75,000,000/. and the imports 75,000,000/. ?— No ; what I stated was, I think, that before 1875 the exports on balance from the United States were equal to the production at home. 509. Well, the production was 75,000,000/. ?— At that time it would be about 75,000,000/. 5 JO. And then 75,000,000/. was exported, I under- stand ? — That is the total amount for the years from about 1862 to 1874 or 1875. 511. {Chairman.) So that, upon the whole, you base your view of the demands which America has made upon the gold of the world, rather upon a study of the balance of export and import, than upon any consideration of the actual amount of coinage in the country, or the balance lying at the banks or in the Treasury ? — 1 may say that it is based upon that consideration mainly, but I have also looked into the statements of the different authorities in the United States, because they give different calculations, and that is the result of it. There is no substantial difference as to the fact of that amount having been absorbed in some way, but then some of the authorities would consider that a great deal of it has practically been taken for the arts, and I see no sufficient evidence of, that myself, and yet I am not able to say precisely what has become of the whcle amount which seems to have been taken by the United States. 512. Do you know whether the estimates made by authorities of the mint of America are based, like your own, jipon a comparison of exports and imports ? — There are two estimates substantially as far as I ean judge ; one is based upon a statement with reference to coin only, and that is, they show the coinage of the United States mint for the period that I have been naming ; they begin there in 1873 Then they deduct all the recoinage in that time ; then they deal with the balance of imports and exports of coin only, and that shows an increase of coin amounting to about 90,000,000/. sterling when they deal with the subject in that way. But that of course would still be subject to the observation that a part of that coin may have been used in the arts. Still when you deal with coin alone, it seems to show an increase of about 90,000,000/. sterling. When you deal with coin and bullion together as I have done, it seems to show an increase of about 15,000,000/. to 20,000,000/. sterling more. 513. {Sir T. Farrer.) Is there any estimate in these reports of the quantity of gold which is used in California? — Not specially, but Mr. Miihlemann, of the Treasury, seems to estimate the total amount in circulation in the country outside of the banks as about 20,000,000/. sterling. 514. {Chairman!) But how does he get at that estimate ? — How he gets it I cannot teU, because he does not go into detail. But still there is that diffi- culty that you do not see the coin in circulation, 515. But, on the whole, yon think that all these lines of inquiry point to a sort of average nf 100,000,000/. ; that we may take that without much risk of error as the demand for the United States ? — There is no doubt about that. That is a new demand. 516. {Sir T- Farrer^ Is there any reason why there should not have been a greater demand fqr, the arts after the resumption of specie payments , than before ? — I think not after the resumption of specie payments, but I could quite imagine that at the time the war was going on, a time of great pressure, it would have been almost considered bad taste to wear ornaments very much, or anything of that kind, and that really there was a large suspension of the use of the precious metals in the arts from about 1862 down to about 1870. I should think that is extremely likely, and you may have had a larger use of the metal in the arts since that time. 517. {Chairman.) Then Holland ? — Then with re- gard to Holland, that is not a very material matter, because Holland is not a large country, and is not a large consumer of the precious metals in the form of coin in any way. But the change in Holland was to the effect that the free coinage of silver was sus- pended, and I would not be able to say whether in point of fact, since then, Holland has formally adopted a gold standard or not. 518. Practically, it has done so ? — The -practical effect of what it has done is perhaps the same, except that as the old coinage of silver is not withdrawn, but circulates at full value at the old ratio,, less gold is used than if there had been a more complete sub- stitution of gold for silver, as in Germany. The Scandinavian countries have done something of the same kind, but I have not formed any estimate of the exact sum all these countries have taken, because it is not a ^'ery large amount altogether. 519. Do you include Java in Holland .-' — Java would be included, because Java and Holland have exactly the same currency. 520. {Mr. Barbour.) Gold is freely coined in Hol- land, I think. It would be coined if brought to the Mint ? — Yes, but not silver. 521. Java has a gold standard ? — Yes, but not gold currency much. 522. {Chairman^ Then Italy is the last country? — Italy had comparatively a recent operation, and Italy raised a loan of 16,000,000/. sterling to enable her to resume specie payments. Practically the whole of that amount, within the last two or three years, was taken to Italy, and has not come back, at least not to any material extent. £23. {Mr. Birch.) I think the loan was 20,000,000/., not 16,000,000/. ? — I think, if my memory serves me right, it was 16,000,000/. effective. It may have been 20,000,000/. nominal. In any case the gold that was taken was 16,000,000/. sterling. [I find, accord- ing to Burdett's " Official Intelligence," that the issues of Rentes at the time in question were about 29,000,000/. nominal, the issue price of the first half being 90, and of the second half 88, but the effective amount required to purchase gold for resuming specie payments was that here stated.] 524. {Chairman.) For the purpose of our inquiry, it would be important, would it not, to distinguish those cases in which the new demand for gold has been as a substitute for silver, and any cases where the new demand for gold has been as a substitute for paper? — I am not quite clear that it would be of much importance for what you are doing now. 625. Would it not on this ground, that where the new gold has been substituted for silver it has not only increased the demand for gold, but diminished the demand for silver, whereas in these cases where the gold was required as a substitute for paper that second result has not followed ? — I think we" shall come to that presently, when we deal with silver, but I may say that, as for as I can judge, there has not been as yet a great diminution of the actual demand for silver, as compared with the period before the fall in silver commenced, for special reasons. I may mention, as one of them, that part of the reform in the United States was the abolition of fractional paper currency, which took place about the same time as the resumption of specie payments, and on that head alone, apart from the question of the Bland dollars which the United States has been coining the United States seem to have coined about 10,000 000/ sterling of silver ipstead of fractional currency. MINUTES OF EVIDBNOJi. 25 526. In addition to the Bland dollars ?— In addition, so I do not think the point is so very material as to whether the new demand for gold has arisen through its being a snbstitute for silver or in some other way. 527. {Mr. Birch.) Have you any information with regard to Spain. Spain has parted with a large quan- tity of gold and taken silver in its place ? — The ques- lion would be whether that is a new demand, whether Spain has not always been practically a gold standard country, at least for a great many years. 528. But the gold it has sent away has been replaced by silver ; that would make a new demand for it ? — Some demand. I have not got the figures. 529. (Chairman.) The demands you have been describing to us are all new. Do they take the place of any demands of an analogous character existing before 1861 ? — I think it is important to draw atten- tion to ihe point, that although they are new as compared with the period just before 1871 ; yet, if we were to go further back, we should find that the demand for gold for France was really an abnormal demand of a somewhat similar kind. That is to say, between 1850 and 1865, France took an immense amount of gold, and that of course was an extra- ordinary demand. I am merely wishing to draw attention to the point, that I am making my com- parison with the period just before 1871, when that demand for gold in France had ceased. 530. Could you give us any idea of the magnitude of the demand for gold in France ? — That of course is a very familiar fact, which you will find in many of the statements. My impression is, that about 22O,0O0,O00Z. sterling was coined in the period stated, but of course that is a figure which you will get very easily in the Blue Books. 531. Over a period of 15 years? — Over a period of about 15 years, and curiously enough, although that to a large extent arose through France having substituted gold for silver in its money, owing to the bi-metallic arrangement, yet the amount of silver which France sent away was very much less than that. I think it was only about 75,000,000Z. sterling. 532. Then the conclusion that you would adopt is, that the amount of gold that was required was not simply as a substitute for silver, but also to fill up the demand for coinage existing in the country itself ? — I think that has been the case to some extent all through these years ; that there has been a growing demand for coinage to some extent. 533. Through increase of population and wealth ? —Through increase of population and wealth, an'd that when a country has made a change, you are not to estimate the demand that it is likely to make by what would have to be substituted, but by the new circumstances altogether. 534. (Mr. Birch.) And it would be also to replace paper ? — To replace paper to some extent, although how far any paper has actually been displaced, except in Germany, would be a very difficult question to decide. I do not think that, in point of fact, there has been much diminution of paper in America until now. Now there is beginning to be some diminution of the bank note circulation, and its place is being taken by gold, and to some extent by silver certificates, but I do not think you can say that since 1873 there has been any material diminution of the paper circula- tion in the United States though it is less of an uncovered circulation than it was. 536. Silver cei'tificates do not differ except in name from ordinary bank notes, I take it from an economic point of view ? — From an economic point of view, both gold and silver certificates are simply bank notes, with the important difierence that they are absolutely represented in the case of gold by a full equivalent, and in the case of silver, at the present market price, not by a full equivalent. 536. (Sir T. Farrer.) And is there not a further difference that the person holding a silver certificate cannot demand gold, but only silver ? — That would be a material difference I think iu point of law, and yet things stand at present in point of Mr. R. Giffan. 26 Nov. 1886. not so material as economic effect. 537. But supposing that gold left the countiy, then it would be material ? — Then it might become material in effect. 538. You have referred to the previous state of things in Fi-ance. Is it not also the case that the demand in the United States was a demand which had been intermittent, rather than an absolutely new demand ? The United States had been a gold country before the war .'' — That would be so in respect of the quality of the demand, but I think when we take into consideration the fact that the United States stopped specie payments in 1860, and did not resume till 1875, an interval of 15 years, in which they had increased enormously in population and wealth, the quantity of the demand in that time had become entirely different. 539. (Mr. Barbour.) And before they stopped cash payment they were bi-metallic, were they not ? — I believfe they were not bi-metaUic, they were practically a gold country. 540. But they were bi-metallic at a ratio of 1 to 16 ? — A ratio existed. 541. Nobody bought silver at the ratio ? — No. 542. They were legally bi-metaUic, but practically gold since 1834 ? — Yes. 543. (Chairman.) But there was no alteration of the law in 1834 was there ? — There was an alteration. They altered the ratio then from 15to 1 to 16 to 1. 544. The demands on the gold productive powers of the world which you have described to us, so far, have been temporary in their character, that is to say, they have been required to make a great change in the currency ? — To a very large extent they have been, and I have thought it might he very important if one could distinguish what has become what one would call the normal demand froih what was absolutely necessary to effect the transition, but I am afraid that we are yet too near the transition period to be able to form an estimate upon this head'. I should say that, as regards the' United States, we might consider that since 1880 aU the demand that has existed has been of the character of a normal demand, but for this reason, that the United States have had so much trouble with the artificial character of the coinage laws, that I think they have had to make sjpecial demands for gold more than perhaps they otherwise would have made, to guard against acddenis, and that one can hardly say even now what the normal demand for the United States is. 545. (Sir T. Farrer.) May there not be another element of change there, arising from the possibility that if the present bank note circulation diminishes in consequence of the diminution of the United States debt, which is the foundation for it, it may be necessary to issue more notes, and to have further gold as a reserve against these notes ? — That is part of the transitional state of affairs that I am referring to, and we do not know what the legislation will be with reference to these points. 546. (Chairman.) Is it not possible to form an estimate of what the normal demand of the gold circulation of the United Kingdom is ? — I think it is extremely difficult, if it can be done at all. 547. If it could be done, might one not apply the law so discovered with regard to the United Kingdom without any very- great risk of error to other civilised countries ? — Well, I think it cannot be done very satisfactorily for this reason, that the circumstances are always changing, and, I may say,- that in these papers that I have referred to already, and which I prepared in 1872, I made some attempt' to discover what amount had been going into circulation in the United Kingdom. That is to say, I took into account the coinage, the re-coinage, the surplus of exports over imports of British coin, and tried to arrive at the sum, and the sum I arrived at in that time was about 2,000,000/. sterling per annum for the 14 years ending with 1872 or 1871, 2,000,000/, steriing per annum. E 2 26 KOYAL COMMISSION ON GOLD AND SILVER; Mr. fl. Giffen. 26 Nov. 1886. 548. Have you any reason to distrust that esti- mate? — I do not know that I have any reason to distrust that, or to have confidence in it, except that people can form their own judgment as to whether the mode described is a proper mode of doing the sum, and judge what the result will be. I have had no means of checking it in any way from any other sources, if that is what you mean. It seems to me the best way to work out the sum, but there are absolutely no means, as far as I know, of checking it in any other way that would be a real check. That was the figure which I arrived at then. But I could not say that that figure, even if good for the United Kingdom some years ago, would represent the normal demand in recent years or give an idea of what the normal demand in other civilised countries would be. The circumstances are so different. 549. (Mr. Birch.) I should like to ask whether you had taken into consideration the coinage of Australia ? — I took that into con.iideration in this way, that I first took the figure of coinage ; I deducted the re-coinage from that ; then I took the figure of the surplus imports or exports, as the case might be, of British gold coin only, and I arrived at a sum which seemed to be the amount going into circulation in the United Kingdom exclusively. 550. (M7\ Fremantle.) Over what number of years was that ? — About 14 years from 1858 down to the end of 1871, and you will find all the particulars of it in the series of articles I wrote in The Economist in 1872. 551. {Mr. Birch.) One very important element to take into consideration, and one very difficult for you to follow, is this : Brazil and Portugal, and other countries use our gold coin ? — That all appeared in the estimate which I made, because that appeared in connection with the balance of imports and exports of British gold coin. 552. I want to try another point. You cannot calculate what is the total amount, supposing Portugal and Brazil to become very fiourishing. You cannot rely on the calculations you made 10 or 15 years ago. They will not serve now. What amount of that gold may remain as circulating in those countries ? — The calculation I made, the one I have been referring to, does not bear on that point at all ; it simply bears on what went into consumption in the United King- dom, but I may say that the figures which I prepared altogether did show what went on balance to Portugal and those countries. 553. {Mr. Fremantle!) Did you take account of imports as well as exports ? — Both. Imports as well as exports. 554. {Chairman.) I suppose the normal demand of any country for coinage consists in the amount re- quired to make up for wear and tear, the amount required for increased coinage as wealth and popula- tion increased, less the amount saved by checks, bills of exchange, and other similar contrivances, which may come into use in the period ? — That would be so, but, of course, there are so many elements of doubt that you cannot be sure that what has happened in the last 10 years, is what ought to happen in the next 10 ; there are so many elements of change. 555. Could not you arrive at some approximate estimate on the lines that I suggested ? We know what the wear and tear is, do we not, or at all events we have a conjecture as to the amount of wear and tear ? — The wear and tear is very inconsiderable, and does not make much difference in the subject. 556. In a country like England the banking facilities and other methods of economising coin have not increased very much within tlie last 20 years, have they ? — I do not think that, effectively, any changes which have taken place in that way would have much bearing on this question. 657. So that all the additional coin that we have required must have been to make up for the small amount of wear and tear, and for the increase of wealth and population ? — And also to make up for any void that may have been caused in the coinage through what may have been taken for use in the arts which we do not know about. And then, of course, I may say that with reference to that calculation it is subject to the great difficulty that when you come to reason finely about it, to aim at minute accuracy, and apparently something like minute accuracy is necessary, you have not the means necessary for a sure result. The figures you arrive at are so small compared to the large figures of imports and exports from which you may make your calculation that the margin of uncertainty with regaid to these imports and exports themselves may be suffi- cient to destroy a good deal the value of the calculation unless you can check it in some other way. 558. {Mr. Birch.) I think you said that there had been no material alteration in the banking facilities. Don't you think that cheques are very much more in use now than they were some 10 or 15 years ago, and are applied to much smaller amounts ; and they take the place of gold ? — One may admit all that, but the question is one of degree. It seems to me that cheques would compete more with bank notes than with gold, but that is one of the points one would like informa- tion about, instead of theorising about it. 559. Formerly nobody drew a cheque under 51., but now people think nothing of drawing a cheque for 1^. It is constantly done? — I have given some attention to that, and, I think, if it is considered for a little while, what the extent of that change might be, and that it affects the habits chiefly of a small class by comparison with the rest of the country, then I do not know how far you would make a saving in coin by the difference in the extent to which cheques have been used in that way, compared with what was the case before. I think one might say, at the same time, with reference to that, that you have had coin economised by means of postal notes, and things of that kind, perhaps, to some extent ; but, looking to the country generally, and considering how much wealth has increased in the same time, it would seem to me very doubtful whether there has been much practical diminution in the necessity for using coin in the interval as compared with the general extent to which coin was used before. 560. {Mr. Fremantle.) It is a fact, is it not, that the gold coinage during the last four years has been very small in comparison with former years ? — I think one of the results of the inquiry which I made in 1872 is to show that if we look at what happened up to that time for the 14 years before, and what has happened in the 1 5 years since, we can say that, taking the same figures for our information, the amount of coin going into circulation has been less since 1872 than it was before that, and in the last five years it would almost seem as if no amount has been going into circulation at all. In the past year it has been coming out of circulation. 561. {Sir T. Farrer.) Notwithstanding the great increase in wealth and population, and commerce ? — Notwithstanding all that has happened. 562. {Chairman.) But would not that point con- clusively to the fact that there must have been some substitution for gold in the way of cheques ? — Not conclusively. There may have been other changes. I would not like to go into the question of what the explanation may be, but there is undoubtedly the fact that, as far as one can judge from the figures, there has been a change since 1872 as compared with the period just before that. 563. {Mr. Houldsworth.) Have you made a similar calculation since 1872 to that which you did before 1872 ? — I am sorry to say, it shows how one forgets, that when I made up some tables for the Commission on Trade, I thought I was going to arrive at the same thing, and gave directions for its being done ; . but I found that one important point had slipped out, and that was that I did not allow for the re- coinage, and if you look at the table for the United Kingdom which your Secretary has been good enough to prepare for you, and which continues these tables which I prepared for the Trade Depression Cominis- MINUSES OF EVIDENCE. 27 siou, you will find that the first five columns of it relate to the amount of gold coined, the net imports or exports of British gold coin, and the amount coined jo/ew the excess of imports or minus the excess of exports. These are substantially the same figures that I used before 1872, but the re-coinage is omitted. Still allowing about 1,000,000^. annually for the re-coinage, one can make a comparison with the period before 1872 and the period since. You will find that in 1860-64 the balance that appeared to be going into circulation, but not deducting the re-coiuage as we ought to do, was 2,300,000^.; in 1865-69 it was 2,800,000/. 564. {Mr. Birch.) Out of the Mint ?— No, from all sources. In 1870-74 it was 2,760,000/. In 1875-79 the figure is 1,608,000/., and in 1880-84 it is 871,000/., so that you have practically before 1872, on these figures, very nearly 3,000,000/. sterling, or deducting for re-coinage, you would get the same figure that I gave before, about 2,000,000/. sterling, but since 1872 the net sum annually added to the coinage has been much less, and lately it has been a minus quantity. 565. {Mr. Houldsworth.) If there was 1,000,000/. of re-coinage, and you deduct that from the 2,760,000/. of 1870-74, the result is about 1 ,760,000/. ?— It becomes something less than 2,000,000/. Then in the following five years it would become something less than 1,000,000/., about 600,000/. only, and in the five years ending 1884 it would be less than nothing. 566. {Chairman.) These figures give you the coinage firom all sources, don't they ? — The coinage from all sources. I take the coinage of the United Kingdom, and add or deduct the excess of imports or exports of British gold coin, and that gives you what comes into circulation from all sources in the United Kingdom. 567. Do you think we could find some method by which we could estimate the normal increase of the demand for gold, and the abnormal demand consequent on the fact that certain countries have adopted a gold standard ? ■ — I think there is a diflBculty with any country, even with regard to the United Kingdom ; but I think as regards the new countries I have been speaking of, the United States especially, that it is impossible, for another reason, that there has not been time to show what the normal demand is. 568. {Mr. Cohen.') Mr. Sauerbeck professes to give it in his paper. He professes to show the increased demand for gold arising solely from those countries that have introduced gold, at page 4 ? — I have read Mi'. Sauerbeck's paper ; but this is a subject with which I have been very familiar, and I do not think Mr. Sauerbeck addresses himself to this special point. The subject is most difficult and you cannot easily get round the difficulties. 569. {Mr. Barbour.) Do you think there is a normal demand for the metal as standard ? — Strictly speaking, there is a demand which you might say would be necessary to maintain prices and wages in a country in equilibrium, all other things remaining unchanged ; but whether it would be possible to obtain, practically, an estimate of what that demand is, is statistically a very difficult question. That is, as I understand, the point which we have been discussing, that theoretically there would be in the nature of things such a demand, but whether you can identify it in the concrete with any particular figure is a very different question. 570. And of course the amount that any country takes in any particular year will be affected by the demand in other countries ? — It would necessarUy be afiected by the demand in other countries ; but then, if you speak of it theoretically, you assume that the demand in other countries is also in a normal con- dition, and this would enable you to say what the normal demand in a particular country is. But of course in point of fact, and this is the real difficulty of the subject, all things are changing, not only in our country but in every country, and that makes it difficult to find a concrete figure that you can identify •vrith your theoretical idea. 26 Nov. 1880. 571. {Sir T. Farrer.) And your assumption is that Mr. R. Giffm. the demand is based upon the hypothesis that prices, wages, and so on remain in a state of equilibrium ? — And that population remains in equilibrium, or at least that you must allow for a constant increase of population. 572. {Chairman.) Then there lias been, as you are aware, a large demand for gold for India since 1871. Do you regard that as of importance? — There is no doubt of its importance in many ways, but when I was considering the subject I did not consider it so specially important with reference to this par- ticular point, because the demand for India has not changed in character as I understand ; it is more a question of degree. The kind of demand for India was in existence before 1871, as well as since then, although there is no doubt that the real amount of tlie demand for India, as compared with the period before 1871, has been somewhat less. I think it may be interesting to state the exact figures, as your secretary lias prepared them for you in that table with reference to British India. It appears from that, that in the five years ending 1855 the net imports of gold into India were about 1,000,000/. sterling per annum ; in the five years ending 1860 the net imports were 3,200,000/. per annum ; in the five years ending 1866 the net imports were 7,000,000/. sterling per annum, and in the five years ending 1870 the net imports were about 5,000,000/. sterling per annum ; in the following five years, that is ending 1875, the amount is only 2,300,000/. per annum ; in the five years ending 1880 the amount is only about 600,000/. per annum, and in the last five years the figure has got up again, and is 4,700,000/. per annum, and in 1885-8(), which is the last of all, the figure is 2,760,000/. per annum, so that although the amount in the last 15 years has been considerably less than in the 15 years before that, yet you cannot say that the demand for India has changed in character at all. There has been a large demand for India at both times, and I do not think that that makes much difEerence in the question we have had before us of the extraordinary demands. The diminution in what India has taken is not a very material set-off t« the extraordinary demands for other countries. 572a. {Sir T. Farrer.) The largest amount of gold that India took was simultaneous vrith the largest amount of silver which she took ? — That would be so. Of course that bears on a different point. I am merely speaking about demands for gold. 573. And both were simultaneous with a very great increase of exports over imports ? — I have not pre- pared myself on that point, but I daresay that would be so. 574. {Mr. liatbour.) These figures refer only to imports and exports by sea? — I assume that that is so, but I am not aware that the trade of India by the land frontier is very material. It may be with refe- rence toJbuUion, bvit I do not think it is with reference to other matters. 575. But are you aware that there was in former years a certain amount of import of gold across the frontier coming down from the direction of Central Asia ? — I have not looked into that at all. It may be material, but that would hardly come into our question at all, because the gold in question never comes into the general markets of the world, as far as I can judge, in any shape or form. 576. But if India were supplied with gold from Central Asia she would not import so much by sea ? — It would have a special effect as regards India, and that might ultimately afiect all those questions that we are considering, but it would not have much concern with the special point that I have been dealing with, and that is the extraordinary demands for gold that come into the general markets of the world, and whether these are set off in any way by the diminution of the demand for India. 577. I merely wanted to get the fact as regards India. The amount is not known, and I do not believe it is large, the amount that now comes in 28 ROYAL COMMISSION ON GOLD AND SILVER: ^ iJ. Giffm. in that way, but it is to some extent coming in ? — I am afraid I cannot answer on that special point. ) Nov. 1886. 578. I do not believe anybody knows, but I have seen Russian coins and Bokhara coins in India, and know they do come down from Central Asia ? — I can understand that would be so. '•'-' 579. Gold is a luxury in India; it is not the standard. I suppose the amount imported depends very much on the means of the people to pay for gold ? — I have no doubt that all through that is a material point with reference to this question, viz., the cost of production at which things are obtained. 580. There is one point on which I should hke to get your opinion. When the value of silver began to fall off, to a native of India it appeared that gold was rising. He bought his gold with rupees, and to him it would appear that gold was rising. If you take those figures you will find that when the exchange falls the import of gold falls off temporarily. For example, it fell very much in 1878-79. There was actually a net export. In 1885-86 you will find again a very small import. I would ask you whether a rise in the value of gold as compared with silver appears for a time to check the import ? — I should not like to express an opinion on that point without examining the facts, but I should say, as regards India, that probably the gold goes there in those years in which the people are well off, and that it goes in larger quantities than at other times. Whether the dif- ference in price apparently made by taking the exchange at a particular moment would affect the demand in India I really could not say. 581. {Mr. Birch.) But is it not clear that as they pay in their currency, which is silver of course, they would pay more silver for the gold? — Yes, but just as they pay more for everything else if it maintains the same relation to gold that it did. No doubt the supposition is, that a fall in the exchange temporarily checks the imports of every kind into India, and stimulates the exports. As far, as I understand, that is only a temporary process, and not a very lasting une. 582. {Chairman.') You have now given us a general survey of the additional demand upon the gold resources of the world during the last few years. Can you next give us a similar survey with regard to the diminution of the demand for silver, or of the area of the demand for silver during the same period? — Well, I think that with regard to silver I have put the phrase in the notes I have given you, " a diminution of the area of employment," so as to call attention to the fact that there are really two points involved, and these are that you might have a certain diminution of the area, and not much diminu- tion of the effective demand, or vice versa. And with reference to the diminution of the area of employment for silver, the most important event, of course, of these years in one way has been the change in Germany, which substituted gold for silver as its standard, and the result of which was that not only did the demand for silver in Germany, to keep things going there, cease, but Germany for a time had a certain amount of silver to sell. I think about 30,000^000/. sterling in all was the sum that was sold. That is the more important of the events as regards silver. Then the next event was, of course, the suspension of the free coinage of silver by the Latin union, and that operated not to diminish the actual employment for silver as compared with what had been in existence before 1872, but a possible employment which might have come into existence if the law had not changed. I think that is necessary to explain exactly what happened in regard to Prance. 583. You mean that Prance being a bi-metallic country it is impossible to say for any given period of years beforehand ■« hether its currency will be chiefly gold or chiefly silver. That necessarily depends upon the oscillation produced by the demands of other countries ?— That is so, and, in point of practice, just before 1871-72 neither Prance nor the Latin conven- tion countries had been large . consumers of silver practically. They were practically, I should say, gold countries at that time, and they had not been large consumers of silver practically. I think that to some extent before 1872, according to these tables which your secretary has prepared, Prance was practi- cally taking silver for a very few years ; but if you go back a little farther you vnll find, according to the table, that down to the end of 1864 there was an excess of exports of silver from Prance, and that had been going on from about 1850, and Prance altogether, instead of being a consmner of silver, was really a seller of silver, and it disposed of about 75,000,000/. sterling. But then after 1865, inclusive, the tide seems to have turned, and Prance was beginning to take back silver again, and the average import in 1865-69 was 3,600,000/. per annum. In 1870-74 this had risen to about 5,500,000/. sterling per annum. But part of that, of course, was the large import in 1874, when the fall in silver had com- menced, and which, in fact, was the occasion which induced the French Government to suspend the coinage of silver. What surprises me to find is, that in the following five years, notwithstanding the sus- pension of the coinage, France actually imported 5,000,000/. sterling of silver per annum, and even in the five years, 1880 to 1884, Prance imported very nearly 1,000,000/. sterling per annum, so that although you had a diminution technically of the area of silver, and probably of the demand for it as com- pared with what the demand would have been if Prance had continued bi-metaUic; yet, in point of fact, if you take the 15 years from 1870, and compare them with the 15 years before, you will find that the practical diminution in the demand for silver in France, and I suppose it has been the same in other Latin countries, has not been sensible at all. There has been that change in the area of the employment I have described, but no practical diminution of the actual demand for silver. 584. Then your general conclusion is that, as far as Europe is concerned, gold has been more required, but silver has not been less required ? — I think, as far as that goes, that the diminution of the area of employment for silver has not amounted practically to a great deal, but this does not, of course, alter the fact that a great alteration has been made by the suspension of free coinage by the Latin convention countries, with reference to the possible demand which might have come from the Latin countries. 585. The amount of which must necessarily be a matter of conjecture ? — I think a matter of conjec- ture, and I think, with reference to this question, that probably it would have made a considerable difference in the demand for silver, but not much in the demand for gold. 586. Before we go to America, and before we leave the Latin union, may I put this further question to you. The operation of the bi-metallic system in France would have tended to drive out the dearer metal, and as from other causes gold would have become the dearer metal, probably the whole cir- culation of Prance would have been silver if she had still remained a bi-metallic country ? — I think the point is quite clear, but what I should like to say with reference to it is that it does not follow that although the silver in France was displaced by gold after 1850, that therefore if Prance becomes bi-metallic silver would displace the gold to the same extent now. That raises really a very important question of theory which perhsips we ought not to go into at this moment. Gold, as it seems to me in former times circulated very much as what is called monetary mer- chandise, even in bi-metallic and in silver countries and it might so continue to circulate if Prance were again to become bi-metaUic. We do not know exactly what the stock of gold in Prance is, and it would be a matter of very nice and intricate calculation indeed how much silver would be required to go to France to displace the amount of gold necessary to establish silver as the sole standard. ■ MINUTES OE EVIDENCE. 29 587. {Sir T. Farrer.) But I suppose we may go this length, that if the Latin Union had not suspended their coinage of silver a larger amount of silver would have been employed in those countries ? — Probably a certain amount of silver, but other events might have happened, and you might have had a less demand for silver, probably, in the United States. 588. {Chairman.') That brings us to the United States. Have you any information to give the Com- mission in regard to them ? — I have simply to call attention to the coinage of silver in connexion with the Bland Act, which has been going on, amounting nearly to 5,000,000/. sterling for almost 10 years, I think. It amounts to very nearly 50,000,000/. sterling — the silver that has been coined in this way in the United States. 589. It need not by law be more than 2,000,000 dollars a month ? — A minimum of 2,000,000 dollars and a maximum of 4.000,000 dollars per month, and 2,000,000 dollars a month is about 4,800,000/. per annum. They must coin that amount. 690. They have never exceeded the minimum ? — They have never exceeded it, I believe. Well, that is a new demand for the United States of a very special character for silver, which I think may be fairly set off against any diminution of the area of employment in other directions as far as the actual use of the metal has been concerned. 591. {Sir T. Farrer.) I heard it suggested in the United States that this action of the Grovernment with regard to silver had, on the whole, the effect of rather depressing than raising the market, and very possibly if they had let silver alone the supply and the demand would have accommodated themselves, and the price would have been higher i! — That is a question that I should feel great difficulty in going into. 592. The fact of this extraordinary demand stimu- lated the supply ? — These are all very difficult matters indeed to go into on questions of fact. 592a. {Mr. Fremantle.) Is it not a fact that since 1878 the general course of the silver market has been downward ? — No doubt the general course of the silver market has been downwards. 593. Notwithstanding that the United States G-overnment have absorbed nearly 5,000,000/. per annum of silver ? — I am quite aware of all that, but I am merely mentioning what the broad facts appear to me with reference to what the actual demand for silver has been. 594- {Chairman.') Perhaps you could now give us the figures with regard to India ? — Of course the figures with reference to India are another great element in the silver question. What has been already stated with regard to gold is true of this, that India and the eastern countries generally have made no change with reference' to the nature of the employment, that they still are counti-ies with a silver currency, and using silver now just as they were before 1 872 ; but, of course, in point of fact, the amount of silver going to India during the last 15 yeai's, I think, has not been quite so great as it was in the 15 years before that. But that does not arise from any change with reference to the area of the employ- ment of silver ; it is actually a change with reference to the practical consumption, and I do not know that in this question it ought to be a set-ofi" to the other matters. There has been no change legally, but practically there has been a less demand than what there was in the previous 15 years. I think that in the previous 15 years, from 1855 to 1870, you may say that the annual demand for India was very nearly 10,000,000/. sterling of silver. I suppose 10,000,000 tens of rupees would be the strictly correct language to use. But at that timejudja was receiving silver from France. It was receiving a great deal of the silver that was displaced from France. 595. {Sir T. Farrer.) At the time of the cotton famine and all that period ?— At the time of the cotton famine and all that period. 26 Nov. 1886. 596. {Chairman.) During that period the total Mr. It. Giffen. received was 10,000,000/., but India was receiving from other quarters ? — From 1872 to 1875 the annual amount India was receiving was 3,000,000/. sterling annually. That was just before the drop in silver. Since then, in 1875-80, the annual amount has been 7,000,000/. sterling, and in 1880-5 the annual amount was 6,000,000/. sterling, and in 1 885-86 the amount has been very nearly 12,000,000/. sterling, so that, although there is a diminution in the last 15 years compared with the previous 15 years, there has been no change in, what I may call, the legal position of India with reference to the matter ; and, practically, the Indian demand has been a very large one, so that there is no set-off very much I think to what I have said with respect to the diminution of the area of employment for silver. 597. Then China ? — Then with reference to China I have put in a table which you have in your hands, which seems to show that although China is usually a country which exports silver, yet since 1875 if you look at the table you will find that there is an excess of imports of silver in almost every year. In 1875 the excess of imports is 2,000,000/. sterling ; in 1876, 3,800,000/. ; in 1877, 5,300,000/. ; 1878, 3,200,000/. ; in 1879 and 1880 there is no balance one way or the other; in 1881 the excess of imports is 1,500,000/. ; 1882 there is a slight balance the other way ; 1883 the excess of imports is 1,200,000/.; in 1884 the excess of imports is 2,100,000/. ; so that China from being a country exporting silver, as was the case just before the drop in silver has since then been a country importing silver on balance. {See Appendix III., F.) 598. Concurrently with the export of gold ? — Concurrently with the export of gold, as we have seen ; but, on the whole, China has taken more silver of late years than it did before. 599. {Mr. Birch.) But did she take gold at the same time that she took silver? — I do not think for- many years, according to that statement which I put in, China has been importing gold upon balance. It has almost been uniformly an exporting country. {See Appendix.) 600. Then she would receive the silver as the balance of her trade ? — In what way precisely she has been receiving the silver of late years I could not say without knowing something of what the trade of China is. 601. {Chairmun.) Can you give us any con- jectural estimate of what proportion of the silver that goes to India goes there for the purpose of keeping up the currency, and what goes there for the purpose of being hoarded, and practically disappearing from the world's use altogether? — I should like to see some evidence from Indian authorities upon that head. My own impression is, that the amount actively in circulation, of silver, is probably very small. I would not like to say how much it is, but that is my impression, — that there are many parts of India, as I understand, which are almost in a state of barter and very many parts where the chief currency is copper, and that the use of silver is very largely in the large towns of India; and altogether I doubt very much whether the amount actively in circulation anything approaches the sum which would seem to have been coined in India. 602. {Mr. Barbour.) The land revenue is the chief portion of the revenue of the Government of India, and it is paid by the cultivators all over the country in rupees ; are you aware of that fact ? — I could quite understand that that might be the case, and that the silver was used for some very special payments, and yet not used generally; that the copper currency might be the real currency that was used in the daily transactions of life. That would be analogous to what happens in other countries. 603. {Chairman.) Your opinion then, to conclude this part of the examination, is, that two changes have taken place. The greatest effect has probably been caused by the increased demand for gold and not by a decreased demand for silver ? — That is the ease ; 30 ROYAL COMMISSION ON GOLD AND SILVER: Nov. 1886. , M. Giffen. that, so far as one can judge respecting the change in the relative values of the two metals, and the causes operating upon that change, you vrould say that the increase of the demand for gold coupled with the diminished production, which I have referred to, has been a more important matter than the diminished demand for silver alone. The increased production of silver, of course, would be a material point. 604. But would it not be accurate to say that the demand for gold and silver are strictly correlative, if you exclude note circulation ; and that, apart from note circulation, to say that the demand for gold has increased, and that the demand for silver has not diminished, is an impossibility ? If one rises, the other must fall, if you exclude consideration of all paper currency ? — If the effect of the increased demand for gold is to cause a rise in gold taken in connection with all the other circumstances, then the other metal must fall relatively to gold ; but it is purely a question of relation with respect to each of -them and all other commodities. That would be a very difficult question to investigate. 605. But as the total work to be done by the two metals as circulation, still excluding note circulation, is the same, or practically the same, to say that the demand for one has increased is exactly the same as saying that the demand for the other has diminished ? — I am not quite sure that I should put it so, because I do not know that. That would raise an important question of theory. I do not think the use of the two metals is precisely the same at all. They are sued for money in different ways, and are useful in different ways in respect of money, and I do not think you could speak of them as exactly on the same footing. 606. At all events, you would go so far, I suppose, as to admit that one of the reasons why there has been an increased demand for gold is, that gold is largely taking the place not merely of silver but also of notes ? — I think there is no question as to gold having taken the place of paper, and that is an im- portant point ; but the chief change with reference to the substitution of gold for silver is simply the change which happened in Germany. There has not been much change otherwise affecting practically the area of employment for silver as compared with what was the case before 1872. 607. Then the only other point upon which 1 have to ask you any questions to-day is about the use of the precious metals in the arts. Could you give us any information on that point ? — Well, I had the advantage yesterday of hearing what was said by Mr. Pixley and Sir Hector Hay, and, of course, I had made some observations upon that subject before; and I should like to say, with reference specially to the estimates of the United States, that I think I can explain some of the difficulties which the gentlemen you had yesterday experienced with reference to these estimates of the Director of the United States Mint. I have got here with me all the reports of the Director of the Mint, bearing on the subject, beginning in 1879, and the general effect is, that they seemed to feel with reference to the question which has already been mentioned, that of the amount of coin going into circulation, and other matters, and the expediency of making estimates of the amount of coin in the country, that they ought to take into account the amount that was used in the arts. Accordingly they began in 1879 by taking note especially of what seemed to be purchased at the mints for use in the arts ; and I think the first years when they began to observe it the amount was about 3,000,000 to 4,000,000 dollars, that seemed to be purchased at the mints for use in the arts in 1879. Then the Director of the Mint, at that time Dr. Burchard states that he sent out circulars to all the people whose addresses he could find in the Directory, en- gaged in the manufacture of the precious metals in different forms, and asked them to fill up this schedule which he sent out to them, stating how much they used in their business, and how much they obtained from United States coin, how much from foreign coin, how much United States bullion, and I think there were one or two similar headings, but at any rate the Schedule was very complete, and he pub- lishes all the results of the answers which he got, and the figures which he got. The first figure which he thus obtained was 7,000,000 dollars as the amount of gold used in the arts and about 5,000,000 dollars as the amount of silver, and that was about the year 1 879. Then, he did not make an estimate in the same way for a year or two after, but simply took the figure of the amount of bullion purchased from the mints and made a shot at the other figures from the information that he liad pre- viously obtained, and so got estimates of the amount used in the arts. Then, about 1883, he made that estimate which has been quoted, of about 14,500,000 dollars of gold ; that is to say, about 2,900,000^. sterling, and that was obtained in the same way as the estimate of 1879, but of course was a great deal larger. However, in the very last report of all of the Director of the Mint, that for the year 1885, in which a new Director seems to have been appointed, Mr. Kimball, I find that the estimate is dropped out altogether, and that you simply have for that year the figure of the amount that is purchased from the mints, with the phrase, " supposed to be for use in the arts," introduced. 608. And what does that amount to ? — My im- pression is, that the estimates in previous years, although I think they were honestly and fairly made, are not made in such a form, or published with such detail, as we ought to expect in a matter of this kind if full credence is to be given to them. Speaking statis- tically, what I should like to see in any estimate of that kind, would be some account of the replies that were received, and whether the replies covered what were known to be the principal manufacturers in the business, and some distinct statement as to how much is conjecture, and how much is a real figure, more or less examined, in the final total which is put forth, and also some account of the process, so that one could see how the diflSculties which must inevitably have cropped up in an investigation of that kind were practically dealt with, as well as what were the means used to prevent duplicates being returned, because you might have a dealer in a large way making a return of what he had disposed of in his business, and then you might have a manufacturer making a return of exactly the same thing. I should have liked to have seen in what way all these obvious difficulties in the statistical investigation were dealt with. So that, looking at what has been done with these estimates, and at the way in which in the last year of all the estimate has been quietly dropped out of the Mint report so far as 1 can see, I should doubt such a high figure as 3,000,000/. as the amount of gOld used in the arts in the United States, although possibly some figure between 1,000,000/. and 2,000,000/. sterUng, and possibly nearer the higher than the lower figure, looking at the thing broadly and the account they give of the business, may be fairly well justified.* 609. Do you know of any estimates which have been made with regard to the United Kingdom ? — I have never heard so full an estimate made as that made by Sir Hector Hay, I think yesterday, but I should say with reference to that estimate that I should have liked very much to have seen a little more detail about it, both with regard to the locality of the places where the gold was supposed to have gone, and with regard to the objects for which it was supposed to have been used. That might have been a means of enabling other people to check it, and would have made it a good deal more valuable. And I think still it would be highly expedient, if the matter is to * Since this evidence was given, a later Mint report, viz. for 1885-8R, has been issued, from which it appears that a fater investigation has been made by means of the issue of Circulars and a figure of 2,000,000/. as the amount of gold used in the a,rts IS arrived at. But there are still no details of the statis- tical process. MINUTES OF EVIDENCE. 31 be investigated at all, that some fuller investigation should be made than what has yet been made. It is not desirable to rest upon statements of that kind of a geuei'al character. 610. Could you suggest the method by which the investigation should be undertaken ? — K'ot in a breath, as it were. It would really take a good deal of time to make a proper investigation. 611. (^Mr. Birch.) Do you agree with Sir Hector Hay's view that only about one -fifth of the total amount used is taken from old coin ? — It seems to me that with reference to the amount of coin used in that way, 1 am a good deal afraid that that must always be a matter of conjecture to a very large extent. 612. It is not generally full weight coin ; it is hght coin which they purchase, and from statistics which I got from the bank with which I happen to be con- nected, it appears that in Birmingham alone they have been selling 10,00OZ. a week to the jewellers ; therefore, that would be one step towards obtaining information ; and I think myself there would be no great difficulty in arriving pretty nearly at a conclusion, because we know in England who the principal manufacturers are ?— Perhaps so. 613. (^Mr.Freniantle.) Is it not probable that heavy gold coin would be taken for the purpose of being melted down ? — The difficulty seems to me, that you cannot tell what happens with regard to very many small people all over the country who may melt up a few sovereigns now and again, and you cannot tell what the general effect may be. In any case that difficulty would remain. 614. {^Chairman.) I do not know whether you could assist the Commission by laying down certain lines of investigation upon this point, which is an extremely important one, so that we might vrith your assistance arrive at something like a conclusion ? — ■ I shall think over it and see what I can do, because J think it is a very important matter. 615. Have you any information with regard to other countries ? — I have no information with regard to other countries except what Mr. Soetbeer gives, and which you will find in the last book to which I have referred you ; and I think it is important to notice that perhaps as regards the Continent, France, Germany, Switzerland, and Holland, what Mr. Soetbeer gives seems to me of more value than what is known with reference to the United States and the United Kingdom as things at present stand. 616. Why is that ? — He has taken a good deal of trouble to get together statements of what is used in particular trades in |)articular towns, the very thing Mr. Birch is suggesting for this country, and he gives a most minute account, for instance, as to what is taken in Switzerland, and that part of France, near Neuchaiel, which is connected with watchmaking. These and other statements show that he j-eally has gone into the subject in detail to a very large extent, and you can see for yourselves that there must be a considerable amount used in arts in some way or other. The one important point to my mind, however, is this, that even if you get an estimate at the present time that will not supply the place of estimates which ought to have been in existence in former times, and it does not follow that if you get a figure for a particular year now, that that can be carried back any length of time, and until you get a series of statistics you get nothing quite satisfactory in a matter of this sort. 617. But on the whole you are inclined to think that Dr. Soetbeer's estimates with regard to the Continent may be taken as fairiy trustworthy ? — I think so. 618. So that if we could add to them the United Kingdom and the United States, we should, at all events with regard to civilised countries, be able to give a fairly accurate estimate of the total amount used in the arts ? — I think so. 619. {Mr. Frem-antle.) But only during recent years ? — Only during recent years, and only taken for the very year for which it is given, and then it seems o 24358. to me that the point to which I have drawn attention 1/7. R. Giffen, more than once to-day would still remain very iui- portant, and that is how much is taken for the arts 2 6 Noy. 18 86. out of the coinage, and how much is got from other sources, because that bears upon the problem which I have referred to in the case of the United States, that you can absolutely trace a quantity of gold to a country, and then you cannot tell what has beiiome of it, whether it is circulating, or whether it is lost, or whether it is used in the arts, or whether it is hoarded. You cannot tell within very wide limits indeed what the state of the stock of gold in a country is. 620. (Chairman.) Then there are two very im- portant points connected with this branch of our inquiry which I believe you are not prepared to give us any information upon. One is the total of the precious metals in circulation in the world available for the world's use, and the other is as to the cost of production of the precious metals ? — As to the cost of production I can tell you nothing, and of course the one ditficulty I should have in the matter would be that if I were making the inquiries 1 should like to know not merely the cost of production in a sort of average way ; but the facts as to the point to which you called the attention of witnesses yesterday, viz., the cost of production at which certain mines would stop, and matters of that kind. And then with reference to the cost of production also it must be considered that that is a thing which of itself may be continually changing just as all other things are changing. If you have a rise in wages in one locality, that raises the cost of production, and if you have a fall in wages, the cost may fall, and you have always to consider that the whole thing is changing, and you may have a mine which is always losing one day, and if you put a better manager over it, it may be making a profit. 621. rhere is the other question, the total stock of precious metals in existence available for the use of the world ; have you any observations to make upon the problems that that question suggests ? — I think I may say that the best statisticians, as a rule, have discouraged any attempt to make such estimates with any confidence, and I believe that the Committee of 1876 were very strong upon the subject, and such estimates were hardly permitted and were not gone into. And I must say that I am disposed to agree with them as to the extreme difficulty of forming any conjecture even as to the amount of the precious metals, the stock as one would call it, whether in circulation or in private hoards, whether you can arrive at any satisfactory figures at all. I think tliat what I have mentioned with reference to the United States, and what has become of the stock there, is sufficient to show that there are ^ery great difficulties indeed in the matter. I have got hero with me Mr. Soetbeer's statement upon the subject, which I can put in if it is thought necessary. 622. I thmk it would be as well ? — But he only gives it, I may say, as it were under protest ; and I bring along with it another statement which is of a very different kind indeed, and that is a statement of the amount of gold in the banks and State treasuries of the different countries named, because that is a thing which you can see. But if you compare the two together, and try to find what iias become of the total estimated stock of the metal in the country, as dis- tinguished from the amount that is in the banks, I do not think that you can arrive at any satisfactory figures at all. Mr. Soetbeer only gives the statement for what it is worth, and I must say it would be very difficult indeed to rest satisfied with it. And I should like to add with reference to it that, of course, even if you do get a correct statement of what you would call the stock of coin in a country, that it may be used in very different ways indeed. Some of it may be actively circulating, and a great deal of it may be circulating only at occasional intervals, just as the coin is used in paying the revenue of the Government of India once a year or once a half year or so, and F 32 ROYAL COMMISSION ON GOLD AND SILVER: Tr. R. Giffen. that other parts of it for all that is known may be kept out of sight and hoarded in some way or other ; 16 No v. 1 88 6. j^ jg impossible to tell. But it is quite impossible to ' assume that the difference between the whole stock of gold in a country and what is in the banks is actively circulating acording to these estimates. 623. Would not an estimate in which the limit of error was even 30 per cent, be better than no estimate at all ?^I think if the limit of error is so wide as that it would make it, with reference to this subject, of com- paratively little value. I should be afraid of the figures altogether ; and then I attach much more importance perhaps than others would do to the character of the use of the stock, and that unless you can get some estimate of how the stock is actually used, as well as an estimate of the stock itself, it would not be of so very much moment. 624. But still it is evident that for certain inquiries connected with our subject, it would be very im- portant to know what proportion of the total stock was annually added to it from mines ? — I think it might be important, but I confess it seems to me so impossible to get at it, that there is very little use trying. I may observe that on former occasions I have had occasion more than once to notice that when there is any great pressure in the money market it is wonderful from what unexpected quarters gold seems to come. Sometimes it seems that do what you like in putting up the bank rate, and making the rate for money in Lombard Street very dear, putting it up to 5, 6, or 7 per cent., nothing seems to happen, but if you go up to 9 per cent, the gold seems to come in a flow, and where it comes from 1 find that no one very well can tell. 625. (Mr. Birch.) That depends very much on the rate of interest in the different countries from which we attract gold. When we raise the rate we must raise it to a point, that supposing the rate of interest in the United States is 4 four cent, people can bring over and employ their money, plus the expense of bringing it over ? — What seems to me the interesting point in the matter is this, that appa- rently there are difEerent kinds of money ; that money will come out to you at 5 per cent, some kind, and another kind you won't get under 7 or 8 or 9 per cent. The pressure seems to act upon a new layer or stock of money as it were, so that you can never tell exactly how the stock of gold is used throughout the world. 626. The rate raised here would not materially affect the gold in this country ; you must attract it from abroad ;^ the gold here is in constant use? — I am not quite sure of that, because I think I have observed that the raising of the rate attj-acts money out of the provinces, and seems to bring more money into the banks in some way. Where it comes from I cannot tell. 627. {Chairman.)' England is perhaps about the only country where you could arrive at it with tolerable certainty; because I think there is very little hoarding in Elngland ? — I should like to know ; I do not know. 628. {Mr. Birch.) What you mean is this, that the banks in the country have certain accumulations of money which they hold in their till and do not send up to London to be employed when they can only get 1 or 2 per cent, for it. ' Directly they can get so much more they send it up and employ it to the last farthing, which probably they would not if they only got a small rate of interest ? — I think that is very important, but what I am a little doubtful about is, whether it is not the case that you get it out of private people's hands as well when the oanks are offering 5 and 6 per cent, for deposits — whether that has not the effect of diminishing the loose money that people have about them. 629. {Mr. Barhour.) I understand you to say that the coining of silver by America under the Bland Bill probably led to an increased demand for gold in America. Did you say so? — No, I do not think I said so. I said' that the coining of silver for the Bland Bill was a set off to any diminution of tha demand for silver elsewhere. 630. You did not say that the coining of silver led to an increased coining of gold ? — I think what you refer to is that the present artificial arrangements of the United States altogether seem to have increased the demand for gold compared with what that country would otherwise have required. 631. All I want to ask is how that comes about ? — Well, at the present moment the United States appear to keep in the Treasury and in the reserve banks a sum that by comparison with England I think would be admitted to be quite abnormal. We get on with a reserve of between 20,000,000/. and 25,000,000/. sterling, and if you add to that what is in the banks throughout the couQtry, I do not think you would come to more than 30,000,000/. 'sterling, the Scotch and Irish Banks, or even if you add all the banks together according to that estimate that was put in by Mr. Palgrave, you would still be under 40,000,000/. sterling, I think. But there you find that in the United States you have 75,000,000/. sterling in the Treasury and in the National Banks- together, and my impression is partly from communication with some gentlemen in the United States and partly from what I see in the newspapers, that they are generally apprehensive, and wish to keep very strong with reference to gold. 632. {Sir T. Farrer.) Is it not the case that there is a very large amount of bullion too ? — -There is a vbry large amount of bullion, but the -75,000,000/. includes both. The bullion is about 12,000,000/., I think. 633. {Mr. Barbour^) On the other hand, you say there has been 50,C00,000/. of silver coined, a large portion of which is circulating either in silver, or as silver certificates. Does not that reduce the demand for gold in America ? If that silver was not circu- lating, would not its place be taken by gold in some form ? — I think that would be so to some extent, al- though the silver is used apparently for small change mostly, to cover notes of small denominations. 634. So yon have that to set against the large de- mand for gold ? — That would be a set off ipro tanto, of course, so far as gold could really be used in circu- lation if there were no silver circulating and no silver certificates. 635. {Mr. Cohen.) I think you stated that you could not give any idea about the amount of coin" in the country ?— I think not ; I think it would be ex- tremely difficult to form a very accurate idea. 636. Have you any impression as to whether the amount of coin in this country, gold or silver, has decreased or increased within the last 10 or 15 years ? — I think we may say that the amount of gold coin has not increased very much for the reasons that have already been stated, at any rate, that it cannot have increased so much as it did in the previous IS years. Whether there has been an actual diminu- tion owing to the withdrawal of coin for use in the arts or otherwise, I cannot say. 637. We heard evidence yesterday as to the pro- duction of mines, that some mines could not produce .silver under 3s. Qd. an ounce I think. Have you any information on that point ? — I Lave no information upon that point, and, of course, I was rather more struck I may say with the statement that it could not be produced under 3s. 6e?. an ounce unless wages fell, than with any other part of the statement, because that is really the important point to my mind that the conditions are always changing, and also what is the cost of production at one place is not the cost at another. 638. But do you think any public department could get at that,— the Foreign Office or the Board of Trade ? — 1 should say it would be extremely diffi- cult unless it could be got through private information in the City. 639. You agree also as to the impossibility of finding out how much of the coined metal is used in re-coinage ? — I think there is not much difficulty with MINUTES OF EVIDENCE. 33 reference to the coinage of a particular country. At tlie mints they would always be able, as a rule, to tell you how much of their own coinage comes to be rc-coined absolutely, because it is light coin that comes in that would not be taken elsewhere, but there is no means of calculating, I should say, what amount of the coinages of particular countries goes to other countries, and is re-coined there. 640. Or absorbed here in the arts ? — Or absorbed in the arts. The quantity of re-coinage is immense, I know. 641. (^Mr. Barbour.) In the statement relating to British India, prepared by Mr. Murray, there is a column headed " Old silver re-coined," and that, I believe, is only British coin ; it does not include the coin of native states, or five-franc pieces, or Austrian dollars ? — I am not aware of what is the case with reference to India, but I do know with reference to other mints that the practice is to state what is the re-coinage of your own coins, and I think the United States exceptionally tells us what comes into the Mint from foreign coins as well, and with great detail, but I do ' not think that that practice is universal. 642. {Mr. Cohen.) Have you any opinion as to the quantity of light gold that is locked up in the banks ? — I have no"special information. 643. You have heard it stated to be 10,000,000^. ? — 1 have seen statements of different kinds, but I have no information that I could put before the Commission. 644. Do you connect that at all with the scarcity, or the supposed scarcity, of gold in this country ? — I should think not, because I should look for the scarcity of which you are talking in another direction altogether. Chiefly it would have an effect on small change actually in people's hands. If there was any real scarcitj' for small change it would be felt there, and, as regards money generally, that would have to be ascertained in a very different way from what would be supposed to be an actual scarcity or famine. 645. The next question is the one that I interpolated before. Do you not think that the common feeling among persons engaged in business other than bul- lion business is that the field for the sale of silver has very much fallen off, contrary to what you have estabhshed here ? — I do not think there is anything contrary to what I have put down here. 646. You did not catch my question. The question is not whether it is contrary, but whether the people do not think generally that the field within which silver can be sold has very much fallen off, and the consumption has very much fallen off ? — I could not say what is the precise impression that people have on the subject, but it seems that those who write upon it, and are acquainted with the facts, as a rule, attach most importance to the increase of the production of silver. 647. What I want to arrive at is whether you do not think it very likely that the fall in silver has been due to panic rather than glut or over-supply ? — I should think not. I should think it is extremely iinlikely that a panic would be lasting and prolonged to this extent, because the occasional fair in prices sets in motion so many other causes, and so many other things have to be adjusted to it that I do not think panic could be so very material-. Panic is a thing that would have a momentary effect. It would not have an effect lasting over several years. 648. Would you advise that the Board of Trade Mr. 11. Giffen. should publish statistical information such as has been collected by this Commission and the Commission ^^ N"^'- i^**^- on the Depression of Trade, as regards the movement of the precious metals so as to inform the public ? At present this is not done ; all that is given is the increase and decrease in this country, and no general information as to consumption ? — I think that as an officer of the Board of Trade tiiat is hardly a question I should answer, because that involves dijGSculties as to how that should be done, and my advice should be given to the Board of Trade. 649. I will put it whether a department of the Government should not do that? — Well, I suppose we should say that some things are very desirable. 650. Except there is some special inquiry of this sort the public have no means of getting at any in- formation on this subject ? — Of course it would bo very desirable that the Government should have means of getting more statistical information. I think that is a point upon which we may all agree, but as to getting things done practically, that is a very different question. 651. {Sir T. Farrer.) I suppose you would think that it would not be very desirable to publish figures unless you could be tolerably certain of their accuracy, and also tolerably certain that they would be of some use ? — And also that when you undertake an investigation that you would be pre- pared to publish exactly the process you have followed, so as to enable people to judge of the value of your work. That is perhaps more important than any other. 652. But supposing it was possible to get any statistics as to the use of metals in the arts with accuracy and certainty, you would be disposed to advise that it should be undertaken ? — I should think so. It seems to be an important matter. 653. {Chairman.) Have you any other point which you would wish to mention? — Well, there is one point that bears on the question of gold production to some extent, and also upon the question of what material has been available in this country, and that is that in addition to the ordinary bullion statistics which can be referred to, account ought to be taken in the ordinary imports and exports of merchandise of the import of gold and silver ore ; and the import of silver ore especially seems to be rather material as it is valued at something like 1,000,000^. sterling per anuum in this country, and that does not appear in the ordinary imports and exports of bullion, but appears in the statistics of merchandise ; and if the Commission desire it, 1 shall put in a table bearing exactly upon this point, and giving the figures as far back as I can carry them. {See Appendix HI., G.) 654. I think that would be very important ? — That is an element which seems not to be taken into account anywhere, and which, if anything, rather tends to confirm the higher estimates of Mr. Soetbeer than the lower estimates of Sir Hector Hay, because it is undoubtedly an import of some little consequence in the matter. The United States and Spain and the South American countries are the countries chiefly from which this silver ore comes. 655. {Mr. Birch.) Not as it comes in lead. A great deal of silver comes in lead? — ^This is silver ore, or ore the greater part of which in value is silver. The witness withdrew. F 2 34 ROYAL COMMISSION ON GOLD AND SILVEE : Fourth Day. Friday, 3rd December 1886. PRESENT : The Right Hon. A. J. BALFOUR, M.T*., the Chaieman, presiding. Mr. D. M. Bakbour. Mr. J. W. BiECii. Mk. L. L. Cohen, M.P. Sir T. H. rAREER, Bart, Mr. C. W. Fremantle, C.B. Mr. W. H. Holldsworth, M.P. Sir John Lubbock, Bart., M.P. Mr. J. R. BuLLEN Smith, C.S.I. Mr. Geo. H. Muerat, Secretary. Mr. R. Giffen. 3 Dec. 1886. Mr. R. G-iFFEN examined. 656. {The Chairman.) As I shall be obliged to leave very shortly, I have arranged with Sir Thomas Fai'rer, who has been good enough to relieve me, to conduct the examination of the new evidence you have to offer us ; but there are one or two matters arising out of the evidence you gave us last time, on which you are perhaps in a position now to throw some more light. You have additional information, have you not, with reference to the difficulty of accounting for part of the gold which has been traced to the United States during the last ] years, since the preparations for resuming specie payments began ? — Yes, since I gave my evidence I have had the opportunity of reading a letter of the Secretary to the Treasury, dated the 2nd of March last. This is a letter from the Secretary to the Treasury in response to a resolution of the House of Representatives on the subject of the circulation of standard silver dollars and other matters, and this contains a statement which seems to me to bear upon what I said with reference to the quantity of gold that has been traced to the Uuited States and that portion of it which it seemed to me you could not see where it was. The Secretary to the Treasury, in the course of t?iis letter, makes the following statement. He says, " The 220,000,000 dollars of our own full and legal " tender silver, if recoined at the same ratio as the vast " and larger and contr-olling stocks of silver in Europe, " might vanish like the full fourth of our 550,000,000 " of dollars of gold coin, which fourth we cannot " track or find, and yet have coined and counted, b^it " have not seen depart, and so ascribe it in our tables " to other banks and private hands." This statement of the Secretary to the Treasury seems to confirm what I said as to the difficulty of tracing some of the gold which we believe has gone to the United States within the last 10 years. One fourth of the 550,000,000 dollars is just about 28,000,000^. sterling, which the Secretary to the Treasury says he " cannot track or find." 657. Then all that the Secretary to the Treasury does is to confirm your statement, not to account for the difficulty which you yourself raised ? — Yes, that it so. I thought it would be interesting to let the Commis- sion know that the Secretary to the Ti'easury in the United States has made a very similar statement to what I made. 658. He is practically unable to throw any more light on the subject than you are yourself i* — Appa- rently not. 659. {Sir T. Farrer.) May t ask, with reference to your former evidence, whether you know any- thing of any increase in demand f.)r the purpose of manufacture of silver articles, arising from the present cheapness of silver ? — It seems to me always a very important point that the use of silver or any other thing in different ways at different times depends very largely upon the price ; and I was interested to observe the other day in the trade reports of the Times, I think it was Monday last week, in a trade report from Sheffield, a statement to the effect that the cheapness of silver had increased the business of the manufacture of silver wares in Sheffield. That was a distinct statement in the trade report. 660. ( The Chairman.') Is there any corresponding decrease in the use of gold in manufactures corre- sponding to its supposed appreciation ? — ISoi that I am aware of, and I should doubt whether the amount of it would be so sensibly felt as to have much difference in manufactures, but I have not observed any statements upon the subject. 661. But you would anticipate, in accordance with the same law to which you have just referred, that if the use of silver has increased by its being cheapened, the use of gold must decrease by the appreciation of gold ? — Yes, that if there was appreciation it would have many effects upon the uses of it in different directions, but what the precise effects would be it would be very difficult to trace. 662. {Mr. Barbour.) If silver has depreciated with reference to gold only, and not with reference to com- modities, do you think there would be any extra inducement to employ silver in the arts ? — I think that this is a statement with reference to the price of silver in gold, and although it would be difficult to trace the change between silver and other commodities, yet in this particular market there is an apparent fall which has the effect of cheapening the price of silver, at any rate for the time. We may assume, therefore, that some of the effects of a fall of price would follow, without going into the larger question of whether silver itself has changed, and how far, with reference to other commodities. In any case, I am merely noticing a specific statement in a trade report that the manufacture of silver wares has been stimulated by the full in price. 663. {Sir T. Farrer.) Have you looked into the question of what general statements of prices there are which will throw any light upon the subject before us ? — Since I gave evidence on the last occa- sion I have looked into it a little, and of course I have paid attention to the question of what statements there are regarding prices, as far as I know them to be in existence. 664. Would you mention what records of prices there are in any useful form which would assist us ? — First of all I think I may notice the faot that there are a great many records of prices of different kinds actual records of prices themselves, such as those con- tained in Tooke's History of Prices, and such as those contained in publications like The Public Ledger, The Economist, The Statist, and special trade journals of every kind. There are numerous records of prices. Then there are official prices, such as those published by the Board of Trade, which show the average prices of imports and exports obtamed by dividing the values by the quantities ; and there are similar official and unofficial records in foreign countries. These all MINUTES OF EVIDENCE. 35 contain prices more or less in the rough, and what I have been particularly examining lately is records of prices in which an attempt is made at arrangement of some kind, so as to show a general result. For the present purpose it seems to me that the mo.st impor- tant thing to get hold of, if we can, are prices arranged in some way or other so as to exhibit a general result and not merely prices in the rough, which are very difficult to follow indeed. And that is the point to which T have been addressing myself lately. 665. You mean prices in the first place so sum- marised as to show a general result and then collected for a series of years so as to show the comparative results in different years ? — That is what I mean ; that beyond merely getting the records of prices or knowing that they exist, it is desirable in an investigation of this kind, if there are any arranged tables, to look at these by preference, because they bring out a general result. 666. Will you mention what are the most important of the arrangements of this kind which have been made ? — Well, I think of all the arrangements of this kind covering the last 50 years or so, and perhaps going back to the beginning of the present century, the most important are the following : There is first of all a study by Mr. Jevons on the fall of gold between 1845-50 and 1862, in which the prices from 1845-50 to 1862 are dealt with. This is one of the first papers in a book which has been published since Mr. Jevons' death, Investigations in Currency and Finance, and it was published originally as a distinct pamphlet in 1863, and that deals with the prices from 1845-50 down to 1862. B67. What is the nature of the prices which he deals with there ? — They are chiefly wholesale prices in the London market — in fact, they are exclusively wholesale prices in the London market. 668. Wholesale prices in the London market ? — Yes. Next is a study by Mr. Jevons, also in the same volume of Investigations in Currency and Finance, and the paper being one, I think, which he read to the Statistical Society in 1865, in which he deals with the prices from 1782 to 1865. These prices .".re based chiefly on the figures in Mr. Tooke's History of Prices, which I have already referred to. 669. Are these also the wholesale prices in the London market ? — These are also the wholesale prices, and in fact much the same prices as are dealt with in the other investigation which he made, so far as the period between 1845-50 and 1862 is concerned. The second investigation relates to the same thing as the first. Then Mr. Jevons continued the latter investi- gation in a letter which he wrote to The Economist in 1 869, and continuing the prices, I think, down to the year 1867. 670. Will you go on with your list ? — Then the next arrangement of prices which I refer to is that of The Economist itself. This was an arrangement which was used by Mr. Nevvmarch in the Statistical Society's Journal in 1859, 1860, and 1861, and after- wards in the Annual Commercial History of The Economist, and this has been continued to the present time, much the same prices being dealt with as those dealt with by Mr. Jevons. Then, lately, for the last few years there have been published arranged prices of imports and exports of the United Kingdom. These are published in special reports of the Board of Trade, which were prepared by myself, the last one of these being circulated in 1885, and bringing down the figures to 1883, in the case of imports from the year 1854, and in the case of exports from the year 1840. The official reference to this paper is C 4456, and that would contain the references to the previous reports of the same kind. Then there is a study by Mr. Sauerbeck in the last September number of the Statistical Society's Journal. Then you have had one or two studies by Mr. Palgrave with reference to French wholesale prices, and partly also containing a modification of The Economist tables, and these you will find in that memorandum which you have had before you, that was laid before the Depression of Trade Commission. Then Mr. Soetbeer in this book, Materialien, S^c, which I referred to in my last examination, gives an arrangement of prices in Hamburg, beginning with the years 1847-50 and ending with the year 1 885. 671. Shall you deal with Mr. Soetbeer's afterwards or will you tell us now ? — I deal with them all afterwards. In addition, there are some American figures and attempts at an arrangement of prices to be referred to, although I do not set so much value by them, for reasons which will be stated. That seems to me to be a list of attempts at some kind of arrange- ment of prices in the last half century, as distinguished from mere records of prices themselves, of which there is, of course, an endless number. 672. Then in all these cases an attempt nas been made to summarise the results by means of an index number. Will you explain exactly what that means ? — They all use more or less what is called an index number, that is a means by which statisticians have endeavoured, in dealing with large masses of prices, and the prices of many articles, to arrivfe at some kind of average result. 673. Can you explain how that is obtained ? — An iude.'c number consists of two things. The first part of it is the statement of the price of a particular thing for a series of years in the form of per-centages on the price of a particular year taken as a unit. Thus, if the price of wheat is 50s. at one time, you call that 100. That would be the unit from which you would start. Then if the price falls to 4:0s. that would appear in your table as a fall from 100 to 80. You would substitute 80 for the 40 ; and the first step in making an index number is to substitute for the expression of a price whatever the quotation may be, a unit of 100, and then work out the per-centage in reference to that unit. 674. On that particular article ? — On that parti- cular article, so that 100 is the unit in all cases, and of course it becomes extremely convenient for comparison. Then the second step is the addition of the prices of several articles so as to form an aggregate which may either be 100 or a multiple of lOO, or any other sum, the expectation being that the variations in the items will be averaged in the aggregate so that an average rise or fall in a given group or groups of articles will be shown. I gave some illustrations of this, 1 may say in these reports which were laid before the Board of Trade upon the prices of imports and exports, and I think it can be stated quite easily how the thing would appear. If you take, for instance, three articles, and it does not matter what articles, but say wheat, sugar, and tea, each at the unit of 100. Of course, the aggregate of the unit is 300. Then suppose you have a change of prices by which the three articles would become relatively 90, 80, and 70, the addition of these would be 240, and then you would say that the average price had changed as 300 is to 240, although that might be difiEerent from the change in the percentage of prices of each particular article. The average is difierent from what each particular article is, and that is the essential principle of (he second step in the index number. 675. Then you make your index number after the change bear the same proportion to the original unit 100 that the price at the subsequent time bears to the price at the first time ? — That is the idea. It does not matter very much what starting point you take, because you have always a change in the relation, and the object is to average the changes in a group of articles so as to give you a general result for the group as distinguished from the special results which you obtain by looking at each article only. 675a. You add the number so changed together, and then compare that aggregate number with the original ""■■* 2 That is the idea, with the original aggregate Mr. B. Giffen. 3 Deo. 1886. unit ?■ unit. f>76. Well, then, for convenience sake you make the original unit a large number ? — For convenience sake it is highly convenient to make the aggregate either 100 or 1,000 or 10,000, because it shows the results S6 ItOYAL COMMISSION OK GOLD AND SILVER: Mr. E. Giffen. almost immediately in the form of a per-ceutage. If the aggregate is not 100 or 1,000 pr 10,000, but say 50 3 Dec. 1886. „r 50^ the difference in the aggregate from year to year ' would not show the per-centage rise or fall, but you would have to work out the per-centage ; whereas, if it is 100, you see the per-centage in a moment, so that it is always convenient if the aggregate unit is 100, or 1,000, or 10,000, or some such figure as that. 677. Before we go any further, can you tell us in what manner these different statisticians tiave selected tlie prices on which they found their calculations ? Is it from the price lists published in London ?-^The most of them are taken from price lists pubhshed in London. Of course that does not apply to the Board of Trade prices which I have referred to, which are the division of the values of particular articles of import and export by the quantity, so that is a price obtained in a different way. The others are the London ) aarket quotations, and of course that is a different thing from the average value of the whole mass of an article imported or exported. 678. The London market quotations of the prices in the market for the time being ? — -The price in the market for the time being. Mr. Sauerbeck has taken, I think, each month's prices and divided by 12, so as to give the mean for the year. Mr. Jevons takes two months, I think, in the year from Tooke's prices, and gives the mean of these two. The Economist in its index number has done much the same in each particular year. It takes the prices on the 1st of January and the 1st of July, and then gives the mean, and of course in a long investigation, I may say, covering a great series of years, it would not matter very much which is taken, because the small variations from month to month in a year would not as a rule be very material in a long investigation. 679. And where the heading comprises different articles at different prices, do you know at all what the process has been iu selecting the pi-ices ? Cotton, of course, may embrace various descriptions of cotton, of which the prices may different, and so on ? — In some of the cases you will find, — and I think this especially applies to Mr. Jevons' work, and to The Economist index number, but it also applies to the (jther arrange- ments which I have mentioned, — you would have two or three prices for cotton or cotton articles ; you would leave two or three columns for cotton or cotton articles, and of course that increases the weight of cotton, as will appear afterwards, in the aggregate number. 680. Then wiU you tell us what is the objection which has been commonly made to the process that you have mentioned ? — Well, I may say that the matter was very much discussed in a Committee which sat in 1 840 on Banks of Issue, with reference to some figures of that kind which Mr. Porter in his Progress of the Nation had referred to for the years 1833 to 1837. He had arrived at an index number of that kind and shown the variations from month to month and from year to year in regard _ to 50 articles. He did not give the details, but apparently a good many of the witnesses who were examined were iu possession of the details, and there was a good deal of discussion about it, and Mr. Tookc raised the objection and insisted upon it most strongly that he found, for in- stance, an article like annatto, which was of very small aggregate value, and entered very little into the com- merce of the country, counted in as of as much importance in the table as an article like wheat, which was very important ; and the objection was that when articles of varying degrees of importance were treated equally, the aggregate did not really exhibit the average but only the mean of certain num- bers. This was quite a true objection and quite valid theoretically, but it is practically dealt with in a variety of ways in the particular arrangements of figures to which I have referred. Mr. Jevons was quite cognisaint of, it, Mr. Newmarch was also quite cognisant of it, and they tried to meet it in various ways so as to give different relative importance to dirfercnt articles. A.nd there are other reasons, 1 think, jvhy the objection praetj(jaUy is not of so much weight ^s it seems to be 'thepreitieally. -j •. ... 681. With regard to these various calculations of #gures, looking at them together, to what dp they relate ? —They relate chiefly, I think, to English wholesale prices, almost I might say to London wholesale prices, with the exception, of course, of the Indian figures, which are a totally differeiif matter to ,the others, vhich relate chiefly to London wholesale prices. • 682. {The Chairman.) Except, Mr. Soetbeer ?— With the exceptions to be mentioned, the exceptions are that Mr. Soetbper deals with Haniburg pricey; but not exclusively so, because he introduces into his final index number 14 a,rj;icles of English export ■trade, which he takes from the export tables of the Board of Trade. And th?. other exception^ is the French figures which Mr. Palgfave deg,ls with in that memorandum,, but I consider that'in recent years the course of French wholesale prices has been, and must have been, much the same as the course of London wholesale prices. It would not be the case if we went back for a very long period, but I think in recent ye^rs that that is what we should expect, and appa- rently it is what has happened, so that practically it is much the same thing as getting London wholesale prices over again. 683. London wholesale prices may be taken, I suppose, as the index of the prices throughout the United Kingdom? — Not only so, but to some extent ap index of the prices of a great many articles which enter into the general foreign trade of the world, and I think it is in that respect that Mr. Soetbeer takes the prices of English exports from the Board of Trade returns. . 684. But would not the prices in foreign countries be affected by such things as their fiscal systems, the taxes, and* legislation with respect to the particular articles ? — No doubt, and I propose to state afterwards the importance of taking prices from a great many (Jifferent places. I am merely calling attention at this moment to the fact that what are dealt with here are London wholesale prices mainly. 685. I do not know whether you mentioned as an exception the Indian prices ? — I mentioned that excep- tion, yes. 686. Then which do you think of these the most important ? — I think that for scientific purposes and generally, owing to its being almost the first impor- tant work of the kind, the greatest value must be attached to that work of Mr. Jevons which I have referred to which is published in that volume of his investigations of currency and finance. The first in- v^estigation of all which was published as a pamphlet under the title of " A serious fall in the value of gold " was a work which attracted a great deal of attention at the time, and altogether, from Mr. Jevons' rank as a statistician and economist, we must attach the greatest value, I think, to that work which he did. 687. Then some steps have been taken to meet the objection which you have just said was raised as to the relative importance of different articles which were Qriginally represented as all equal ?: — This was done by Mr. Jevons by giving practically more numbers than one to certain articles of importance, such as cotton. I think that in regard to cotton he gives it three numbers really. He takes in cotton prices three times over, so that he makes cotton more important, in the number of about 40 articles which he deals with, than any other article to which he only gives one number. That is one of the ways by which Mr. Jevons circumvented the objection of giving equal importance to all the different articles dealt with. 688. {Sir John Lubbock.) Did he count cotton as three ? — He counted cotton practically as three and you will see that that is done with reference to other things. You will see that it is a very simple thing, a rule of thumb method, assigning more impor- tance to one class of article than to any other. 689. {Sir T. Farrer.) Did he simply , treble the number or take different qualities ? — He really took different prices for. different qualities of cotton. MINUTES OF EVIDENCE. 37 690. {Mr. Houldsworth.) Did he do that arbitrarily or on the principle of quantity ? — I am afraid he did it I. almost quite arbitrarily. He knew that certain^ articles were prominent and bulky and important, and roughly he assigned a greater weight to them than he did to other articles. There was no attempt at assign- ing relative importance to each article upon a definite principle. 691. {Sir T. Farrer.) To what extent do you' think that defect important ?— I do not think it is practically so important with reference to these investigations which have been made as it might seem to be at first sight, because, in fact, almost all the important prices, moved in much the same direction at different times. They may have moved to a different extent, but any possible correction would only affiect the quantity of the rise or fall at different times, owing to the general changes in almost' the whole list of, articles being in the same direction in the periods, investigated. 692. Supposing that there was a very great difference in important articles, such, for instance, asi cotton at the time of the American War, would not that very materially aifect the corrections of the general result ? — That is so in point of fact. As Mrr Jevons himself notices, that does create a certain difference, which you can see between what he shows and what The Economist index number shows. He notices that at that very time we speak of, 1864-65; starting from the same period, namely, 1845-50, TAa. Econofnist shows a somewhat greater rise than what Mr. Jevons shows bstween 1845-50 and 1862, and the difference he explains is due to the fact that The Economist has four cotton articles out of 22, whereas he has only three out of about 50, he says 40 or 50. I have not got the reference quite straight, but I think it is either 40 or 50. The Economist has four articles out of 22, so that when you had that great rise owing to the American war, 7%e Economist index number went up more than what Mr. Jevons' index number went up. These things can be allowed for upon an inspection of the tables always. 693. Then what do you say with respect to Mr. Jevons' investigations for an earlier period ?-^-I attach a good deal of importance to the carrying back of the figures a good way before the period which is im- mediately dealt with, and Mr. Jevons' investigations from 1782 to 1865 seem to me to be very important. They show a rise from 1782 to the beginning of the century, that is, taking the aggregate of the index number, and then with fluctuations every ten years or so and minor fluctuations, they show a fall from the beginning of the century down to 1 845-50. Since then there was a. movement upwards down to about 1862j and still a rise of prices as late as 1867 compared with with 1845-50. Of course Mr. Jevons' figures did not come down later than that but we know from The Economist index number that the rise was maintained or went on till about 1873, and since then there has been a fall resembling in some respects the fall from the beginning of the century down to 1845-50, but a little more rapid. 694. I think you said that Mr. Jevons' investi- gations of the, earlier period were founded to a great extent upon Tooke's History of Prices ? — He states that he takes the prices mainly from Mr. Tooke's History. 695. And that is a book of ' very considerable authority ?— There is no doubt that, as far as the prices are concerned, it is almost the only record which can very conveniently be referred to. 696. Mr. Jevons had no opportunity of consulting original price lists, original authorities, for that earlier period, I suppose ?— Only to a very limited extent, if any. ' ! . ' 697. Then with respect to The Economist index number, in what way does ttiat compare with Mr. Jevons' ?— It is much- the same as Mr. Jevons', the articles dealt with being very much the same as Mr. Jevons' articles. I do not think it is qhite so good in some respects as Mr. Jevons', especially for the reason. 3 Dec. 1886. which has already been mentioned, that too much weight Mr. R. Giffem. appears to be given to cotton and cotton manufaCteres. I may also say that it seems to have been formed, if' I may judge, in a comparatively accidental way. In the Statistical Society's Journal of 1859, 1860, and 1861, the prices of the 22 articles are shown by per-centages, each article separately, but they are not added together so as to form the aggregate index numbet of 2,200, which was afterwards formed. This was done apparently, after Mr. Jevons' first investigation ap- peared, so that the index number of The Economist, T should say, has been to some extent an accidental for- mation, but it is, roughly speaking, quite apart from this question of cotton, much the same as the index number of Mr. Jevons. 698. Was this due to Mr. Newmarch ? — There is practically no doubt of that. I may say that he was the editor of the Statistical Society's Journal at the time. It was quite well known that it was his doing, and I do know in point of fact that it was Newmarch. 699. I think you have already mentioned what the difference in fluctuations was in consequence of the difference about cotton ? — Yes. 700. Well, then, in both these cases there is no allowance made for the different importance of different articles founded upon any actual figures or facts, it is simply an estimate made by the statistician ? — To some extent it is a rule of thumb practice in order to allow greater importance to the obviously important articles, but there is no fixed principle or any distinct objective standard followed in assigning the relative weight to the articles, 701. Then would you mention what is the general result of The Economist index number ? — The general result of that number, continued to the present time, is that there was a fall after 1864-5, as I think you will see from these diagrams which your Secretary has prepared, a rise in 1871-3, and a fall since the latter date to the present time with the exception of a short recovery in 1881-3, so that the prices are now, after being higher, somewhat under the level of 1845-50. 702. Is that a diagram which you have had pre- pared ? — No, this is a diagram which your Secretary has prepared, and which he has given me the advantage of looking at, and I think, if the Commission would look at it, it would be rather interesting just at this point, because the large diagram shows the very exceptional rise in 1864 in The Economist index number, owing to cotton. Then prices go down to 1868, 1869, and 1870, then they go up in 1873 very sharply, then they go down very sharply to 1879. After 1879 there is a rise, and then from 1882 almost to the present time there is a descent. 703. (Mr. Houldsworth.) Do they affirm pretty well what is given in Mr. Sauerbeck? — They correspond very well with what is given by Mr. Sauerbeck. The prices being the same practically dealt with, namely, London wholesale prices, the result ought to be pretty nearly the same, and the curves do correspond fairly well. 704. {The Chairman.) Perhaps it would be con- venient at this time if you could tell us why The Economist index numbers appear to differ violently with regard to the year 1864 both from Dr. Soetbeer and still more from Mr. Sauerbeck ? — It is chiefly the cotton, I believe. 705. So that you would prefer either of two other estimates to The Economist's curve ? — I would not like to go so far as that. Of course, the true way to use figures of that kind is to compare them, and I should not like to go so far as that. I think we may say that there was an exceptional rise according to T%e Economist's index number in cotton, but apart from that I do not know but what the result is as fairly given as any of the others. 706. {Sir T. Farrer.) I suppose, if you wished to know what has been the actual rise or fall in the prices, it would be right to attach a very great value tO' cotton ; cotton being so very important an article? — It raises a question as to what is the real relative 38 ROYAL COMMISSION ON GOLD AND SILVER : 3 Dec I806. Mr. K. Giffen. importance of articles ; cotton is, no doubt, very im- portant. Cotton and the textiles taken together are, nt> doubt, very important. 707. The special rise in cotton would have nothing to do with the value of the precious metals, or of gold, but if you are regarding prices alone it is an im- portant element, is it not?— It is a very important element in the question of prices. As to how far it is related to gold, I think I would postpone answering that at this moment. 708. I only mean to say that, if you are taking statistics of prices, there is nothing incorrect in taking the special rise of a very important article arising from special circumstances ? — It is one of the things whioh you must have regard to. In dealing with a thing comprehensively you must deal with every fact. 709. "Will you now explain what is the difference in the method that you have adopted at the Board of Trade in dealing with this question ? — The main difference between any of the figures which have been mentioned, and those of the Board of Trade reports is that, dealing with the variations from year to year, allowance is made for the relative importance of each article according to the proportion of its value to the total value of imports and exports respectively ; that is to say, I take the import trade and the export trade themselves, and I deal with each article ac- cording to its relative importance in that trade. That is purely an objective standard; it is not anything which I invent myself according to any rule of thumb method, but an objective standird which may or may not be of value. 710. Perhaps you would explain the exact method which you adopt in doing that ? — The way in which this is done is to multiply the per-centage varia- tion iu price of any particular article by the pro- portionate numler of the article, and divide by the sum of the pi'oportionace numbers. It is really a very simple process, b}' which you allow for the relative weight of each article. You multiply the per-centage of rise or fall by the proportionate number that you have assigned to the article, and then you divide by the sum of the proportionate numbers. 711. Perhaps you will explain from the beginning, how you start ? — You give a proportionate number, it appears in these tables, according to the importance of the article in the import trade. Say it is corn. I do not know exactly what the figures are, but suppose corn is 10 per cent, of the ijaiport trade, then the proportionate number assigned to it would be 10. Suppose cotton was 5 per cent, the proportionate number assigned to it would be 5, and so on. 712. Then it is founded entirely upon the imports? You take no account of what is produced in the country ? — As regards the import trade it is founded entirely upon the imports, and as regards the export trade it is founded entirely upon the exports — a purely objective standard. 713. Then you take your figure at 10 for corn ? — Or whatever it may be, supposing it to be 10, — I think it is about that, or from 6 to J 0, — you make that the proportionate number. 714. The proportion out of the whole index number ? — The proportion of the whole 100. I may say that in this way I do not get up to the index number of 100, because the number of articles in the imports for which you can get prices by dividing the values by the quantities is limited. Imports of that kind are only 81 per cent, of the total, and accordingly the aggregate index number for the imports, the unit which I dealt with, was 81 • 16, so as always to keen before the mind's eye that the proportion assigned to each article was its proportion of the total imports, and not merely the proportion of the total import's for which one was able to get prices in that way. The same with the exports. I could only get a smaller proportion of export articles for which it was possible to give prices in that way, and the aggregate index number accordingly is 65 • 8. 715. Then would you explain in wliat way you show the changes in prices ? — The changes are shown by multiplying the per-centage of variation in the case of each article by the proportionate number, and then dividing by the sum of the numbers. 716. Then you take your proportion of the articles to the total imports, and the total exports for one year, you do not vary with each year ? — The year I ha-se taken is the year 1875, but you will find in these tables here that the materials are given for taking an index number from any other year that you please. The proportions are shown, and you can see that no material variation would be made by taking the proportions of any other year. And I may say that some time was spent upon this point in the office, and we ascertained that no material difference in the results would be made by taking any other year to find out what the proportions of the trade were. It does not make any material difference. 717. That either the proportions of the different articles to orie another do not vary so much, or else the different changes in price of the different articles do not vary so much as to make your conclusions incorrect on account of any change in the relative importance of the different articles ? — It is both ways. The proportions of the articles in our trade do not change so very much from year to year as to throw you out. And then, of course, the other question of change of prices would come in also, but there is no such difference in the course of prices as to be very material when the figures are dealt with in this way. 718. Can you say to what extent your results obtained by this process agree with or differ from those obtainnd by The Economist ? — It seems to me that according to these diagrams which your Secretary has prepared, or rather according to the comparative table of index numbers which he has prepared, that the results are pretty well the same as those shown by The Economist index number ; that is to say, that you have a rise of prices about 1864, and then you have a rise about 1873, and then you have a faU since the latter date, interrupted to a slight extent but not to a very large extent between 1881 and 1883. But I may say that in working out the totals with this calculation, which is very elaborate and difiicult, I have not worked them out completely for a series of years, I have only taken certain years which I had reason to believe were either what I called maximum or minimum years of prices. I have not worked it out for every year ; of course, it could be done with a little trouble. 719. Well, in any tables of this kind, by any of these methods, you take a certain description of article and you continue it all through, so that wheat at the beginning of the century is wheat at the present time; iron at the beginning of the century is iron at the present time ; and so on. Did not the articles themselves change ? — It is quite true that the articles themselves must change, many of them at least to a very large extent,— some may not change quite so much; but there is always that difficulty in the matter,-^ that you do not know that the price which you are dealing with at one period is the price of exactly the same thing which you are dealing with at another period. That is really an inherent dilfficulty in these matters, there is no doubt. 720. And it is impossible to get over it ? — I do not think you can 'get over it, even in the case of what may seem to be very simple articles 'indeed. The simplest of all, perhaps, are the metals. You may know that copper is copper, but I do not know but what there may be, even in some of the metals some changes in the specific descriptions which are quoted from time to time, and you may not always get the same articles unless you are very careful to see what you are doing. 721. Do we know, for instance, what is iron and what is steel?— I think, as regards an article like Scotch pig iron, there IS some evidence with which we would be satisfied that the article is substantially the same. MtNUTliS OF EVIDBNCBi S9 722. With respect to steel, there has beeu the greatest _ difficulty, has there uot, in knowing what to classify as steel?— We have had the greatest difficulty at the Board of Trade in knowing how' to classify the exports of iron and steel, but how far there have been the same difficulties in the market quotations I am not so sure. 1 think the people engaged in business would always know what they were buying, and if one acquainted with the steel trade was making up the prices it might be possible to get the same price, a very long way back, for exactly the same thing, but I am not quite sure. 723. At any rate, articles do vary from time to time very much indeed, do they not ? — There are great variations in articles, there is no doubt of that. 724. (^Mr. Barbour.) Are there some articles which, remain the same always, such as wheat ? — I do not know that wheat remains the same always. 725. Ton think it varies also ? — I have no reason to believe that the wheat brought to market now is the same thing as the Enghsh wheat of 500 years ago, for instance. 726. {Sir T. Farrer.) Is it not the fact that in the earlier part of the century, the quality of English wheat was so bad that there was difficulty in making bread of it ? — That difficulty exists always in such an article as wheat. It varies from harvest to harvest, from generation to generation, and from country to country. 727. Whereas now, in consequence of importation from different parts of the world, wheat has arrived at a higher quality, or at any rate more regular quality ? — I think if we go from articles like wheat to articles like meat we may be quite sure that the difference of quality is really enormous, or may be enormous. I may add, with reference to wheat, as it has been mentioned, that there is another cause of variations in price, from time to time, in the different mode of selling wheat which may be adopted. The practice of selling wheat by weight is coming universally into vogue, and that will make some difference, I think, — how much I could not say, — between the prices of the present time and the prices of former periods, when the sale took place by measure. Of course, when the sale was by measure and the sample happened to be very heavy, that would raise the price more than if the sale was to be by weight and you were always selling the same weight. 728. {Sir T. Farrer.') Is the sale now by the bushel at such a weight ? — The practice of selling by weight or by weighed measure, as we call it, is growing very much, and such sales are converted into English prices of wheat at a certain uniform weight. A quarter is taken to be so many pounds of wheat, barley, or oats. 729. {Mr. Birch.) With regard to oats, or any other kind of grain, formerly, no matter what it weighed, you bought it by the quarter ? — You bought it by the quarter, and then you allowed for the weight in the price. 730. If you buy a quarter of oats now you always ask whether it is 38 lbs. or 42 lbs., and buy accordingly. Now they sell entirely by weight? — Entirely by weight, and the price by weight would be entirely different from the price when you sell by measure in which the weight is allowed for roughly in the price. 731. {Sir T. Farrer.) Then with regard to Mr. Palgrave's French index, does that lead you, so far as it goes, to the same results ? — T think the result is much the same. There is this point, with reference to Mr. Palgrave's statements, that he only goes back, I think, to 1865-69, so that he only shows the varia- tion since that time ; but since that time the variations which he shows in the French prices and in the corrected Economist tables which he gives are much the same as the variations of the Economist index number itself. There is not much that would turn upon any differences that appear. 732. Then he makes some allowances for the relative importance of different articles, does he not ? — He does so, and the point is stated very fully in o 24358. that memorandum which was laid before the Trade Mr. R. Giffen. Depression Commission, but even then I do not think that he quite adopts a purely objective standard. The ^ ^^'^- ^^^^" calculation to some extent remains a rule of thumb. 733. Then with respect to Mr. Soetbeer's tables, have you anything to observe upon them ? — ■ Mr. Soetbeer's tables* are very elaborate and very full, and he has 114 articles altogether, 100 of them being Hamburg articles. He has this merit, that he divides the articles distinctly into five or six large groups, and he gives an index number for each group, and then he works up finally to his aggregate index number by treating each group as the equal of the other, and he gives you the final index number in that way, so that he allows in the final index number for the relative importance of all the articles in a particular group by putting more articles into one group than what he puts into another ; and I think, so far, if that is done intelligently that is a very good method to follow. 734. Then how do his conclusions agree with the English conclusions i* — Mr. Soetbeer's results seem to be much the same in this way, that though he does not bring prices down quite to so low a point as The Economist index number itself — for instance, comparing the present time with 1845-50, — yet the course of the prices is much the same, that is to say, there is a curve upwards from about 1845-60 to about 1864 ; then a decline, followed by a curve upwards to about 1873 ; and then much the same fall in price after that, although not quite to so low a point as what is shown by The Economist index number. But I may say that there is some difference between Mr. Soetbeer's and the other prices even in detail ; and you find it with reference to agricultural produce, that prices in Hamburg, if we are to take the statement, do not seem to have gone back quite so far as prices in London. 735. Is that in quite recent years? — Yes, the prices in Hamburg. For instance, where in London you find that the price has gone back now to the price in 1845-50, you find that that is not so in Hamburg. For instance, an article like oats. We find according to our English tables that the price has gone back pretty much to what it was in 1846-50, but in Mr. Soetbeer's tables we find that, taking 100 as the unit in 1845-50, the price in the last five years is 130, showing rather a rise and not going back to the same point. 736. Is that since the German protective duties ? — It may be partly owing to the German protective duties, but I think partly it may also arise from the possibility that prices in Hamburg have not quite changed all through in the same way as prices in London. 737. You find something of that variation in Mr. Palgrave's table of the price of wheat in Fi-ance, do you not ? — ^In the price of wheat in France that is noticeable very conspicuously, but I am merely showing that there is a little difference between Mr. Soetbeer's and the other tables, and I think, perhaps, I should add that he appears to me to assign rather too much weight in his tables to one or two very small articles, such as hops, and this seems to affect the result to some extent, because hops have risen enormously in price in Hamburg, comparing 1845-50 with the present time — from 100 to 355, 1 think. 738. But I suppose hops are things which vary very much from time to time ? — Hops vary very much in price, but being a small article, if you give it an equal value with oats, say, you may affect the average result a good deal. 739. Then you have looked at Mr. Sauerbeck's figures which you have referred to ? — I have also looked at Mr. Sauerbeck's figures, and of course they deal with wholesale prices in London, and ought to give and do give very much the same result as The Economist'' s index number, with some variations ; and they especially agree, I think, in the fall of prices from 1873 or thereabouts. 740. But Mr. Sauerbeck's tables, I suppose, are founded upon these other tables, are they not ? — No, a 40 ROrAL COMMISSION ON GOLD AND SILVER : Mr. R. Giffen. 3 Dec. 1886. I do not think so. I think that to a large extent he has taken different price lists, and worked out the thhig de novo for himself. But he takes pretty much the same articles, as far as I can judge. There are one or two important differences, as he includes, for instance, coal, which I think is not included, if my memory serves me rightly, either in Mr. Jevons' or in The Economist's index number. There are one or two matters of that kind in Mr. Sauerbeck's tables. 741. And do Mr. Sauerbeck's figures agree, on the whole, with the other tables ? — I think, on the whole, there is no disagreement of a material kind, and at any rate you can see that from the comparisons and diagrams which your secretary has been good enough to draw up. 742. And if it is an independent investigation they affirm the other figures ? — To a certain extent they affirm the other figures. 743. Then there are certain American figures that you have referred to ? — The American figures tbat I have referred to are some that are contained in the 9th Keport of the Director of the Mint of the United States, in which he deals with very many articles indeed, — the prices of articles in New York ; and in which allowance is made for the prices being in paper at a certain period covered, and they are all reduced to gold prices, while the prices of all the articles are reduced to per-centages in quite the proper way, and these per-centages are added up and divided by the number of articles. But I aia sorry to say that, follow- ing this method and with so many articles dealt with, the result does not appear to be quite satisfactory, because no allowance seems to be made, however roughly, for the relative importance of different articles. I have brought here with me a table showing what the aggregates are, and the index number in different years, in this table of the Director of the Mint, but it does not seem to have been con- tinued since 1880, and I think it is subject to that observation, that allowance is not made sufiiciently fior the relative importance of the different articles. I may say, too, that articles are put in and dropped out without sufficient explanation, and that may throw you out a good deal. I do not know that the results are very materially different from anything that is shown by the London prices, because you have the course of prices to some extent the same as that which has been shown, but I am not quite satisfied with the table, for the reasons that I have stated. (See Appendix III. H.) 744. Then you would not rely very much upon that American table ? — I would like a better American table of prices for comparison. I would not say that the result would be jnaterially different when you did get a better table, but one likes to see the prices worked out more completely, so that you can follow it. 745. And I suppose that is the best and most authentic table that has been published in America ? — So far as I am aware that is almost the only arranged table that I can speak about. There may have been others, and there are of course a great many records of prices in the United States which may be made use of, I believe, if the investigation was carried further. 746. But they do not exist in any summarised form ? — I am not aware that they exist, that is all I can say. 747. (,Mr. Barbour.) May I ask what is the date of that ? — The ninth report of the Director of the Mint. I could not state the year, but the latest year to which the figures are brought down is the year 1880, and I propose to put in this table showing the numbers, for what they are worth. 748. (Sir T. Farrer.) Bearing in mind the various qualifications which you have made about these figures, can you tell us, subject to those qualifications, what are the general results of these different tables ? The final result, I should say, is that they show an average fall in these wholesale prices from the beginning of the century down to 1845-50 ; a rise from the latter date t) 1864, continued, but with an intermediate decline, to 1871-73 ; and a fall since 1871-73, which makes the average wholesale price lower now than for 50 years, and in fact lower than at any time during the present century. That is with reference to these wholesale piices. 749. Then going still farther back, can you make any comparisons with the prices of previous times ? — This is of course a matter more of historical and anti- quarian interest, and yet it may have some bearing on the question, because up to the end of last century — and we have the authority of Adam Smith for it so far as he investigated the subject — the appearance was that there had been a fall in the value of silver going on for several centuries ; that is to say, that the prices of the more important articles appeared to rise. And this is brought out in a very interesting table con- tained in a paper on weights and measures read to the Royal Society in 1798, by Sir George Shuckburgh Evelyn. The rise from the time of the discovery of America to the beginning of the century, taking wheat, one or two other principal articles of agricultural pro- duce, and labourers' wages, as a standard, is brought out as between 400 and 500 per cent. The table is really very interesting, because the author seems to have used an index number that in many respects is quite as good as any index number that has been used since. Of course it deals with very few articles, and the record is very defective. There are especially no manufactured articles in it. But still, as regards certain principal things, he seems to bring out a fall in the value of silver, and a rise in these commodities of between 400 and 500 per cent. 750. Do you suppose he had data for such things as labourers' wages ? — There were no doubt some data in existence at that time, and he refers very clearly to the authorities from which he gets his figures. Of course there has been a great deal added to our information since that time as to that early period, and if the matter were gone into now I have no doubt that a great many corrections and emendations would have to be made in the work that was done, but as far as method goes it seems to be a very good table indeed, and there is no doubt also, I should think, that if you take an article like wheat as the test, that a great fall in the value of silver is shown between 1400 and 1800, and that was the conclusion of Adam Smith in a well-known chapter. 751. {The Chairman.) Does Sir George give any tables dealing similarly with gold prices ? — He deals, of course, with silver prices, because silver was the standard money of England practically. He simply deals with the prices, but Adam Smith, of course, in dealing with the subject dicusses it as a fall in the value of silver. 752. {Sir T. Farrer.) As we know the relation be- tween gold and silver pretty well, that would tell us what the relation was ? — I think you would find that if you were working them out into gold prices the fall in the value of gold would not come out nearly so great as the fall in the value of silver, because gold was rising relatively to silver all through these centuries, there is no doubt about that. 753. {The Chairman.) From 13 to 1 ? — From 13 and even from II to I to about 15 to 1, or even more. 754. {Mr. Fremantle.) In 1798 ?— Yes. 755. {Sir T. Farrer.) Down to the end of last century there seemed to be a tolerably continuous rise in silver prices, and the process has discontinued in this century ? — The point seems to be that if we com- pare from century to century we seem to get a steady rise in prices or a steady fall in the value of silver from about 1200 to 1800. Of course, it is quite possible that the fluctuations in a particular period may have been different, but that is what seems to have been going on when we compare century with century. But since the beginning of the present century the course would seem to have been different, because the tendency has been for prices to fall, that is these wholesale prices, with the exception of the short in- terval between 1850 and 1873, have generally been falling, so that the course of prices in the present MINUTES OF EVIDENCE. 41 centur}'- generally would seem to have been different from the course of prices for several centuries before. 756. ( The Chairman.') But of course, when you talk of the centuries before 1800, you are talking of silver prices, you are not talking of prices up to the middle of this century, gold prices? — I am comparing them with the standard, but I think it is also clear that there would have been a fall even in gold prices, down to the beginning of the present century, if you work out the relation of gold to silver upon that table of Sir George Evelyn. 757. There must have been a fail in gold if there was 300 or 400 per cent, difference in the silver prices ; a fall of 30 per cent., say ? — That is quite true, but it is possible that that fall was not quite continuous. You would require to see when the change in the relation between gold and silver took place, and we must not speak too positively as to what would have happened in a particular century, if you put it into gold prices. 758. {Mr. Barbour.') But containing the whole time there must have been a rise in gold prices too ? — Containing the whole time, there is undoubtedly a rise in gold prices. 759. {Sir T. Farrer.) A rise in gold prices as well as in silver prices ? — ^As well as in silver prices. 760. And then the beginning of this century ? — The process seems to have been in the other direction since the beginning of this century, with the ex- ception of the interval between 1850 and 1873. 761. Then besides these prices which we have been dealing with, there are some tables of Indian prices ; what have you to say about them ? — These are the tables of Indian prices which are found in the Third Report of the Trade Depression Commission, and I am not quite clear whether Mr. Palgrave put them in, or how they were put in before the Trade Depression Commission, but I believe they were circulated separately as weU. 762. {Mr. Barbovr.') I know that Mr. Prinsep put in certain tables, and Mr. Palgrave worked out some figures from them ? — These tables that were put in contained an index number, and they are signed by Mr. Prinsep. WeU this index number relates to 10 articles, three being native grains of home consumption, to each of which the unit of 100 is assigned, making the aggregate for native grains 300 ; two being grains partly exported, namely rice and wheat, to which the unit of 100 each is also assigned, making the aggregate for these two, 200 ; and finally, five articles, almost exclusively of export, namely, cotton, castor oil, linseed, jute, and hides, to each of which also a unit of 100 is given, making the aggregate 500, and the a.ggregate of all iDeing 1,000. So that the index number of India is thus a much smaller affair, of much narrower compass than any of the things which we have been dealing with, and of course it relates to a totally different field, and a totally different area of prices. 763. {Sir T. Farrer.') Then, taking the tables as they stand, what would the general result appear to be from them, supposing them to be trustworthy ? — The general result appears to be a fall of nearly 20 per cent, in 1870-74 compared with 1865-69; a rise in 1875-79 compared with the previous quinquennial period, and with 1865-69 ; and finally a fall of about two per cent, in 1880-84 compared with 1870-74. These tables only cover about 20 years, and that is the result of them. Tou may say that there is a fall in the last five years of about 20 per cent, com- pared with the first five, but a fall "of about two per cent, only in the last five years compared with the second five, that is to say with the period just befor the drop in silver. 764. A fall of two per cent, compared with the period immediately before the fall in silver? — Yes, that is what they seem to show. Of course, if you take particular years, and the very latest year of all, the difference would be greater, and there seems to have been a greater fall. 765. Then have you a,nything to observe upon the way in which these results have been obtained? — I 3 Deo. 1886. think, if I may say so in presence of Mr. Barbour, that ^''- ^- Gj/fen. the assignment of relative importance is not properly attended to in forming this table, that it is somewhat arbitrary in construction altogether. Tor instance, one of the articles in the last group which has faUen heavily is castor oil, which hardly seems to me to be of equal importance with rice and wheat, which have not fallen at all, comparing 1880-84 with 1870-74. 766. Then do you think the number of articles taken is suflicient to enable persons to draw general conclusions from it ? — I am afraid not. I think you ought to have had more articles if you are to deal with the matter satisfactorily at all. 767. Then have you anything to observe upon the mode in which the particular prices given have been taken ? — I am not quite satisfied with the mode of arriving at the prices of the first five axticles on the list. The mean of the prices in certain markets is taken ; that is to say, in markets in different parts of India, which may be very widely separated from each other, and although the range of these prices is very different, while no allowance is made for the relative importance of the markets in any way. I am a little doubtful whether the rise in rice would not come out more than it does if Rangoon and Patna were assigned greater importance than they are assigned by this mode of arriving at a mean price. 768. But assuming that we obtain general results from them j the result would seem to be that there has been no such fall in India lately as there has been in this country ? — I think it is apparent, not only from these arranged figures, but from the prices themselves, if you look at them, that there has been no such fall in prices in India in the last 10 or 15 years as there has been in London wholesale prices. I think that wouhl be a very safe thing to say. 769. And on the other hand there does not seem fo be any such rise in prices as might have been antici- pated from a very large depreciation in silver ? — That L must not go into. I would not like to say off-hand what should have, happened from a depreciation of silver. 770. That perhaps is not a fair question, but there does not seem to be any great rise in prices in India ? — It is quite evident, I think, that there has been no great rise in prices if these articles and markets are taken as the test. 771. Since the depreciation of silver? — I should admit that, but then I am not prepared to say that the depreciation of silver ought to have Ifd to a great rise in prices. 772. {Mr. Cohen.) Would you not be prepared to admit that, taking the last five years, prices have fallen in India as reckoned in silver? — There is no doubt about that. 773. These figures establish that ? — That there has been a tendency to fall, that prices are lower at the end of five years than in the beginning of the period. 774. Taking the index number established to be lower, you do not question that result ? — I do not question that prices at the end are lower than in the beginning, but I do not think there is a large fall in ihe index number comparing the last five years with the five years 1870-74. 775. The next number is about three lower ; you would not question that, would you ? — That is so small II, difference that it is not enough to reason about in a matter of this kind. You ought to take into account that the number is quite arbitrary, and that is not a result to reason about. 776. What I want to get at is that you do not challenge the figures which have been put in by Mr. Prinsep and Mr. Palgrave showing the movement of prices in India for the last 15 years ?— Well, if it is put to me in th.at way, I must also add that I do no admit the correctness. 777. {The Chairman.) I understand your view is that, while you may take these figures as giving a general conclusion, you cannot draw any accurate G: 2 42 ROYAL OOMMTSSION ON GOLD AND SILVER : 3 Deo. 1886. Mr. B. Giffen. deductions from small variations ? — That is the point that I think very important, yes. 778. (Mr. Cohen.) If the variation is but a small one, you cannot make a large one out of it. You can conclude that prices have been steady and not varied, because there is a small variation, just as you can say there has been a heavy movement in prices because there has been a large one ? — Yes, but I have been explaining that I do not think there are sufficient materials to constitute a good average in these tables showing an index number. 779. As far as they go, you would accept them, would you not ? — But it is not a good index numbei', and I would not even go so far as to say that I accept them even in detail. 780. (Mr. Barbour.) There is one question I should like to ask. Have you any reason to suppose that if the index number were based upon a wider series of prices the result might have been different ? — 1 have not been able to investigate the figures suificiently in India. Nobody would like more than I would to see a very good study of the Indian prices. Each place I should like to see taken by itself, and all the articles belong- ing to that place, and a good index number formed for pei'haps about 60 places, and if you could include wages as well, so much the better. Then T think you might have something which would enable you to arrive at very interesting conclusions. 781. (The Chairman.) You are asking more for India than you have given us for England, have you not ? — I am, certainly ; but there is one reason why you would not require to have so many places in England, that it is a much smaller place than India, and the facilities for communication are very great ; but I should certainly like, if the inveotigation is continued, to see a much larger amount of information even for the United Kingdom. 782. (Sir T. Farrer.) But if I understand you, you do not place nearly as great a reliance upon tlie results obtained by means of these figures obtained for India as we do upon the results obtained for the United Kingdom ? — I do not think the index number is quite so comprehensive or quite so good. 783. (Mr. Cohen.) For all that, as regards these figures themselves, they are reliable, surely, as between one period and another ; the same fault would range throughout ? — Well, if I might make a remark, — it is 7iot in any offensive way that I am going to speak it, — there are a great many prices for India, but they are published without any note or comment of any kind, and without explanations of apparent discre- pancies from year to year, or between place and place. That seemed to me very important, and at any rate the prices would be much more useful to outsiders like myself if they were carefully annotated and investi- gated, and if they showed on the face of them some evidence that a good statistician had directed the inquiry, and had investigated all the apparent discre- pancies. 784. (Mr. Barbour.') Are you not a-viare that in India the means of communication are very defective in many cases ? — I quite believe that that is the case, and that is one reason why I should like prices from a great many places. 785. And are you not aware that India is a country which in many parts is especially subject to drought ? — That is so, undoubtedly. 786. And where a country is subject to drought, and the means of communication are very defective, you would expect great variations in the prices of agricultural produce from year to year ? — I should be less surprised at it than I should be in a place like London, but then I should also like, when I have the figures put before me, to have notes put indicating what had happened really in those years. 787. Have you at all studied these figures with reference to the various periods at which famines have been reported in India, and if so have you found prices have varied very much according to famines ? Not sufliciently so, because a good many figures I have seen are not accompanied by the necessary explana- tions. It may be that the thing exists in other figures in the India Office, but I have not had them. 788. For instance, if you look at the figures in statement D., taking Jowar for 1875, 1876, 1877, 1878, 1879, and 1880, you will find that in 1875 it was cheap, in 1876 cheap, in 1877, 1878, 1879 there was a remarkable rise, and in 1880 it became cheap again P^That seems to be so from the figures. 789. Well, was there not one of the severest famines on record in the year 1877, 1878, which would account for the excessive dearness in 1877, 1878, 1879, and the cheapness before and afterwards ? — I am not able to go into points of that kind. All I am pointing out is that the explanation is not on the face of the tables, and that notes would be useful. 790. I was merely wishing to bring out the fact that this extraordinary variation in price is very often due to famine ?^ — I should quite believe that, but I think there are many other variations. This point has come upon me unexpectedly, but I think there are other variations which would not be so accounted for, and which I should like to see investigated, and comparisons between place and place. 791. Would you point out one of these variations } — 1 think that generally, — I do not know whether these are the materials from which I made my observations, — but generally, if you look at statement A., you will find, for instance, with regard to Jowar, that uniformly at Surat the figure seems to be much larger, that is, I suppose, from the way the tables are made up, the price much lower, than at any of the other places on the list. And I should like to see, when T find things of that kind, where the difference is really so great, that some person, in editing the table, had paid atten- tion to the matter and had made inquiries regarding it. It would give me much greater confidence in the figures if there were notes of that kind. 792. (The Chairman.) But the fact that the variation was caused by famine, is not that an addi- tional reason for giving explanatory notes and tables ? — I should like it, certainly, for all purposes. 793. (Sir T. Farrer.) Do you think that the figures are sufficiently trustworthy to enable one to say that there has not been a great rise of prices in India ? — T should not like to express an opinion till I see better and more comprehensive figures, and a greater number of articles. 794. All that you have given us hitherto applies to wholesale prices, and principally to the whole- sale prices in the London market. You have not given us anything with regard to the prices of labour or of services? — Well, on that point I am not aware of any arranged tables relating to retail prices, nor of any very good tables in which the principle of an index number is used relating to wages. Of course, there are a great many original records of different kinds in existence with reference to wages, although I doubt if there is anything at all which could be used for an investigation of this kind with reference to retail prices. 795. Let us keep retail prices separate. As regards the price of labour, which we may divide into professional remuneration, salaries, and wages,— I think you say that there are no tables that would give us anything like an index number or anything like the general results that you have got out for the wholesale prices ?— No continuous tables. There may be some other mode of arriving at the final result, but no con- tinuous tables of that kind that I am aware of. 796. On the whole, do not the investigations which have been made by yourself and by other statisticians, Mr. Courcelle-Seneuil, Mr. Atkinson of Boston, and Professor Leone Levi here, all point in the direction of a rise in wages ?— I think that from all that I have observed you may say that there has been a very general rise of wages in Europe, in this country and io the United States, and I think I may say also in India, in the last 50 years. At any rate, there seemed to be a great rise in wages from about 1850 down to 1873 ; but what the exact course of the movement in wages and stjll piore in salaries has been in short MINUTES OF EVIDENCE. 43 periods, in such a period for instance as the last 10 years, I do not think there are any means of following out very well. 797. {Mr. Cohen.) Would you include all Europe in your answer? — Well, part of Europe. I speak especially of France and Germany, Switzerland, Italy, and the northern countries of Europe. As to Austria and Hungary and the south-eastern countries, and Russia, I am not aware that 1 could speak at all. 798. {Mr. Fremantle.) Then what has been the course since 1873 ? — This is just the difficulty. You can trace a rise of wages if you take a very long period into consideration — 50 years ; but what the precise course has been since 1873 in particular, it is very difiBcult to follow out. We know that in some cases, pai'ticularly in the coal and iron trades, wages have gone down since that time, but what the average reduction would be, if we were to take the whole country into account, it would be very difficult indeed to say. 799. ( The Chairman^ Would it not be possible to get from the books of eminent firms in leading indus- tries what variations had occuri ed in the wages that they were concerned with ? — I think that when some information which we are now getting from the Board of Trade is published it will throw a good deal of light even upon this point, but the difficulty is this, that it becomes absolutely necessary to allow for the relative importance of different kinds of wages, and the con- stituents of the labour market, if one may say so, change from period to period. You have really got substantially, when you come to an investigation of this kind, to form an average for the whole community, as it were, at one period, which is a very difficult thing, and compare it with the average at another period. 800. But are these sources of error greater as regards labour than they are as regards commodities ? — The difficulty is that we cannot get the figures at all. If we could get them they would be free from error to a very large extent, because you would make them up into a general average for the whole community, but the difficulty is to get the records. 801. Could we not call members of leading firms in the most important industries ?— Perhaps. 802. {Sir T. Farrer.) We have, we know, most elaborate returns of the wages in one very important employment, in ships ? — 'Yes. 803. We have very elaborate returns of seamen's wages, in fact we have the articles of all the ships. We have found very great difficulty, have we not, in com- paring and classifying those so as to compare one period with another in consequence of the very great change in the character of the employment ?— The difficulty I consider to be very serious indeed, and I may say that in the return we are now preparing at the Board of Trade we see the difficulty continually. The classi- fication in most manufactures is so minute that it is very difficult to assign relative importance even in the return of wages which you would get from a particular firm. They would show you wages beginning at 40s. and going down to 15s. a week, and what the real average would he upon a proper statistical investiga- tion would be very difficult to tell, and how that should be used to work up to a general average for the whole country, would also be very difficult. I do uot say that it is impossible to arrive at some good result by careful manipulation and calculation, but still it' would require a good deal of arrangement indeed to bring out general results of wages to show what they were, say at intervals of 10 years, since 1845-50. 804 You have told us that there is a considerable difficulty even with regard to wholesale prices from the change in the character of the artides which we place under the same denomination at different times .'' — Yes, that is so. 805. And that that causes a necessary defect in any statistics of the kind, a necessary cause of inaccuracy. That difficulty is a much greater one in the case of labour, is it not ?-I should say that it is a necessary cause of imperfection in the data, and constitutes a great difficulty in handling them so as to arrive at the final result. 806. So as to make sure, when you are speaking of labour at one period and another, that you are speaking of the same thing ? — Yes; and there is also this point. I believe it is the case, for instance, in the United Kingdom that a great levelling of wages up to the metropolitan level has been going on for the last 20 years ; so the effect of that would be that wages, if you take the metropolis as a standard, hardly seem to rise, but if you take a place like Glasgow, Man- chester, or Dundee, you have a much greater rise of wages than what you seem to have for the me- tropohs, and the problem for the statistician is how to set off the one against the other and to arrive at a true average for the whole country. 807. Then what you say with respect to wages applies, I suppose, also to salaries and to professional services, that there is no record that would enable you to compare those at different periods ? — I think, perhaps, that as regards the latter there are some materials in the income tax returns, but they would require to be manipulated and studied a great deal before you could make much out of them. I do not know how far it would be possible to make anything out of that. 808. {Mr. Houldsworth.) Did I understand that an attempt was going to be made with reference to wages ? — We are getting up a great deal with regard to wages at the Board of Trade now. 809. Would it be available for us ? — I am afraid I won't be in time for the Commission, at least I should doubt it very much. If there is anything in it I shall be in communication with the Secretary, and I shall let him know. 810. {Sir T. Farrer.') But your impression on the whole, from all you have gathered, is that wages have been on the rise up to 1873-74 .' — There is no doubt of that, comparing the present time with 1845-50, there has been an enormous rise in money wages. There is no doubt of the fact, but what the exact course of the history has been, and how far there is a change in money wages, comparing 1873 for instance with the present time, I do not think there are suffi- cient materials in existence almost to form a judgment, at any rate not to any fine degree of accuracy. 811. But during that long period, during which you have told us there was a considerable fall in wholesale prices, there has been on the whole a considerable rise in money wages ? — I do not know that there has been a great fall of wholesale prices, say between 1845-50 and the present time, but at any rate there has been no rise, and yet wages have risen greatly. What the actual course of wages has been in the last 10 or 15 years when wholesale prices have been falling largely is a little uncertain. It seems certain they have not risen but on the average they may have fallen a little, though how much I know of no means of ascertaining. 812. {Mr. Birch.) But the most important period for us is the period since 1873. Surely there are regular standards of artisans' wages, people paid so much an hour ; there would be no difficulty in obtaining information on this head ? — And then you ascertain particular facts, but the difficulty is to work them up to a general average. 813. It would give us some idea. Take London, for instance. In 1873 a firm paid so, much an hour to a painter ; now they pay so much, and the hours of labour are so many. It may not be so accurate as your calcu- lations generally are, but we may go a long way towards what we desire to ascertain ? — You would have to ascer- tain the proportion of painters at one time to the rest of the community, and a great deal besides of much difficulty, such as whether the employment was con- stant, and many other things of that kind. The diffi- culties are really very great indeed. I do not say they cannot be got over, but you require to have a study of the tables, and you must not speak too quickly on the change of wages. In this matter great ac- curacy may be necessary. An average variation of pel" cent, say in the wages of the community would Mr.B. 3 Dec. 44 ROYAL COMMISSION ON GOLD AND SILVER : Mr. B. Giffen. be very difficult to ascertain, and the difference on the wages 10 years ago and now may not be more than 3 Dec. 1886. t^at. 814. And agricultural labourers again, i think you may arrive at tolerable accuracy there ? — Even in agricultural labour it would be very dangerous to take the figures of a particular place only, and not investigate the whole subject. 815." (/Sir T. Farrer.) Then there is another class of payments that I should like to ask you about, what we may call services, such as for instance railway fares, freights of ships ; are there any data for ascer- taining whether those have risen or fallen ? — Well, as to freights I think you will find a table of freights, unhappily it is for a short period only, in the evidence which I gave before the Commission on Trade Depression, and that shows no doubt a considerable fall in rates in the last 10 or 15 years; but that table is not continued very far back, and it would be very difficult to make comparisons for a long period, although I have no doubt practically, considering tho subject along with others, that there must have been a great reduction in freights. 816. Railway fares and rates? — Railway fares have been practically reduced in this way, I think, that there is more third-class travelling, and that the third- class carriages are better. Even if the fares remain the same you have points like that that you would have to consider with respect to services of that kind. Railway rates are of most importance in America. There can be no doubt that rates for freight have fallen very much indeed — the rates for through freights ; I am not quite sure as to rates generally. 817. Are you aware that Mr. Atkinson states that the reduction of rates in any one year in recent years is equal to the whole money spent upon railways ? In that year the reduction of rates has been so great that if the rate of the previous year had been paid it would have paid for the making of the railways for that year ? — I have no doubt there is great reduction ; but I think it is chiefly through rates. 818. What you have told us has been with respect to wholesale prices. You have nothing of the same -sort with respect to retail prices, have you ? — I doubt if it would be possible even to get retail prices over a long period. The thing is really so difficult, how a retail price is constituted. 819. Do retail prices follow wholesale prices generally, and to what extent ? — I think there is a very important matter in connexion with prices, and it is noticed by Mr. Jevons in that first essay that I referred to, in which he deals with what he calls minor commodities, as well as the principal commodities that he refers to. His principal subject is about 39 or 40 principal commodities, but then he makes a longer list, and the longer list includes altogether 118 commo- dities, and dealing with what he, calls the minor commodities he finds that between 1845-50 and 1862, while the big commodities that he was dealing with rose about 16 per cent, the minor commodities only rose about six per cent., so that although there was an average increase of prices all round, yet the increase in the minor commodities was not so great as the increase in the chief wholesale commodities. Then you have to take into account the retail prices as well, and I think there is a good reason why tho retail prices should not always change as the whole- sale prices change, at any rate not to the same degree. The reason is, that the price of an article retail includes not only the price of the raw material but the cost of distribution, and to some extent the cost of manipulation as well, so that unless the cost of manipulation and cost of distribution change exactly as the raw material changes, you might have a much greater rise or fall in the raw material than what you have in the article that is finally dealt with by the retailer, and I think that wheat and bread offer a very good illustration. For instance, a rise in wheat from 30*. to 60*. per quarter, that is a rise of 100 per cent, would be equal to a rise in the price of the raw mat-etial of bread from 3rf. to Grf. the 41b. loaf; but assuming the price of the loaf when wheat is 30«. to be 6d., namely 3d. for the raw material, and 3rf. for manufacture and distribution, the price at 60*. would be 96?. only, that is a rise from 6d. to.Qd. in the manufactured article sold retail, or only 50 per cent, as compared with a rise of 100 per cent, in the raw material. There are other articles, such as clothing and ladies' dresses, and all kinds of articles, to which even stronger remarks would apply as to the difference between the variation in the price of the raw material, and the variation in the price of the manufactured article as sold retail. 820. {Mr. Birch.) Don't you think that this co-operative stores movement has tended materially to give people generally the benefit of every fall in price ? — In that you still have the great difference that I speak of. That may be the tendency in future, but I am speaking now of things actually as they exist. 821. {Sir T. Farrer.) You say that retail prices do not generally follow wholesale prices, or at any rate follow them in a very irregular way ? — They do not necessarily follow wholesale prices, at any rate not in the same degree. That is a point which I should like to make. 822. And wholesale prices are not a test of wages ? Wages may rise though prices may fall, and ince versa ? — I think it would be important to follow the relation of retail prices and wages to wholesale prices. You must not assume the one thing from the other, the important thing is to understand what the facts are. 823. {Mr. Birch.) Surely the retail prices would more affect the wages than the wholesale prices ? — The relation of wages to retail prices would also be important to ascertain if you could get them. 824. But that is an important element, much more than the wholesale .? — I do not know ; I think that the wholesale prices are also very important to know, and there is this valuable point about them, that you can obtain them much more easily than the retail prices. 825. It is only with reference to wages. Agricul- tural wages are generally supposed to be the lowest limit upon which a man can live, and such men cannot buy wholesale. It is the retail price that materially affects wages ? — That involves matters of great theo- retical interest, no doubt, but wages certainly form the most important element in the price of raw material because the raw material is produced by labour like other things,_ and the price represents wages that have been paid. 826. {Sir T. Farrer.) Then I think you are of opinion that our figures might be very^well taken at many more places than they are ? Even the wholesale prices are not the same at all places? — I think it would be very important indeed that you should have figures for a great many places, even as to wholesale prices. 827. Even within the United Kingdom? — Even within the United Kingdom. For instance, I have observed in the recent discussions about Irish rents that it has been urged on behalf of landlords in Ireland that the tenant in Ireland has got the benefit not .only of the rise in the prices of agricultural pro- duce, meat, and other articles, that would be deduced from the price in the wholesale markets, but he has got an additional benefit in this way, that the cost of conveyance from his farm to the wholesale market has been diminished and that really is an important point. The rise in prices by which the tenant farmer has gained in some distant part of the country, and the agriculturist generally has gained, may be even greater than what is shown by the rise in prices in the wholesale markets in London or other wholesale markets. This I have already observed I think, with reference to the French prices the different course of the prices of wheat in England and France; and I may say also that some figures which I have been looking at lately would seem to show that the price of wheat in Italy has not fallen so much as the price of wheat in London, that there are differences in almost all the principal countries of MINUTES OF EVIDENCE. 45 Europe, in the course of the price of wheat. As fur as the degree of the change is concerned, the fall in London seems to be at a sort of maximum compared with other places in Europe. 828. But their currency would have something to do with it. The Italian notes were at a considerable discount at one time ? — Well, if the work was pro- perly done the changes in currency ought to have been allowed for, but I have investigated the figures so recently that I can hardly speak about it. 829. (Mr. Barbour.) Might not the cause of the fall in wheat in London be explained by the fact that the area under wheat in England is being reduced ? — I have hardly been suggesting causes iu what I have said. I am merely pointing out the expediency of having prices from more places than one, because the facts may be different. No doubt if the area under wheat is being reduced in England, it is because the crop is not a profitable one. 830. Therefore there may be a certain quantity of wheat sold in England every year not at a profit. That would tend to make wheat fall rather more than in other countries ? — I have no doubt there are such explanations, and other explanations which might be got at, but the point I am pressing of course is that it is important to get prices for more places than one, and that explanation if true would reinforce my argument. 831. (Sir T. Farrer.) And you are of opinion that there is a process of equalisation or levelling going on both in prices and in wages ? — I think there is, owing to the great reduction in the cost of conveyance, and that that levelling is going on over very wide areas indeed. 832. It appears then that what we have with re- spect to wholesale prices, is, looking at prices alone, a mere contribution to any general answer to the question whether prices have fallen or risen and to what extent. What you have given is only a contribution to a complete answer to that question ? — That is the way in which I look at it, that it is only one element out of many that ought to be got for the purpose of properly discussing the question. 833-4. And that with respect to the mere fact of the price that is paid for an article, when we come to analyse the meaning of that price there arise other considerations, do there not ? — Of course, in all these inquiries that I have been making just now, I have not taken into account at all what would be the causes of the changes of prices at different times. That raises questions of exceeding difficulty ; how you are to distinguish what particular causes co-operate in producing the particular result in the economic world. It is always a very difficult matter. 835. You have been dealing not with the question of causes but with the question of facts ?— Simply with the question of facts. 836. The facts of prices, and the result is that we have an indication, but a very imperfect indication, that, on the whole, prices have followed a certain course ? — That is so. 837. Then, as to the cause or meaning of those prices, there may be various constructions put upon them ? I suspect there would be endless discussions as to the causes, of which Mr. Tooke's History of Prices is a specimen. He devotes six volumes to the discussion of the causes of the changes in prices, and chiefly to a demonstration that they are not owing to certain causes, but may be owing to others. 838. To take the thing in its most elementary form, price is an indication of the value of an article in money, is it not ? — The prices which I have been re- ferring to are, of course, money prices which may be taken iu two ways, one in the articles and the other in money. If the money price goes up, that means that the price that would have been expressed in the article would have gone down. 839. So that it is in fact an equation of two articles ?— That is the way in which I always look at it. 840. Then you may alter that relation by increasing Mr. R. Giffen. or diminishing the quantity of either the one or the other r — You may say that the relation is altered by 3 I^eo. 1886. causes affecting either the commodities or the money ; that the investigation of the causes should relate to two branches of the subject, as it were. One branch of investigation would be what has happened regard- ing the commodities ; and the other, what has happened regarding money. 841. If the cost of production of commodities is much diminished, if the facility for bringing them to market is much increased, if the quantity of human effort necessary to bring them into a state for con- sumption is diminished, then that would naturally diminish the money price of the article, although the money remained tlie same ? — Unless there was a corresponding change in money. 842. The money remaining the same ? — Yes. 843. On the other hand, if the cost of production, the difficulty of producing the article, remained the same, and the money differed, then the price would alter in consequence of the alteration in the money ? — That is one mode of putting it, but of course it is a very theoretical mode of putting it. 844. (Mr. Cohen.) Would it be possible to dis- tinguish how much of a given change could be ascribed to one set of causes, and how much to the other set ? — I should not like to say how far it is possible, 845. I am not asking you to do it, I am asking you whether it would be possible to do it ? — I think it would be possible to arrive at some important con- clusions giving light upon the subject, though whether it would be possible to arrive at an exact definite conclusion, so definite as that question puts it, I should have very great doubts indeed. 846. (Sir T. Farrer.) I was going to ask you whether you think you would be able to prepare any- thing that would throw light upon it ? — I think that I should refer you to what I have written on the subject. I can hardly say that I am prepared at present to carry the discussion any further. 847. You have spoken of a general tendency during the greater part of last century to a fall in prices. Have there not during that period, at any rate in the case of manufactured goods, been very great improvements both in production and in transit ? — That is a point of very great importance, I think, with reference to these historical investigations ; and although the prices that I referred to of Sir George Evelyn seemed to show a rise in the value of silver of between 400 and 500 per cent., still it was important to keep in mind that this was only with reference to the particular articles and things specified in the table, which did not include to any extent manufactured articles, and I believe that if you were to take the course of prices of manufactured articles, that that course would not have been precisely the same as that shown by the other articles. And there is one illustration which is very strong in my mind. You take such an article as sugar; at the time when Sir George Evelyn has commenced, that is about 400 or 500 years ago, the current price of sugar, as you see from Thorold Eogers' History of Prices, was about 2s. per lb. That is in the money of the present time, you may say 5s, per lb. The present price of sugar is something like Zd. per lb., so that it is only -^ of what it was at the time when these figures of Sir George Evelyn that I have been referring to began, and of course, if you were able to include sugar and a good many other articles in the index number it might alter the inference from the index number as to the course of prices very materially indeed. I believe that that would be even more true of the modern time than it would be of any past century, because you have had so much greater a development of manufacture in the last 100 years than at any previous time. 848. Sugar is a very peculiar article, is it not, in which you can trace a variety of causes which would lead to its cheaper production ?— It is an article which, from being an article of extreme luxury, has become, through the cheapening of the cost, an article 46 KOYAIi COMMISSION 0^f GOLD ANi) SILVER; 3 Dec. 1886. Mr. B. Giffen. of ordinary consumption, and the diiference even in money between the present time and 400 or 500 years ago is that the price now is only about -^^ what it was. 849. And you are able in the case o£ sugar to trace the causes, are you not ? For instance, the very much larger number of countries producing sugar, the intro- duction of beet sugar, very great improvements in the manufacture, great facilities of transit, and lastly legis- lation, which pays people for selling sugar cheap ? — That has all contributed to the low price of sugar, as we happen to know from our Board of Trade special knowledge of that special subject. 850. I suppose one may go through several leading articles to see how some of those elements have contributed very largely to the cheapening of the cost of production ? — I think with regard to iron that is especially the case. As far as I can make out, a very common price for iron—though it is difficult to read the prices of past times and reduce them to modern money — a very common price for finished iron about 400 or 500 years ago would have been about 30^. per ton, and the corresponding price now would be about 51. per ton, so that that would be a very large set-off to the rise in .prices which seems to be shown by Sir George Evelyn in that table to which I have referred. Of course iron now enters much more largely into the production of articles than it did in the former period. 851. And we know that there have been very great ' improvements in the mode by which iron is produced, which it is not necessary to enumerate ? — Iron ; and even more especially steel. 852. The same thing would be true of cotton to a great extent, would it not, that the manufacture is very greatly improved ? — That is true of cotton un- doubtedly, and also there is this point, that jotton is a comjJaratively new article in the manufacture of the world, that the thing hardly existed 400 or 500 years ago. 853. And it is also true, with regard to such articles as wheat, that we know how the cost of production has been diminished by bringing such very large quan- tities from different tracts of the world now under cul- tivation which were never cultivated before, and by facilities in transit ? — That is quite true. 854. And so you may go through a number of articles and show reasons for the fall in price quite in- dependent of anything relating to the precious metals ? — Yes, but the point I was on just now, I think, was a little different. I was trying to explain that the tables we have been discussing, showing the rise in prices down to the present century, would have been modified if we had been able. to include other articles where the price has actually fallen at the same time as others have risen. 855. That would relate to the tables that go back to the last century ? — Yes. 856. That would not relate to the tables that go back since 1874-73 ? — It might relate to them a little, — the same principle would apply. The effect of the tables might be modified, if we could include more articles. 857. {Mr. Birch.) But tea at the beginning of this century was about a guinea a pound, was it not ? — I have heard of 16s. a pound. I was not aware that it was a guinea. 858. {Sir T. Farrer.) I think the conclusion to which you would point is rather that while there has been a fall in prices, it is extremely difficult to say to what cause or causes, and in what proportions that fall is due to those different causes ? — No doubt that is a matter of the utmost difficulty. 859. {Mr. Barbour.) With regard to these Indian tables, I may explain that I am not responsible for thetn, and I think that the figures they give of prices from markets in the interior of the country would not be accepted by anybody as minutely accurate. There are no prices current, no price lists, very often no bio- market. Some Government ofiicial goes and inquires from month to month what the price is. That is sent in, and the figures are published as they come in While one man may go to an establishment that deals wholesale, if there is such an establishment in the place, another may go to a retail establishment, and so forth. I think, however, as showing the general course of prices they are sufficiently accurate, and there are one or two ■ questions I should like to ask you about them. As regards the prices given for cotton, castor- oil, linseed, jute, and hides in these Indian tables, are you aware that they are taken from the Bombay and Calcutta Commercial Lists ? — I did not, I think, make any criticism upon these particular prices. Of course, it was evident from what I said that I was referring to the prices in the interior. 860. These prices from markets in the interior of the country, I believe, are prepared in a different way. There are no price lists? — From what I know of statistics of prices generally, I should say that to get prices from the interior of a country is naturally a very diflacult matter, and that it ought always to be explained in giving them forth how they are obtained. 861. And I .suppose the prices taken from the well- known price lists of Calcutta and Bombay would be more satisfactory to you than prices brought from the markets in the interior of the country T — If they were properly abstracted from the price lists. 862. If they were correctly taken from the price lists ? — And you could also check them to a certain extent from the imports and exports, if they were obtained in a proper manner, dividing the values by the quantities. , 863. That would depend upon the correctness of the declared values, would it not ? — That is so, and I am assuming that that work is done in a proper way. 864. (Mr. Cohen.) When we speak of the apprecia- tion and depreciation of gold, you measure that appre- ciation or depreciation, as the case may be, by the prices of commodities, do you not ? — The phrases are phrases which I am very careful about using myself, but I suppose that would be one way in which you could use the words. 865. Would there be any other way ? — You can speak of appreciation and depreciation as between gold and silver themselves. 866. But where there is only one standard in the country you must measure it in something ?— But still you could also speak of appreciation and depreciation with reference to gold and silver themselves. 867. Supposing we were speaking now of the appreciation of gold or depreciation in this country, you could only measure that by commodities, could 'you not? — Commodities and services, that is to say wages. The one thing is as important as the other. ^ 868. The result, then, of the inquiry on which we have been engaged to-day would be to establish the fact that there are really no practical means of telling whether gold has appreciated or depreciated, in your opinion ?— No ; it only establishes the fact, I think that it is a difficult matter. ' 869. I will ask you another question. Have you given your attention particularly to the movement of prices m Europe since the demonetisation of silver by the Latin Union ?— Not very specially. 870._ Are you aware that since 1 873, with only one exception, the prices as reflected in the index number of The Economist have moved pari passu with the fluctuations in silver r— They seem to correspond very nearly, there is no doubt about that. These wholesale prices seem to correspond with the move- ment of silver itself as expressed in gold. 871. {Sir J. Lubbock.) Did I understand you to say you rather question The Economist index number because you thought undue imporlance had been given to cotton in the calculation ? — No ; I was rather pointing out that it was referred to as an imperfection by Mr. Jevons himself, and undoubtedly it seems to alter the result as compared with other figures which are used. It is a point which people must observe and form their own judgment upon as to whether cotton should enter so largely into the aggregate of the index number. It is a question for discussion and judgment. My own opinion is that it does enter too MINUTES OF EVIDENCE. 47 largely, but that is not like pointing out an error in it exactly : it is a matter for discussion and judgment. 872. Because, if I remember right, .the numbers allotted to cotton were three or four, I think you said, out of 22 ?— Four out of 22, Mr. Jevons points out. 873. That would be something less than 20 per cent. ?— That is so. 874-5. Now in the return of the Board oi Trade of the per-centage of the value of each specified article of British and Irish produce, I see that — for the exports we take the year 1865— that cotton was 34 per cent, of the exports and 24 per cent, of the imports, and therefore in both cases cotton really occupied a more important position with reference to our commerce even than that which The Economist's &guTes yvould give it? — And what I should say would be that cotton ought to occupy even a more important place than it does in the Econamist index number when we are dealing only with the import and export trade of the United Kingdom, but it does not follow that in a general index number that that should be the test of the relative importance. It is a test of relative importance if you are taking your index number for the foreign trade only ; but it does not follow that it is a test that ought to be followed when you have a great many articles, and putting in a good many which are not very largely subjects of foreign trade at all, so that the selection is to some extent arbitrary. At any rate the effect is different when you have four articles out of 22 cotton instead of three out of 40 as you have in another table. 876-7. So that although the weight attached to cotton is even below its real proportion when we are dealing with the export and import trade of the country, when we deal with the whole trade of the country including the internal trade, you think it is rather too much ? — It may or may not be too much. If one was forming an ideal index number you would have to consider many points and consider what you should do ; what you ought to consider your objective standard would indeed be very difficult to find out. The witness withdrew. Adjourned till Wednesday. Fifth Day. Wednesday, 8tli December 1886. Mr. R. Giffm. 3 Dec. 188S. PRESENT : The Right Hon. A. J. BALFOUR, M.P., the Chairman, presiding. Mr. D. M. Barbour. Mr. J. W. Birch. Mr. L. L. Cohen, M.P. Sir T. H. Farrer, Bart. Mr. C. W. Fremantle, C.B. Mr. W. H. Houldsworth, M.P. Sir John Lubbock, Bart., M.P. Mr. Geo. H. Murray, Secretary. Mr. Augustus Sauerbeck examined. 878. {The Chairman.) The Commission at this moment are engaged investigating the demand for and supply of the precious metals for the purposes of currency. That is a question which I think you have dealt with in a contribution to the Statistical Society, and it is on certain facts brought out in your pamphlet that we desire to examine you to-day ? — Yes. 879. There is a table here which, I think, you have taken from a well-known book by Dr. Soetbeer, giving the average annual production of the precious metals from the year 1861 to the year 1884. You have translated the weights given by Dr. Soetbeer into pounds sterling for the various decades through that period ? — ^Yes. 880. Have you examined the evidence on which Di . Soetbeer has framed that table ? — No, I have not. 881. You simply take that table as given by an eminent statistician, and one that, therefore, in your opinion, can be relied on within certain limits of error ? — Yes. I may just say that in the last edition he made some very slight alterations. Dr. Soetbeer alters the fio-ures as he obtains fuller and more reliable statistics. 882. But he adheres in the main to the figures as they stand in your pamphlet ? — My figures are from last year's issue, and the difference in the new edition is very slight. It would not afiect general results. 883. You do not think it in the least probable that there is an error of 20 per cent, in any of the figures that you have given ? — I should not think so. They are indeed higher than any estimates published by other sources, and for my purpose I found it best to take the highest estimates, so as to be on the safe side. o 24358. 884. But though these figures cannot bi3 relied on as absolutely accurate, the limit of error is not, in your opinion, very great, as far as you can judge ? — I should think not. 885. Are you not in error on page 5 in your quota- tion from Dr. Soetbeer as to the amount of the precious metals used in the arts ? — I do not think so. He puts down the consumption of gold at 110,000 kilos, and the net consumption, after deducting old metal, at 90,000. That is still the estimate in the new edition. 886. But I thought Dr. Soetbeer's estimate was for the whole world, and you add to his estimate of 12,250,000/. the requirements of Spain, Portugal, Austria, Russia, Turkey, Asia, Africa, Australia, Central and South America ? — The estimates of con- sumption are for Europe and the United States. What I add for Spain, Portugal, Austria, and Russia is for coinages and banking reserves, and for Asia, Australia, South America, &c., the total requirements. 887. You made no independent investigations into the use of the precious metals for the purposes of arts and manufactures ? — No, I did not ; but in an indirect manner I came to the conclusion that if anything the figures are too high. 888. There is one table which you quote from Dr. Soetbeer as to the total amount of metallic money in circulation, which would supply us with very important information if it could be relied upon. It is that given on page 6? — That was published in last year's edition, and is not repeated this year alto- gether, except the amount of gold. Dr. Soetbeer gives the figures with all reserve. Statements of the total stock of money in the world have been published H Mr. A. Sauerbeck. 8 Dec. 1886. 48 llOYAL COMMISSION ON GOLD AND SILVER : Mr. A. Sauerbeck. 8 Dec. 1886. by various authorities who have to some extent checked each other, so that we may now have more reliable data. But on the whole estimates as to the amount of gold aud silver in a country are, as you are well aware, very vague. 889. They are very vague indeed, and I presume nobody would say that these are to be rehed upoQ as absolutely trustworthy ?— No, I should say not ; but an estimate as near as possible. 890. But could you give any conjecture, or does Dr. Soetbeer give us any ground for conjecture, as to the limit of error within which we may accept these figures ? — No, he does hot. 891. Now I want to ask you with regard to the statements on page 8 of your pamphlet as to banking and other modes of economising the precious metals for the purpose of currency. That is, of course, a vital question when we are dealing with the demand made on the stock of the precious metals. Is this a question into which you 'have made independent investigation ? — I made general investigations into it, and, of course, all my remarks refer to the time during the last 14 or lo years, since the adoption of the German monetary reform. 892. Could you explain the statement you made tha telegraphic transfers are the reverse of an economy of the precious metals ? — My statement was that the use of telegraphic and other transfers and of cheques in the place of bills of exchange is probably the reverse of economising, as by means of endorse- ment a bill can effect a great many payments and requires money only at due date, while for cheques money may be claimed, and bankers have to keep sufiicient cash reserves for this purpose. Therefore if such transactions increase it may have an effect upon the current accounts of bankers and hence on their cash reserves. 893. So that the reason that you think that a telegraphic transfer is not an economy as compared with a bill of exchange is that the telegraphic transfer requires a reserve in the bank, and a bill of exchange requires no such reserve ?— Transfers may require a reserve. 894. Is that generally accepted by banking autho- rities ? — I cannot say whether this opinion is generally accepted by banking authorities, 895. That is not a subject into which you have made any investigations ? — Permit me to explain more fully. Many political economists express the opinion that transactions carried on by bills of exchange and cheques may be almost indefinitely expanded. This is true of bills of exchange as of book credits so long as there is sufficient circulating capital, but in the case of cheques and transfers at banks it is — so far as my judgment goes— only partially true. Where there is a perfect system of clearing many amounts balance each other without requiring money, but the moment they enter into current accounts or that amounts are drawn from current accounts, they afEect the banking reserves. In London, therefore, not all transfers would affect the banking reserves, but if the influence is ever so small it must be greater than in the case of payments by bills. But my remarks refer to all commercial countries, and if on the Continent, in places where there is no clearing house, transfers are made, funds must be at the bank, covered to some extent by cash. 896. When you say that it is shown that bills of ejxhange have lost some of their efficiency by the fact that they have fewer endorsements upon them, and therefore represent fewer transactions, how is that, in your opinion, to be accounted for ?— It may be by that custom of making cash payments, by the development of many large banks, and the discounting of bills. Of course, formerly, more people, particularly on the Continent, used to make their payments by bills of exchange. Now they go to the bank, discount " a bill of exchange and pay perhaps by cheque or transfer. 897. So that again, in your opinion, the fact that bills do not pass from hand to hand in the manner they used to do requires the banks to hold a greater reserve than was formerly the ca.se? — It may add to the growth of current accounts and consequently to the amount of cash held. 898. Are you of opinion that as matter of fact the banks do hold larger reserves than they used to do ? — I am not fully acquainted with that. Of course, it is very difficult to go into all the details of the liabilities of the banks, and how much they have to keep, but on the whole they must be prepared for cheques and transfers, that they may be taken up in money, while if a payment is made by bill of exchange, of course no real payment takes place until the bill fnlls due. In this country it would appear that, according to the "Economisfs " statistics, the amount of current accounts and deposits has advanced since 1879 from about 510 million £ to about 570 million £ in 1885. The Enghsh banks, excluding the Bank of England, hold about 21 or 22 per cent, covered by cash and money at cnll. It is assumed that the actual cash held is very small, but the actual amount does not matter so long as the proportion remains the same. Should there be no increase in the totid cash reserves, then we have to set against it the fall in prices and the smaller requirements of capital and money ibr larger quantities. 899. Have you made any independent in-vestiga- tions into the extension of the Clearing House and other systems of economising the precious metals in countries other than England? — Clearing Houses have been established at Paris and Vienna, and also in some places in Germany, but I do not think that the clearings as yet are vei-y important, so far as I have seen the figures. 900. Then your general conclusion would be that whereas in the United Kingdom we are already banked to the utmost, and no further economy of the precious metals is to be anticipated, there is still room in other countries for adopting similar expedients ? — Yes, with regard to other countries, I should fully say that ; but even in the United -Kingdom, probably, we have not arrived at the limit. I cannot see any great advance lately, but still it may be further developed by and by. 901. Then you are of opinion that the United Kingdom, as a matter of fact, has not advanced in this direction during the last 30 years, but that, never- theless, an advance is still possible ? — Durine the last 14 or 15 years. All my remarks refer to that period. 902. When you call attention, as I think you do, in one part of your pamphlet', to the fact that we may possibly have to look for an increased demand on the stock of the precious metals, through the resumption of specie payment by Russia and by Austria, we may perhaps set against that the probability that on the Continent, and perhaps in America also, an economy of the precious metals may ensue through the exten- sion of banking expedients ? — Yes ; it may ensue, but you know very well people will not change their customs of paying simply on account of a greater demand for gold, but only when they find that it suits them best for their own purpose. 903. But I suppose you would say that as far as a forecast is possible, it is quite as likely that the Continent vrill increase its banking operations, as that Eussia would adopt a specie payment? — It is quite possible, because .i great movement is going on in Germany, anyhow ; but the development in order to economise a very large amount of money, particularly by the extension of banking among smaller merchants, shopkeepers, and private individuals, as is the case in this country, would be a comparatively slow one, while Austria and perhaps, also Eussia may cause a new demand for gold within a not very remote time. They might require 100 million £, and the economising of money would have to be increased to such an extent as to set free a similar amount in Continental countries. 904. Then we come to the tables of prices which you have given, or rather the summary of your in- MINUTES OF EVIDENCE. iO veshgations as to prices, supplemented by these tables, which you have handed in ?— The tables handed in are partly extracted from, my paper in the " Statistical Society's Journal," partly they represent additional investigations. (See Appendix IV.) 905. I do not know that I have any special inquiries to make with regard to the items dealt wilh, but I should like to ask you, with regard to your system of index numbers, whether the conclusion you have arrived at is not that, though index numbers which do not take account of the quantities of commo- dities dealt with are theoretically inaccurate, practically the results so obtained do not differ materially from those which you obtain if you make some allowance for the quantities ? — In a system of index numbers there may occur errors, if you do not take any notice of quantities, and I have checked my figures to some extent by calculating also according to quantities. In fact, I have calculated the figures on three different systems. On page 15 I give the nominal values of the quantities in 1849, in 1873, and in 1885, at the average prices of 1867-77, which formed my standard, and then I calculated these at the index numbers in each year, and found that the change in prices was, if anything, more important than actually shown' by my ordinary index numbers, but that it did not differ materially. 906. So that whatever methods you adopt you arrive substantially at the same result? — For the 45 commodities which I have taken. 907. {Sir T. Farrer.) Might I ask you how you get your quantities? — You will observe on pages 36 and 38 that I have calculated the quantities of pro- duction and imports of all the various commodities. I have estimated the real values and the nominal values at uniform prices. 908. I wanted only to ask so as to get at the quantities. Ton have the imports, but how did you get at the quantities produced within the country ? — Well, as near as possible, partly according to official statements. 909. Are there any official statements ? — In the case of wheat we have now official statements as regards the production, and also for potatoes, barley, and oats, and for former years there were estimates by Sir James Caird, the " Times," and other autho- rities. Then with regard to minerals we have official statements of the production [in this country. In a few cases, for instance, hides, tallow, and timber, I had to leave out the production as I could not get any reliable estimates. 910. {The Chairman.) Tour tables are based upon the consideration of the English wholesale price of these 45 commodities ': — Yes. 911. Do your conclusions, with regard to the fall of prices, apply to retail as well as to wholesale prices ? — Perhaps in a less degree, because there are a good many (ulicles which principally enter into the retail trade, like meat and butter, that have not fallen so much as the general average, but where there is ' a great decline, as in the ease of corn and sugar, I think the consumer gets the full advantage. For instance, in the case of bread, best bread costs now about Gd. the 4 lb. loaf, which used to be Sd. and 9d,, and I understand up to lie?., and inferior bread can be got at ^\d. and 5 J. in London. 912. Does that fall in the retail price of bread correspond in amount to the fall in the price of wheat ? The fall in retail prices might not fully correspond according to per-centage. If the raw article has fallen 40 per cent., and forms about one-half of the value of the manufactured goods, and wages have not fallen, then the fall for the manufactured article would only be one-half in per-centage, but in many commo- dities there is great competition and curtailment of profit, and prices have probably also been very much depressed on account of that. 913. Then, according to your view, wages have not fallen to the same extent as commodities ; but the wholesale producer has had to curtail his profits in order to pay wages, and the retail dealer, on the other hand, has not curtailed his profits, but has paid wages Mr. out of the public. That would be the conclusion to A. Sauerbeck. which your last answer points, at aU events ? — No ; — -" what I intended to convey was that if wholesale prices ^ ' have, for instance, fallen 40 per cent., and wages have not fallen, then the decline would only be 20 per cent, for the manufactured goods ; but, on the other hand, there was great competition in retail as well as whole- sale business, and prices have been perhaps further reduced, but there are no statistical data for any retail prices. It is possible that, to some extent, the retail sellers made larger profits for some time, but I do not think that will be maintained for very long if it has been going on. 914. Competition between' the retail sellers will ultimately give the whole advantage derived from the fall of wholesale prices to the public ? — It should do so. 915. {Sir T. Farrer^ The prices that you have given us here are wholesale prices ? — All of them. 916. {The Chairman.) You have, I think, con- structed a curve of wholesale prices for certain years ? —Yes. 917. Do you think that materials exist for making a corresponding curve indicating the variations of retail prices ? — No, I should say that there are no data at all to go by. 918. Then do you think it would be possible to construct a similar curve for the variation in the price of labour ? — I very much doubt it, but I have not myself gone into the question of labour. I think it is very difficult to get full information with regard to wages. 919. I think you state somewhere in the course of your pamphlet that labour has not fallen to an extent corresponding with the general fall in prices ? — That is my ifnpression. It has fallen to some extent, but not by far to the same extent. 920. Have you made any investigations on the subject ? — I have not myself made any investigations, but I have seen some publications, and the reports of the last Commission appear to confirm my views. 921. The Commission on the Depression of Trade ? —Yes. 922. You have studied the facts there brought forward ? — Yes. 923. But the facts that you can obtain from that source are not sufficient to enable you to construct a curve of the kind of which I speak ? — It would not be sufficient, I should think. Of course, you would have to get the details of the price of labour all over the country, or at least in the principal towns of the country. 924. Would that be a matter of very great difficulty ? — I should say so, but I believe Mr. Giffen is now trying to get that information, — labour statistics. I understand that Mr. Giffen has sent a circular to about" 6,000 people. Of course it will be very difficult to digest their rephes. Still, he may get some information from which he may perhaps be able to construct such a curve, but (or any private individual it would be altogether impossible, I should say. 925. {Mr, Houldsworth.) You have a number of subsidiary curves for food,, corn, meat, butter, sugarj coffee, and tea. Would it not be possible to make a number of small ones in certain trades for labour as, of course, price lists exist for certain trades, in fact, nearly all trades. They perhaps do not cover the whole ground, but, as far as they went, curves could be constructed ? — I myself have not been able, in fact I have not tried sufficiently to get full information on it. 926. {Sir T. Farrer.) I think several statisticians have given great attention to this question of the price of labour, that is to say, the rate of wages. Mr. Giffen himself has written a paper upon the state of the labouringvelasses, and I ihink the conclusion that he comes to is that during the last 50 years the money wages of labour in this country have risen by about 100 per cent. Are you aware of that? — I have seen Mr. Giffeu's paper. H 2 50 EOYAL COMMISSION ON GOLD AHD SILVER: A. Mr. Sauerbeck. 3 Dee. 1886. 927. That was in 1884; and at the moment when he wrote his last essay, in 1886, the price of labour was falling again, but not to the same extent as it had risen. That, I think, was Mr. Giffen's conclusion. Then Mr. Leone Levi, I believe, comes to the con- clusion that labour had risen in the same way during a long period of years, but that during the last four or five years it had fallen 15 per cent. ? — "Well, I dare- say that would be the case in many trades. 928. I think the general results arrived at by Mr. Atkinson, of America, and Mr. Leroy-Beaulieu, of France, are that the wages of labour have on the whole been rising very considerably up to the period within which they wrote, which is within the last three years. Mr. Leroy-Beaulieu's book was written three years ago, Mr. Atkinson's two years ago, I think. , All agree that there has been during the last two or three years something of a fall ? — Yes. 929. {The Chairman.) A fall of 15 per cent, would not be very widely different from the fall that you calculated in commodities ? — Well, it would after all, because such a fall of 15 per cent, would probably be calculated on the highest point, but if you were to take the average of 1867-77 the fall would perhaps be less, because I believe before 1870 wages were still lower than they are now. 930- Are you aware of the terms of the circular which Mr. Giffen has issued to these 6,000 indi- viduals ? — I read it at the time. 931. Does it ask for particulars as to the relation which wages now bear to what they did 20 years ago ? — I believe he is making inquiries as far back as possible, to get a range if possible. That, I believe,"' was the purpose of his inquiry. 932. I have not asked you any questions with regard to the demand for precious metals for the purpose of currency, for I believe you have contented yourself with taking Mr. Soetbeer's estimates, on which you think reliance may be placed ? — For the demand for coinage for the last 14 years I made some special tables on page 4. 933. Do those tables differ from those which Mr. Soetbeer himself has compiled ? — I do not know exactly whether Mr. Soetbeer has made similar estimates. I took the total coinage in Germany, and the amount of bars in the bank, I deducted a rather high estimate of what may have been melted down and exported, and then I arrived at the net require- ments for Germany. And in the IJnited States I took the gold currency now and in 1873 as estimated by officials, and from that I arrived at the net require- ments ; there are further two small estimates for Italy, Holland, and Scandinavia, making the whole requirements 178,000,000?. You will remember that Mr. Goschen at the time put them at 200,000,000/. 934. These investigations represent original research of yours into the coinage question; they are not merely a digest of Mr. Soetbeer's figures? — Tliese figures are not taken from Mr. Soetbeer at all. I took the official figures of the coinage in Germany and of the estimates in the United States. 935. Now I should like to ask you with regard to the estimates you have made of the increase of pro- duction, would you not expect that the amount of pro- duction would at all events bear some relation to the demand for the precious metals, that if there is a great increase in the amount of commodities produced and in the number of commercial transactions there will be a greater strain put upon the metallic resources of the world, provided that no change occurs in banking facilities during the same period? — That is my opinion. 936. And it is from that point of view that you have investigated the increase in the production of comraoditi^is ? — Quite so. 937. Are you of opinion that the conclusions you have arrived at may on the whole be relied upon ? I think they are fairly reliable, as near as can possibly be made out, but, as I mentioned, the figure of 28 per cent, as the increase of production since 1873 is, if anything, rather too high than too low. 938. The increase in the United Kingdom I think you put at 17 per cent., do you not? — Yes, that is from a different set of statistics, from page 36. 939. Then I suppose you would say the total increase in the production of commodities lies some- where between 17 and 28 percent, i* — I should say so, yes, but nearer to the latter figure. 940. Then we may adopt that conclusion without any serious risk of error ? — Just so. • 941. So that your general conclusion may be put in this way, that while commodities have increased somewhere between 17 and 28 per cent, the supply of gold during the same period has only just been sufficient to meet new currency requirements, without supplying any of that natural increase which would be required, or at any rate, which, according to one theory, would be required, to maintain prices at their old level.' — Yes, that is my conclusion. Of course, you have to take the amount of money in that sense, not of gold alone. 942. I ought to have said gold currency? — The monetary circulation — gold, silver, and paper-money — in those countries having now practically the gold standard. 943. While, therefore, gold is appreciated through that double set of causes — the diminished production, and the increased demand owing to both the increase of commodities and the alterations of currency — silver is depreciated through the double cause of an increased supply and a restricted demand for currency purposes ? —Yes. 944. And that the increase of production in the countries using silver has not been sufficient to over- take that increase in supply ? — You mean the increased demand in silver-using countries was not sufficient ? 945. 1 suppose you would admit that there is an increase of commodities in silver-using countries as well as in gold-using countries ? — Yes, there is certainly an increase in the exports. 946. You have collected no facts with regard to the increased production in silver-using countries ' — No. So far as it is exported it is included in my figures, but what is consumed at home would not be included. My figures give the supply in Europe and North America. 947. Still, on the whole, 1 suppose you would be inclined to admit that there was an increase of pro- duction in silver-using countries as well as gold-using countries ? — I should say so, yes. 948. And, therefore, if there had been no increased supply of silver, and no restriction of the supply of silver for coinage purposes in Europe, silver prices would have fallen in the same way that gold prices have fallen ? — In that case silver prices would have moved in the same proportion as gold prices, but the general fall, if any, would have been much smaller, as, notwithsta.nding the decreased production of gold, Europe and North America would have received a considerable addition to their monetary circulation, while the exchange of silver would have kept on its former level. It is influenced by the great production of silver and by the diminished demand. 949. So that the increased production and dimi- nished demand have more than made up for the increased production of commodities in silver-using countries ? — Just so. 950. So that you are of opinion thdt causes have been at work which, quite irrespective of silver, have appreciated gold, and quite irrespective of gold have depreciated silver ? — If you exclude the changes in the currency. Of course, if silver were still a stan- dard coin in Europe — for instance, if Germany had not altered the coinage, and France was still coining silver — then the level of prices might still be the same as before, as the large production of silver would have been quite sufficient to make good the diminished supply of gold. 951. (Mr. Cohen.) I do not think the witness understands that silver is not depreciated as compared with commodities, only as compared with o-old ? It is depreciated as compared with gold. '^ MINUTES OF EVIDENCE, 51 952. {The Chairman.) I thought I understood you to say it had depreciated with regard to commo- dities owing, no doubt, to change of currency in Germany and Italy ? — I did not fully understand your question. It has fallea about 20 pei' cent, and com- modities 28 per cent., whicli is very near. 953. Have you made any investigations as to the relations between silver and commodities in silver- using countries? — No, I have not made inquiries as to that, but I should say that prices have fallen to some extent, because I find that as compared with 1867-77, the 11 years on which I base my calculations, 10 articles exported from India have fallen 35 per cent., while silver has only fallen 20 per cent., at least up to 1885. It was lower this year. Therefore, the con- clusion would be that there must be some decline also in the silver-using countries. 954. {Mr. Barbour.) Would not the reduction of freight between England and India come in there ? — Yes, to some extent the difference may be due to a reduction of charges. 955. I think you said that you were of opinion that Dr. Soetbeer's estimate of the precious metals consumed in the arts was too high ? — I think so. But I made no independent investigations, and cannot criticise Dr. Soetbeer's researclies. I came to this conclusion in an indirect manner. You will see from page o that I found a deficit of 94,000,000/. which cannot be proved to exist in any country. 956. And it is on that that you base your opinion ? — It is on that that I base my opinion that it could not have been so large, because nil the estimates for requirements are very moderate, wliile T have taken the largest estimates of production. 957. On page •> also you say the figures of import and export of gold in France are urireliable. Have you any special grounds for saying so ? — I found out that there is a great increase in the imports over exports which could not possibly have taken place ; and I believe Mr. Soetbeer also proved that the figures must be wrong. 958. Then you said that there had been an increase of production of commodities in the countries using the silver standard ? — I conclude that, because we receive more goods from them, like wheat. 959. Have you any grounds for saying that the increase of production in silver-using countries is as great as the increase of production in gold countries ? — I should say that it is very nearly so, because we receive now a great many goods from the silver countries. There is a large increase in many articles exported from India. 960. But is not the consumption of the silver countries very great — of India, for instance — in pro-^ portion to the quantity exported ; therefore an increase in the quantity exported is not a proof that there is a corresponding increase in the quantity consumed in the country ? — It is not a proof, but still the imports have also increased, and, of course, there would be the general conclusion that the country has developed just like any other countries in general production. 961. But you could not say with any certainty? — I have no statistics. 962. That the increase of production in the country was in proportion to the increase of imports and exports ?~-No, I could not say that with any certainty. 963. {Mr. Birch.) I see you state that you agree with Mr. GifEen that there had been no extension of banking facilities or of banks during the last 20 years ? I mention in my paper that it does not appear that any important change has taken place in the cheque and clearing systems in the United Kingdom, and that it has been stated by Mr. Giifen that this country was fully " banked " some 30 years ago. 964. From statements which I have collected it appears that in the last 20 years bank offices have increased from 2,417 to 3,886. That is rather a large increase ?— Well, of course the trade of the country has increased, and the population. 965. But I think you will allow that the rise from 2,417 to 3,886 is a very large extension of banking ? — It is a very large one, but I am speaking specially of the use of cheques and cleai-ing, the economising of money. 966. That would naturally result, would it not'. If you had a very large extension of banks, you would have a very large extension of cheques also ? — I admit an extension, but not a very important one, particu- larly as there is a decrease since 1873 in the London clearing. 967. Then you say that telegraphic transfer takes the place of bills of exchange, and therefore that greater reserves are necessary. I think you will agree with me that the majority of business houses keep a large amount of their money at call, and particularly those houses that are liable to have great demands on them in the shape of telegraphic transfers ? — Well, just so; they would have more money available like that. 968. But is it not the case that where one draws from a house another one pays in ? — Just so. Of course there are a great many payments which balance each other ; but still, generally speaking, if everything is paid by cash, the natural conclusion I thought would be that it would affect the banking reserves. 969. But you see what I mean with regard to keeping the money at call, which is now so largely re» sorted to ? — Yes, but the more money is lent out at call, the easier the money market ; while if large amounts are withdrawn it will make the market tighter ; both influences will act on the monetary reserves. My re- marks do not only apply to telegraphic transfers in London, but to the substitution of transfers and cheques generally for bills of exchange, all over the world, also in places where there is no clearing house. 970. You gay that the telegraphic transfers have taken the place of bills of exchange, They have, to a large extent ; but have you in your estimates at all calculated the amount of bills of exchange which are in existence- in England ? — The stamp duty on bills of exchange and bank notes in the United Kingdom from 1871-75 amounted to 1,030,000Z. on the average, and in 1885-86 to 800,000/. only. The circulation of bills of exchange in. Germany at the end of the year on the average of 1872-75 was estimated at 186 million £ against 165 million £ in 1885-86. There is a decrease notwithstanding an enormous development of trade in Germany. 971. Then have you taken into consideration at all the economy that is produced by the cotton clearing in Liverpool which formerly used to take up 150,000/. a week ? — ^No, I have not taken that into considera- tion. Of course there may be various modes by which an economising has taken place, but it appears also probable that there is an actual decrease in the amount of gold in this country. 972. Then with regard to the index numbers of prices, you think that they are much to be relied on in this way, that wheat would be influenced by one reason, cotton by another, steel by another, and each article would have influences bearing upon it quite distinct the one from the other. You could not well mix them up together ? — The reason that regu- lates the price of each article is to be found in the article itself, except when there is a general develop- ment or a general depression, when perhaps several articles together, or all of them, may fall or rise. 973. But no doubt you have often observed how one article falls and the other rises, but from entirely distinct reasons ? — I consider all the reasons for a rise or fall in a single article within short periods as distinct, and belonging to that article itself on the whole. 974. But you cannot do that in your index numbers ? — I take the average of them. I consider one article may have risen and another fallen, and then I take the average. No doubt, if the average of all the index numbers goes down then the proportion of fall must be greater than that of rise. 975.' You say at page 14 : — " It may be argued ■' that index numbers do not in the aggregate give Mr. A. Sauerbtch. 8 Dec. 1886. m ROYAL CQMMISS.IOl^ ON GOiLD AND SILVEB ; ■ -M'- " a correct illustration of the actual course of prices." A. Sauerbeck, ^jj^t t^ieis specially to quantities ?— That has been „ J. ~ argued, and I think it is to some extent true. They ^''" ■ are not fully reliable, but perhaps they are better if you calculate from a higher j)oint downwards than if you calculate from a lowei' point upwards, as the influence of exti-aordinary movements on the general average will be less if the price falls from 100 to 25 than if it rises from 100 to 400 ; for instance, cotton from 24f/. to 6d. or from 6d. to 24rf. The change of price would be exactly the same, but the influence on the total index numbers would be very different. 976. You say on page 4 : — " The monetary reforms " in Germany, Holland, and Scandinavia, and the " resumption of specie payment in Italy and the " United States, caused a considerable extra de- " mand for gold," are you aware from whence this gold was drawn, because, I suppose, if it was taken from hoards it would not particularly matter ? — The question of hoards exists, but still, nobody has ever proved that there were any large hoards. 977. Not in France ? — Well, at least it could not be proved in figures ; nobody could estimate it. 978. Has it not been estimated ? — It may have been estimated, but I do not know how you will arrive at the figures. 979. I think that when the indemnity was paid to Germany, was there not some information obtained with regard to the amounts that came out of hoards in Prance ? — I do not think that it would be possible to ascertain what amount of money is hoarded and is afterwards put in circulation again. 980. {Mr. Cohen.) Have you any informatiolf about the hoarding of silver in India ?•— -No, I have no information. 9Hli And have you any information as to the locking up of gold in this country, through light gold being stored in the diflTerent banks ? — ^No, I cannot give any information. 982. Have you any information upon the cost of the production of silver in America ? — I cannot answer this question. 983. There are questions connected with prices in your book at page 39. You recapitulate the causes of the fall in prices as being due to the alteration of cur- rencies, the demonetisation of silver, and the insuffi- cient supply of gold ; you could not state which is the most prominent of these causes, and to what extent each is accountable for the fall, could you ? — I men- tion two principal causes of the fall of prices : — (1.) Reduction of cost of production and conveyance, and in consequence gi'eat increase of production ; (2.) alterations in currencies, demonetisation of silver, and insufi3.cient supply of gold. The lasi three cannot be separated. We have first the alterations in curren- cies and demonetisation of silver in Germany and Scandinavia, and as a consequence the stoppage of free silver coinage in the Latin Union, Holland, Austria, &c. Then the resumption of specie pay- ment in the United States and Italy. Had silver not been demonetised, the free coinage would not have been stopped, and the decreased supply of gold would not have mattered. On the other hand, had the pro- duction of gold increased to, say, 35 million £, the demonetisation of silver would not have had much effect on prices in gold countries. On the whole, I consider the influence of the precious metals is principally on average prices, and would therefore call attention to the dotted hue on the diagram at the end of my paper, giving always the average of 10 years. Of course we cannot compare the present prices, those of very depressed years, with a very good year, or even with a whole period, and say that the whole fall is due to currency influences. There are all kinds of influences, great increase in produc- tion, diminished demand, general depression, &c. 984. {The Chairman.') Your view is that tempo- rary fluctuations in prices are due to temporary alte- rations of supply and demand, but that any permanent alteration of prices is probably due to some alteration in the relative supply and demand of the precious metals for currency purposes? — Yes, I express these views on page 11. 985. Would largely be due to them ? — Largely. 986. {Mr. Cohen.) Have you seen a table which has been compiled for the last 13 years, showing that since the demonetisation of silver the fall or rise in the price of 22 of the chief commodities has moved down and up according to the movements of the silver market, with the exception of only one year i' — I have not seen these tables, but silver has been falling continuously, 987. I beg your pardon, it has not fallen con- tinuously. What I want to bring out is, that the oscillations of silver down and up have moved with the same oscillations of the prices of these 22 commodities, with the exception only of one year out of the 13 ? — It has frequently been the case, pai'ticularly in 1876, when there was a general fall of prices of com- modities in the middle of the year, together with a fall in the price of silver, and they moved up together afterwards. If I said that silver has been falling con- tinuously, I meant- that the average annual prices showed on the whole a downward course. 988. You state at page 40 that if silver had not been demonetised, and if the production of gold had not decreased, the fall in prices would have been very much smaller. According to that you give the chief factor in the case of prices to the demonetisation of silver. Is that your opinion ? — To a very great extent. I said perhaps it had a greater influence on prices. 989. The demonetisation of silver ? — The demone- tisation of silver and the decreased production of gold. Of course if the gold production had very much increased, then we might have higher prices now. 990. The great factor in low prices you take to be the combined cause of the falUng oS of the production of gold and the demonetisation of silver ? — Just so. The supply of money has not increased at a similar ratio to the supply of commodities. 991. {Sir T. Farrer.) The information you have given us with respect to prices is confined entirely to the wholesale prices of certain articles in London ? — Just so. 992. That is founded upon the system of index numbers ?— Y''es. 993. In that system of index numbers you admit that there are certain defects, although you think that on the average they produce a tolerably accurate result. One of these imperfections is that the relative importance is not given to different articles ? — Just so. 994. You have attempted to check that by taking particular years, and you found that it produced much the same result ? — Yes, for these 45 articles. 995. But still, whatever it is, it is a defect in the system ? — Just so. 996. Then, in the first place, they are not accurate if you take a long period of years. Then the other question. You are obliged for a purpose of this kind to group a number of articles under one heading In the course of a series of years, those articles may entirely change their character, may they not ? — They may, but so may other sets of commodities. 997. Quite so, therefore you are not quite certain that at one period in a table of this sort, you are dealing with the same thing that you are at another. That is an inherent defect? — Yes. I must take it for granted that the importance of each article has remained the same. 998. That the character of each article has remained the same ? — And the character. 999. But as matter of fact it may not ? It may not. 1000. In this table, at page 12, you group various articles. Take for instance sugar, coffee, and tea and you get a certain result ; but the causes that may have influenced the lowering of price of those different articles may be extremely different, may they not ? They may. 1001. Therefore you cannot deduce any general conclusions as to the cause of the reduction of price of MINUTES OF EVIDEJTrJE. 53 a whole group that you put together in that way, without analysing and seeing what are the different articles of which it is composed? — That would be necessary if you refer to special articles or even groups. 1002. "We are not now concerned with causes, but I should like to ask you one general question con- cerning the effect of grouping and averages. You have said in your paper that there are special causes of the fall of prices of some articles. If we take two articles A and B, and suppose that A falls in price 50 per cent, from a special cause, whilst B remains stationary, it will be an arithmetical fact that the average fall of the two is 25 per cent., but it will be a fact of little or no significance. Now, if it could be shown that out of the articles contained in your list, or in one of your groups, the majority have largely fallen in price from special causes, would not the value of your average or index numbers for any seneral purpose be to that extent diminished ? — There might occur such a defect in a group as you say. If one large article had fallen and a small one risen, both from special reasons, the mean drawn without regard to quantities would be valueless. Take for exaniple the large article sugar and the small article cocoa. Unimportant articles, particularly if they have followed a different course from the general average should, therefore, be excluded, and the groups be made to contain as many numbers as possible. I have not included very small articles, and have given to very important articles two index numbers. One group contains four numbers only, all the others seven, eight, and 11 numbers. As the movements of the various articles within the groups have not varied greatlyduring the last 1 5 years, the average may give a fair illustration j but as mentioned in my paper the defect may exist if a comparison is made with very remote times, and going further back my groups may show this defect. In the total of all the index numbers the probability will be that fluctuations from special causes in one directioii will be balanced by movements in the opposite direc- tion. Index numbers checked by quantities give a fairly reliable result, and there is no better system ; but it is impossible to be quite exact, as even accord- ing to quantities the calculation may be made by dilFerent methods, all perhaps open to criticism. 1003. And when you come to consider the causes of prices, before one conld get at a very accurate result, it would be necessary to take each article separately and see what are the various causes of depreciation in each ? — If you wish to find out the causes for each article, yes. 1004. Well those are all observations to be made on any system of prices framed on this system of index numbers ? — Just so. 1005. And apply to the wholesale prices in London which you have given ? — ^Yes. 1006. Have you endeavoured to get wholesale prices elsewhere than in London ? — I have the publications in Germany by Mr. Soetbeer, which are not really wholesale market prices ; but nearly all deduced from the import prices. 1007. And from prices at Hamburg for different things ?— Yes, at Hamburg. 1008. And some of them British prices ? — Yes, 14 British export prices, 8 Hamburg market, and 92 import prices. 1009. Have you compared your hne ot curve with the various lines which he gives in this table of his ? —Yes, I have reduced his figures to my level of 1867-77, and I find that up to about 1873 his prices follow almost exactly my curves, but slightly under mine, after that he remained above my level ';' and the reason for this I found to be that he included a very large number of unimportant articles. 1010. You have seen this diagram of his ?— Yes, I have seen that. , 1011. You see that in this diagram he has got a variety of lines relating to different articles, and he has put also this red line, which is taken from <■<■ The Economist" a- line very much corresponding to yours, except during the American -wsar, when the index number in " The Economist " is much higher .? — Yes, at the time of the American war it went very much higher. 1012. It does not correspond with yours there because you have allowed for that. Generally speak- ing, I think '^ The Economist" numbers and your numbers agree very fairly, do they not ? — They cannot fully agree because, first of all, " The Eeohomist" numbers are for a certain day, the Ist of January, always, while my numbers give the average prices of the whole year. With regard to the American war I have not made an allowance, but in my table cotton is only counted as two index numbers in 43, while in " The Economist" it is counted as four in %2 numbers, and hence the influence of the high prices is much greater in the latter table. 1013. Still the point I want to get at is that this line which gives " The Economist " number, on the whole, is not very different from yours — at least not durihg the last 20 years. But you will observe if you take Dr. Sbetbeef's lines of prices of different things, iaken from different sources, that they differ very widely indeed from either " The Economist " line or yours ? — So do mine if you take the prices of different kinds of goods. You observe that in meat and butter for instance if you look at these tables. 1014. I am quite aware of that, that they differ, but he takes these for different periods, the price of producdoiis of agriculture, of cattle, of mining, and 100 articles, including British export articles, and ^hose all, I think, differ considerably from your line ? -T-If you take separate lines of Mr. Soetbeer you would have to compare them with separate hues of mine. , 1015. You will see that the continuous bliie line is a curve which applies to all jarticles, and that Dr. Soetbeer lays, much stress on the tables from which this curve is drawn as probably more universal and more accurate than the tables of " The Economist." You will also see that this blue .line of Dr. Soetbeer's, though coinciding in general character with " The Economist " curve, is less abrupt and descends much less at the latest period. Have you any obseryations to make on this? — Yes,, 1 said before that Mr. Soet- beer's figures showed a less important fall, and that the reason for this is principally the addition of a very large number of small ai'ticles. Besides, oiScial import prices I eonsider to be less reliable than market prices, at any rate they follow the movements more slowly. I reduced the prices in Mr. Soetbeer's tables to my level, comparing 1885 with the ayerage of 1867-77, and I found that for the same articles as treated in my tables there is a fall of 24 per cent, as a,gainst my 28 per cent. But for the other articles the average decline is only 15^ per cent. Now I should like to draw your attention to the fact that Mr. Soetbeer's index numbers are calculated on the basis of the four years 1847-50, a very low period, and, as I mentioned previously, I consider the system of calculating from low prices upwards to be less accurate than from high prices downwards. Many of the small articles had reached a much higher level already some 15 or 20 years ago, and it thus occurs that small articles like cocoa, pepper, horns, ivory, &c. receive now twice or three times the importance as large articles like wheat, cotton, wool, iron, &c. I have prepared additional statistics, not yet published, as handed in, in which I give still 61 prices of other raw produce and 51 prices of manufactured and partly maiiiifactured articles, nearly all deduced from the Board of Trade returns, which may riot yet show the extreme fall. You will observe that taking my 45 descriptions and the additional commodities and calculating all according to their importance, I' find an average decline for aU the 157 articles of 26 per cent, as against 28 per cent, according to the, 45 index numbers of the principal articles. If Mr. Soetbeer were to adopt a similar course I have no doubt he would obtain similar results with, regard to.Gerpjan prices. Mr. A. Sauerbeck. 8 Deo. 1886. 54 ROYAL COMMISSION ON GOLD AND SILVER; Mr. A. Sauerbeck. 8 Dec. 1886. 1016. I do ngt know whether you have read any of the reports which have been made lately about trade abroad, reports made by Mr. Strachey to the Foreign Office, and made to the late Commission ? — I have read some of them. 1017. From those it would appear that owing to the protective duties in Germany the manufacturers of Germany are in the habit of selling much dearer in Germany than they .are selling in England ? — So I understand. 1018. And that has been a complaint by many of our own people, the fair traders made it a great subject of complaint ? — Yes, I know that that is the case. 1019. ( The Chairman.) That they sell at a higher price in Germany than they do in England ? — Yes, they form a ring, for instance, for the sale of steel rails. 1020. {Sir T. Farrer.) They make England what the Americans call the " dumping " ground for cheap German goods, the effect of which would be to make the price list in Germany considerably higher than in Englan3 ? — Yes, for protected articles, and all articles imported including duty. 1021. I think you will find in those reports that in the case of sugar, for instance, which has been an article peculiarly protected by its bounty, the price at Hamburg is 12 marks for the cwt., if sold to England, and 21s. if sold in Germany. That would make a very material difference in so important an article as sugar, would it not ? — Yes, it would. 1022. Well then, if we go to America we find the same thing happening. For instance, here is a passage from a book of authority in America, " The history of the United States Tariff." " It is a well known fact " that the mining companies of Lake Superior had " controlled until within a year or two almost the " entire production of copper in the United States. " They maintaiaed for many years a combination " for fixing the price of copper. Their price has heen " steadily higher than the price of copper abroad, and " when they have found it impossible to dispose of all " their product at home at the combination price " large quantities have been sent abroad and sold " there at lower prices in order to relieve the home " mai-ket." There again, you would have the prices in America of an important article like copper higher than the prices in England ? — Quite so, where they are influenced. 1023. Even though the article was exported from America. Then in the appendix to that book, at page 106, Mr. Taussig gives the price of copper in England as from one-third to one-seventh less than in America during a series of years from 1875 to 1884 ; therefore a price list of that in America would be vpry different from a price list in England ? — Yes, but of course the difference would principally be where there is an alteration in the duties. If the duty had always remained the same, perhaps for a great number of articles you may find the same curves. 1024. I am not speaking now of the curves, I am speaking of the price of the article. When you take the price from 1875 to 1884, as you have here, you find that on the whole it is from one-third to one- seventh higher in America than it is in England, That would alter very materially one of these curves so far as copper is concerned ? — Just so. 1025. Take again steel rails. The difference there between the price in England and the price in America has been as much as 100 per cent., therefore if you take a price list in America it would be a very different thing from a price list in England ? — You would of course have to take the prices in the free market. 1026. But we are now speaking of the relation of money prices to articles, surely we must take the money prices as they exist in America and the money prices as they exist in England, must we not. These arfi the prices at which all steel rails and all copper are sold in America ? — Just so. 1027. {Mr. Barbour.) Is therj a duty on the import of copper and steel rails into America ? — 1 have no doubt there is. 1028. {Sir T. Farrer.) What 1 wanted to get at was that, taking three such articles as sugar, copper, and steel, the wholesale prices in those foreign markets do not correspond with the wholesale prices in our own, and therefore if we are to come to any attempt to get at the relation between certain articles through- out the world and gold and silver, we must have a much larger induction than can be obtained from the prices of wholesale articles in London. 1029. {The Chairman^ That difference of price between America on the one hand and a free market like England on the other, though it undoubtedly exists, does not affect the curve of prices from year to year, or does not materially affect the curve of prices from year to year ? — It may not if the duties remain the same. 1030. {Sir T. Farrer^ It certainly may not affect the curve, but it may and probably does in this way. Is it not the case, that protection at first will make the price of the article very much higher in the protected country ? — Yes. 1031. But it frequently happens, does it not, as we know it has happened with sugar, that that induced over-production in that country ? — Just so. 1032. And possibly in the end the price in the protected country may fall so as to be very nearly on a par with the unprotected country ? — Yes, that may be the case. 1033. So that it will make the fluctuations even greater than in the unprotected country. Then, I would just ask you this : Has not the object of our recent legislation from Sir Robert Peel's time been to remove as many of the barriers as possible from pro- duction and importation, and consequently to make this country as cheap a country as possible for all articles that we want ? — I think that has been done, but that has been done a long time" ago. If you go over the prices of the last 20 or 30 years they are no longer affected by duties. 1034. The prices in this country are no longer affected by duties, but tiie prices in other countries are affected by duties ? — Yes, they may be. 1035. And by bounties ? — Yes. 1036. And by that Indirect form of bounty given by protection which enables the manufacturers to form a ring and sell dear at home and cheap abroad ? — Yes. 1037. I think you said that you could not get any statistics of retail prices ? — No, I could not. 1038. Well, I suppose, for the purpose of comparing the quantity of gold with the demand for it, as shown by prices, we ought to take retail prices quite as much as wholesale prices, ought we not ? — They would, of course, be very useful to know, but I do not think it would be possible to get complete statistics. 1 039. I quite agree with you, but retail prices are as important for that particular purpose as wholesale prices, are they not ? — Oh, they are. 1040. Then, I think you said that you have not got any statistics whatever of what we may call the prices of service. Taking now the different forms in which we may get the prices of service. First of all the public service. Has there been any diminution of salaries, or of wages paid in the public service ? — I cannot give any information on that, but I may refer to a table in Germany where there has still been an increase in the last 14 years in the salaries of the railway servants. 1041. Has there been any diminution? — No there has been an increase. There was a considerable rise in earlier years from 1850 to 1872, and a slight rise from 1872 to 1886, according to Mr, Soetbeer but it is just possible that the salaries in 1872 were far too low in comparison with the cost of livino-. 1042. That is the public service in Germany, is it not ? — Yes, in Prussia. 1043. Well, then, in professional remuneration has there been any fall ? — I have not gone into that. All MINUTES OF EVIDENCE. 65 my own researches have been conflued to the wholesale articles. 1044. And with regard to the wages of labour we may state, may we not, that the general impression of statisticians is that the wages of labour rose very considerably from about the year 1850 to the year 1875, and that they have probably slightly fallen since ? — That is the impression. 1045. {Mr. Birch.) In Germany, I think you said, they had risen ?— I understood the last question as referring to wages generally in this country. The figures with regard to Germany which I just men- tioned refer to the salaries of railway servants, not exactly to the wages of general labourers. 1046. {Sir T. Farrer.) In Germany,. I think, Mr. Soetbeer's figures, so far as they go, go to show- that wages have remained much upon a level and have not fallen at all ? — I think he does not state a quotable fall. 1047. Is not this the conclusion of Dr. Soetbeer's examination of this question, that the cost of living in Germany is from 60 to 80 per cent, higher than it was before the gold discoveries ? — This would be partly due to higher wages and higher retail prices, but partly also to the improved standard of life. There is no doubt that, owing to the increase of wealth, people, nominally in the same position, live now everywhere a great deal better than some 30 years ago. 1048. {Mr. Birch.) The excessive duty in Ger- many makes living very expensive ? — You could hardly speak of excessive duties in Germany. Living there is still cheaper than in England, but the difference was greater formerly. Germany was not so rich a country formerly as it is now, and, of course, everything must have risen to a great extent. 1049. {Sir T. Farrer.) What Dr. Soetbeer says is as follows : — " Though many other observations might " be made on the general views to be derived from " the above tables, we withhold them for want of " space. The principal object of our observations has " been to point out to what great and numerous *' changes wholesale prices are subject ; how many " different factors exercise a decisive influence on their " formation; and how infinitely difficult it must be to " arrive at any moderately certain opinion about the " real.level.of general wholesale prices at any one given " time, compared with their levels in other periods of " time. If, notwithstanding these difficulties, we are " to attempt to draw some summary conclusion from " the foregoing means of information concerning " the changes in the purchasing power of gold, we " should be disposed to say, that, compared with *' the time immediately preceding the recent gold " discoveries, the cost of living, proportioned to their " position in life, of the .great majority of the German " population has during the most recent years been on " an average from 60 to 80 per cent, higher than it " was 30 years ago. In comparison with the period " 1871-75 there is, on the whole, no farther rise to " be proved. The general level of prices iH the " wholesale trade in the last five years appears in " comparison with the time before 1851 to be about "18 per cent, higher ; but in comparison with the " period 1871-75 to have fallen about 12 per cent. " Any such assumptions must however be accepted " with all caution as only approximate estimates." 1050. {Mr. Birch.) Is that the price with tlie duty? — It refers to the Hamburg wholesale prices without the duty, on the average of the last five years. 1051. Prices of services, if one may call it, are quite as important when we wish to compare what gold has to do with the supply of gold as the prices of goods, are they not ? — I believe the inquiry should mainly extend to the prices of wholesale articles — agricultural and mining — to which on the whole the same laws apply as to the production of gold and silver; and I think, if I may touch a theoretical part, that wages and many other expenses depend very much upon capital, and that so long as the capital of the 24358. country increases at the same ratio as population per- Mr. haps you will not see a very strong fall in wages. .-4. Sauerbeck. 1052. Still we are now concerned with the actual -^ — ~ effect of gold prices paid for particular things, and for ^°' ' our purpose, that is to say, the relation of gold to different things, the relation of gold to services is quite as important as the relation of gold to commo- dities ; do you not quite agree, or do you not wish to express an opinion ? For instance, the price of goods went up, the wages went also up, and if we had to get perhaps the same prices for commodities that we had 10 years ago wages would probably have risen ? — It is quite possible that wages would have risen perhaps for the same reason that they have not materially fallen now ; the increase of commodities has been larger than the increase of population, causing a greater demand for labour until the last few years, when in many branches the demand fell off". Had prices been maintained it would no doubt have been more satisfactory to all producing classes, to the vast majority of the people. The more we deviate from the wholesale prices, in the direction of retail prices, wages, professional services, and ultimately of fancy prices for art treasures, the greater the influence of custom and of the amount of capital. We cannot simply reduce everything to the supply of the precious metals, and speaking of prices generally we cannot, therefore, lay down a mathematical rule. Certain prices may remain nominally the saroe and yet the quality we obtain may be different. Wages for ordinary labour and salaries may not fail, but the advance for greater skill and experience may be less. Actual prices of some articles or of certain services may remain unaltered, but the number of those willing to continue paying these prices, and hence of those obtaining them, may change, and the total sum paid may therefore be altered. It would be impossible to arrange statistical comparisons for everything that may come under the term of " prices." 1053. I did not quite understand what you meant with respect to the increase of commodities. Would you kindly explain what the argument is ? — ^You mean generally. The purpose of my inquiry into the in- crease of commodities was to find out whether it is very much larger than it used to be in former periods, 1054. Whether there was a much larger quantity of commodities ? — Whether the increase of commo- dities since 1873 was very much larger than the per-centage of former years, and I found that from ] 849 to 1 860 we had an increase in this country of 30 per cent., and from 1860 to 1873 of 37 per cent. 1055. I will take your facts. I am not inquiring how you got at those facts, but assuming that there is 30 per cent, or any other figure of increase, what deduction do you draw from it i" — I was going to say, I wanted to prove that the increase proportionately was not larger than in former periods. While in former periods the quantity of money, gold and silver, was constantly increased it was possible to maintain a certain price level for about 25 years, and now we have no such increase in the monetary circulation while we have an increase of production at the same rate as formerly, and by that I want to prove that if we had kept up the same supply of money we might possibly have maintained the former price level on the average, or that the fall would have been very much smaller. 1056. You say that in former times the supply of gold has kept pace with the increase of commodities and then prices kept up, but now the supply of gold has not kept pace with the increase of commodities and therefore prices have fallen ; that is the argument, is it not ? — That is my argument. 1057. (Mr. Fremantle.) You said just now, I think, that the demonetisation of silver had caused the fall in prices ? — The insufficient increase in the quantity of money, whether it is gold or silver, was caused by the diminution of gold and the demonetisation of silver. Germany had a silver currency, and France used to coin silver also, and now both and other silver I 56 ROYAL COMMISSION ON GOLD AND SILVER: Mr. and bi -metallic countries have given up the coinage of A, Sauerbeck, silver. 1058. (Mr. Houldsworth.) On that point, do you 8 Dec. 1886 . (.o^gi^er that a new demand for gold, such as occurred in Germany when silver was demonetised, affects the position of gold as a standard of value? — ^Yes, it would. Like any demand for an article, it would increase its value. 1059. Even if it came from hoards or reserves or ornaments ? — No, not then. 1060. Then where does it come from if it does not come from hoards or reserves or ornaments when there is a new demand ? — Well, in this case it came from the new production, but if that new production had not been sufficient it would have been taken out of the currency of other countries. I do not consider that a source. 1061. But if it came from hoards or reserves or ornaments, it would not affect the standard of value ? — You do not mean the bank reserves ? 1062. Yes, 1 mean any reserve of gold from any place except new produ'ction ? — Well if it came from regular hoards, or from manufactured articles, of course it wiSuld be like a new supply ; but if it was taken out of banks, where it was held ;as a reserve against lia- bilities, it would aifect the standard of value. 1063. To put it another way, supposing this new demand had sprung up when there was no additional production at all, and had been supplied, would you have called that a demand that altered the position of gold as a standard of value ? — Yes, I should call it so ; because if gold were not produced then it would have to be supplied out of the currencies of other countries. 1064. And that would have altered the position of gold all over the world as a standard of value ? — i)ecidedly, unless the gold taken from other countries was replaced by silver or paper money circulating at the same value as gold, or that a system was invented economising money to the same extent as the amounts of gold exported. 1065. (The Chairman.') It would have appreciated gold in fact ? — It would have appreciated gold. 1066. (Mr. Houldsworth.) And yet the gold was in existence before ? — It was in existence, but the countries whence it was taken would have to transact the same business with less currency. As it was, the whole new supply has only served to meet the extra demand of various countries. Perhaps the quantity of gold in other countries has not diminished, or has only slightly diminished. 1067. You said, I think, that the increase of the supply of gold has not been as great, as the increase in the supply of commodities, and. therefore prices have fallen? — Just so. 1068. If the supply of gold had been as great as that of commodities of course prices would have remained ? — Prices might have remained practically the same or the production of commodities might have still further increased, if this would have been possible. 1069. {Sir J. Lubbock.) In reply to Mr. Birch, just now, witli reference to banking facilities, you I'eferred to the fall in the transactions, of the London Clearing House, but you did not, did you, intend to imply that that was owing to any change in the banking facilities given in London ? — No, I only wanted to imply that any great advance in the use of cheques cannot be proved from the Clearing House returns. Of course prices have fallen so much that now the amounts are smaller, but on the other hand, the quantities of commodities are much larger. 1070. But do not you think that that fall in the amounts is entirely due to the fall in prices, and the diminution in the Stock Exchange transactions, and has no reference whatever to the amount of bankinc facilities ? — I lay no stress on the actual decrease ol the London Clearing House ; there were certainly more speculation and larger Stock Exchange transactions in 1873, while the fall of prices is to some extent balanced by the larger quantities. I do not speak of a reduction of banking facilities, but I cannot find a very important advance, as banking was certaiiily well developed in this country 15 years ago. The present stock of gold bullion and gold and silver coin in Europe and North America is estimated at about 1,000 million £, and including paper money there has been practically no increase in the monetary circula- tion for the last 15 years. Now, if the increase Lad gone on at the rate of 15 million £ a year, as it is assumed to have been between 1850 and 1870, we should have had an addition of 225 million £, or in per-centage very much the same as the increase of commodities. What I wanted to imply is that I cannot see an advance in banking facilities in Europe and North America to such an extent as to make up for even a moderate proportion of these 225 million £. 1071. Are you conversant with the operation of country clearing ? — I am not so well acquainted with that. 1072. I daresay you are generally aware that the introduction of country clearing has led to great facilities in the collection of country cheques ?^Yes, I know, but I believe there are no figures published, 1073. And though it has not affected the question of the amount referred to by you just now, still in this country it has had some appreciable effect ? — Yes, it may have had some effect. 1074. But speaking generally, so far as foreign countries are concerned, you are of opinion that there has been no great advance in banking facUities ? — There is no great increase, although they think that in Germany the transfer system which the German Imperial Bank has introduced is the cause of a great economising of money. But I do not consider it is to such an extent, because in consequence of the intro- duction of that system the deposits of the bank or the current accounts of the customers have increased, and the bank always holds about 50 or 60 per cent, of its liabilities in cash. The convenience may be very great, but as the deposits, and, consequently, the cash reserves, have increased, the actual economising of money cannot be very important. Besides to a great extent from one town to another the transfers simply take the place of bills of exchange. 1075. {The Chairman.) So that the money instead of passing from hand to hand goes into the reserves of the bank, and is as much required as it was before ? —Yes. 1076. {Sir J. Lubbock.) Sir Thomas Farrer asked you some questions with reference to the high prices in Germany which are obtained by combinations among manufacturers. I did not quite understand from your answer whether that had been in operation for any considerable time ? — I am not fully acquainted with the fact, but I am told that it had been done in the case of steel rails in Germany and of copper in the United States. 1077. Supposing that it refers to any particular article in which the combination had been in operation for some time, then although it would affect the actual price it would not affect the curve, would it ? — Wei), it might affect it. It might depress prices here, but of course there are all kinds of influences, and as to the index numbers we must take it for granted that these influences level each other. 1078. Yes, but it might be that although the general level would be higher the fluctuations would still be the same in the two countries ? — They might differ to some extent, if they are influenced by duties, but where they are free of duties, as at Hamburg, the fall is very much as it is here. 1079. Then the system being altogether an artificial system you would hardly think it possible to lay down any general rule as to the effect it would have on general prices ? — It cannot be done ; we must take inter- national prices free of any interference of the State. 1080. And you would consider that the London prices being independent of such artificial operations would on the whole be the best guide to follow ? I should think so. 1081. {Sir T. Farrer.) Suppose that the quantity of these articles sold in the United States is as great as the quantity sold in England, would not the effect MINUTES or EVIDENCE. 57 of those transactions upon the relations to gold.- be exactly as great as the effect of the transactions in England, and would not the relation of gold to the commodity vary although it was an artificial reason that raised the price ?— I should say that in the long run the curve would remain very much the same. If an alteration takes place it might have an influence. 1082. But we are dealing with the actual prices, are we not, in these wholesale prices ? — Just so. 1083. We are dealing with the relation of commo- dities to gold, therefore you must take the actual prices, must you not, without going into causes ? — But they are influenced by duties. The per-centage of fall or rise may be different. Of course, not all prices rule alike in different countries, but those of international commodities, easily transportable, cannot, allowing for difference of freight and duties, vary much at any one time, though in many respects the gradual course of prices may show some difference ; if, for instance, a country is, in the case of a certain article, changing from an exporting to an importing country. The influence of this and of State inter- ference is clearly seen by a comparison of the prices of wheat in France and Germany with those in England during the last 100 years. Articles difficult to transport, wages, &c., may show some difference, according to the stage of development of various countries. Other things being equal, a country having for some reason or other higher prices would require more money for its transactions. With regard to America, I may mention as a fact that wholesale prices have fallen 29 per cent, as compared with 1870-72. 1084. (Sir J. Ltebbock.) It was this I wanted to arrive at, that if you have countries where you have duties which may change, rings which may be broken up one day and reconstituted the next, the prices there do not give you so good a basis of calculation as the prices in some free market like London, where you are not influenced by duties or combinations ? — Just so. 1085. Sir Thomas Farrer also asked you some questions with reference to retail prices. Now, sup- posing they were obtainable, have you any reason to suppose that they would affect the conclusions to which you have arrived in your memoir ? — I think the retail prices have, on the average, fallen less than the wholesale prices. All my arguments refer to the 45 wholesale commodities. If other commodities have fallen less, the result has to be modified to some extent. 1086. But you have no reason to suppose that if you could have arrived at tables of retail commodities that would have affected the conclusions to which you have come ? — I do not think it would have affected them to a large extent, because there is no doubt that retail commodities have fallen also. 1087. (Sir T. Farrer^ Is it not the case that at Magdeburg, the great sugar market, the price of sugar to the Grerman consumer is exactly the price to the English exporter plus the bounty ? That is in one of the consular reports ? — That would be the wholesale price ? [ should say that is correct. 1088. (Mr. Barbour.) Did you say, in reply to Sir T. Farrer, that you thought that for the purpose of an inquiry such as the present one retail prices were as important as wholesale prices ? — Well, of course, retail prices would also have to be considered if you come to the purchasing power of gold. 1089. Retail prices are much more a matter of custom than wholesale prices, are they not? — They are a matter of custom in many ways, and, as 1 said before, in many ways such prices are influenced by the amount of capital. 1090. My question was, they are much more de- termined by custom, at any rate, for some time, than wholesale prices are. Wholesale prices are deter- mined in the open market, and retail prices, to a certain extent and for a limited time, are determined by custom ? — Oh, yes. 1091. Therefore, wholesale prices would show the working of the general law much more readily than retail prices ? — Yes, they would. 1092. (Mr. Birch.') They would show it sooner, but retail prices, in the long run, wx)uld show it better. I did not, however, understand what special reasoES there are for retail prices not being affected as much as wholesale. They are not, of course, first ; they take time ; they neither rise nor fall for a long time because it must be known all over the country before it takes place. But it takes place both ways, because, supposing a man in the country has laid in sugar very cheap, he constantly con- tinues to sell his sugar cheaper, even when the price goes up ; and exactly in the inverse ratio, if he has bought his sugar very dear, he does not begin to reduce his price so soon. It goes on more slowly. But the retail prices are of very great importance as affect- ing wages, what a man can live, upon ? — Yes. 1093. (Sir T. Farrer.) This is rather a theoretical question, but as regards that part of the precious metals which is used in circulation, and not in the reserves, retail prices and wages must have a much greater effect upon it than wholesale prices, must they not, because more of it is used in those transactions ? — Yes, more of the coin is used, certainly. It is very difiicult to arrive at the exact mode how it is acting, but we must suppose in the long run, if the transactions increase and the mode of payment remains the same, and there is no increase in the supply of money, that prices must fall. Of course it can only be seen in a general way. 1094. ( The Chairman.) The tables you have put in are not merely a reproduction of those you have given in your pamphlet, but they represent the results of a more elaborate inve'stigation carried out upon the same lines ? — Yes, but only for the average of the period of 11 years 1867 to 1877, and for 1885. 8 Dec. 1886. The witness withdrew. Mr. D. M. Barbour examined. 1095. (The Chairman.) We desire, as we are investigating the question of the demand for precious metals, to ask you for such information as you can give us on the question of hoarding in India. You have had a very long experience of that country, have you not ? — 1 have had 20 years' experience. 1096. Can you tell us what special opportunities you had in India for investigating financial questions connected with that country? — Pbr about eight years I was employed in the interior of the country, partly as a magistrate and partly in the collection of the revenue, and so I saw a good deal of the habits of the people closely. After that, for about 12 years, I was gene- rally employed in the financial department of the Government of India For the first eight years of my service I was in close contact with the people every day. 1097. Have you given much attention to this special question of hoarding by the natives ? — I have given a good deal of attention to it. 1098. Then you do concur with the general opinion expressed by most observers that there is always, and has been, for centuries, a very large amount of hoarding among the natives of India ? — It is beyond question that there is a lai'ge amount of hoarding both of gold and silver. 1099. What form doeg that hoarding take ?— Gold and silver are hoarded in the form of bullion or coin, and frequently the metal is made into ornaments, and partly used for the purposes of ornament and partly kept as a hoard ; it is impossible to discriminate between the use of gold and silver as ornaments and their use simply for the purposes of hoarding. liOO. Practically, I suppose when a native desires I 2 Mr. D. M. Barbour. 58 KOTAL COMMISSION ON GOLD AND SILVER ; itr. D. M. Barbour. 8 Dec. 1886. to save money he is comparatively indifferent whether it is in the form of a hoard in the earth in some hidden place, or whether it is in the form of jewels ? — ^I think he prefers it as a rule in the form of ornaments for his family, because it is a hoard, and it is also a source of gratification to them to possess these ornaments. 1101. Is that because it is more easily converted when it is in the form of jewellery, or simply because it pleases him ? — I think simply because it pleases him that his family should have ornaments. 1 102. Can you give us any estimate of the amount of such hoarding ? — I do not think it is possible for anybody to give exact figures, but we know that 130,000,000/. of gold have been imported, net, by sea since 1833-36. 1 103. By net imports of gold, you mean imported and not exported ? — Imported and not exported, and there has no doubt been a certain amount of import and export by land, but I think that may be neglected. 1104. It is comparatively trifling? — It is trifling as compared with the imports and exports by sea. There was no doubt a large amount of gold in India before 1835 ; how much I do not know. 1105. As none of this is used for coin in India, the whole of it must either be lost or used in manufactures or hoarded ; is that not so ? — Speaking generally, that is the case ; but there is a portion of it in the form of coin, and perhaps, to some extent, and in a certain sense, it may be said to circulate. 1106. (J/r. IToiildstoorth.) You are referring to such pieces of gold as we saw here. Mr. Pixley showed us a small bar ? — I refer to gold in the form of coin rather than to bars. 1107. {The Chairman.) But that does form a kind of currency to whatever extent it is used, I under- stand ? — To whatever extent it was used it would be a form of currency ; but I do not think gold is used as currency to any great extent. 1108. What you speak of is used to a larger extent ? — I do not think gold coin is much used either. 1 may explain that there is a large trade in gold in India. A large quantity of gold is imported every year and is distributed throughout the country. The dealers in gold receive gold from Calcutta and Bombay and sell it in small quantities to people who want it, generally goldsmiths, and, of course, a banker, or a man dealing in gold, if Le has a transaction with any- body else, will be ready to take gold in payment. He knows the market value of gold, and is able to make a profit out of the transaction, but, in the ordinary sense of the word, there is no circulation of gold in India. 1109. But would a merchant treat gold in a dif- ferent manner to any other merchandise in common demand ; would he not take gold in payment of a debt ? — A merchant, and espcially a banker, would no doubt be more ready to take gold than ordinary mer- chandise in payment of a debt, because it is easily handled, and does not deteriorate by keeping, and because the market ratio is known day by day and fixed very closely. 1110. Still, practically, we may ignore the amount of gold which is used as currency ?— T think so ; but India is a very big country, and nobody can speak for the whole of it ; so far as my information goes, you may ignore the circulation of gold as currency. 1111. Tou cannot even give a conjecture as to the proportion of this 130,000,000/. which is now in that form of hoard, but it must be nearly the whole amount ? — I should say nearly the whole amount. 1112. And that in addition to whatever was hoarded during previous centuries ? — Yes. 1113. Could you give us any estimate of the amount of silver hoarded in India ? — Prom my personal expe- rience and observation I should be inclined to say that the amount of silver hoarded, excluding current coin was greater than the amount of gold ; but I made some inquiries, on the results of which I do not place much reliance, which go ratbef to show that the amount of gold hoarded is larger than the amount of silver, if current silver coin be excluded from the silver hoarded. 1114. Why should you exclude the current coin ? — Well, because I have found it impossible to say as regards current coin what portion of it was hoarded, and what portion of it was intended to be put into circulation in ordinary course. 1115. But I suppose a considerable amount of the hoarded silver would be in the form of coin ?-^A very large amount cerbiinly. 1116. So that, according to your own observation, the amount of silver hoarded must be very much in excess of the gold hoarded, because the amount of gold hoarded is equal to the amount of silver, and we have to add to that the amount of silver hoarded in the form of coin ? — I should say the amount of silver hoarded in all forms was decidedly greater than the amount of gold. 1117. Then the total amount of hoard since 1835 of the two metals together can hardly be less than 300,000,000/..? — I do not like to speak to exact figures in such a matter, but I should say the amount hoarded approaches 300,000,000/. 1118. (Mr. Houldiworth.) What is the exact amount that you say is hoarded of silver not in the form of coin ? — Nearly equal to that of gold. Of course I speak from the best information that I could obtain. 1119. {The Chairman.) You do not profess to speak from accurate statistical data, but from the best information you could obtain ? — That is so. 1120. Then if we are to accept Dr. Soetbeer's rough estimate of the total amount of coinage in circulation in the world, the hoarding in India alone would very nearly amountto one-third of that. If I am not mistaken Dr. Soetbeer puts the total amount of coin in circula- tion at 1,000,000,000/., and you put the total amount of hoarding in India roughly at 300,000,000/. ? — I should say that the hoarding since 1835 approaches 300,000,000/. 1121. In other words it almost equals one-third of the total amount in circulation ? — Yes. 1122. Of course hoarding may mean two rather different things. It may mean money put away, as people say, in a stocking, which wiU certainly be drawn out by the bribe of a high rate of interest or some other inducement, or it may mean hoarding which practically nothing likely to occur will ever throw upon the markets of the world ? — Of course you may define hoarding in various ways. 1 123. In what sense do you use the word hoarding when you tell us that it amounts to about 300,000,000/. in India ? — I use it in the sense that the gold and silver are withdrawn from circulation without any inten- tion, unless under very special circumstances, of re- turning them to circulation again. _ 1124. And, practically, nothing but a case of neces- sity, like famine or war, would induce those who are hoarding the money to turn it into coin again? — Nothing but some special circumstance; war would probably have the effect of increasing hoarding. A change in the habits of the people, if it should happen in the course of time, would bring gold and silver forth from the hoards. 1125. But no mere inducement of profit, no fall in the price of commodities or increase of the normal rate of ipterest, would have any effect in diminishing the amount of hoarding ? — Not within any limit of the rise of the rate of interest that you can foresee, that you can treat as practical. I have little doubt that a very large increase of interest would draw forth something, but the increase of interest would be so great that practically you need not consider that por- tion of the question. 1 126. {Mr. Houldsworth.) Famine would draw it ? — Famine is the chief cause. 1127. Famine would draw it all — I mean if the necessity arose? — You can hardly conceive famine throughout the whole country. 1128. Well, I mean wherever the famine was that it would draw out up to the amount of the necessities. It MINUTES OF EVIDENCE. 59 is in a form that they could convert into commodities if they were in the position to absolutely require it ?— At a certain sacrifice they could. 1129. And I suppose they would do it ? — They have done it. J 130. (iSiV J. Lubboch.) Is there any large amount which is actually lost, which previous owners have hidden away, or do you consider that the great bulk of it could be brought forth again if it was necessary ? — 1 do not think that much of it has been lost in that sense — hidden and could not be found again. A por- tion has, no doubt, but I think that a considerable amount of gold is used in manufacture in India, and is practically lost for ever. I could not give you figures, but I have had information to that effect. 1131. {Mr. Houldsworth.) In what form is it lost ; does it go into articles that never would be converted ? — Well, I was informed that in Delhi there was a consumption of gold in connexion with "pawn." It is a custom at ceremonies among the natives of India to give you what is called " pawn," which is the signal for you to leave after an interview, and there is some gold used for ornament in con- nexion with this. I was informed by a gentleman that 100/. a day in gold was used in Delhi alone in manufacture connected with " pawn," which was lost for ever. 1132. Would not the recipient of it take it and keep it ? — It is so trifling that he would not do so. 1133. Might I ask you if you think there is any absorption in the temples, or in worship, or in some form that, at any rate, would not be so easily drawn out, even in the case of famine ? — I cannot speak on that point from my own experience, but I have heard that, in Southern India especially, there are considerable stores of gold and silver connected with the temples. -, 1134. Which are considered sacred, I suppose ? — I fancy they would only come forth under great pressure. 1135. {The Chairman.) In illustration of the defini- tion you just gave of hoarding, is it not the fact tliat the high prices of cotton caused by the American war extracted a very small portion of these hoards, while a case of exceptional necessity like famine exfracted a considerable portion of them ? — The high price of cotton tended the other way ; it led to a large addi- tion to the hoards. 1136. Can you give us any facts or illustrations of the procedure of the natives in regard to hoarding ? — A short time ago I had an estimate prepared of the amount of silver that went to Simla, and that went to Simla because the Government had large payments there to make to its officers, Simla being the summer head-quarters, and partly for payment on account of European troops stationed in the hills. The figures of the amount of silver that went there from 1861 to 1886 are perfectly accurate. They are the official returns of the amount of silver sent there, and they come to 6 krores 64 lacs, or, using the ordinary notation, 6,640,000/. {See Appendix V.) 1137. Then how much of that money reappeared in circulation ? — There is no definite flow of silver from Simla ; there are no remittances of silver to any con- siderable extent that you could put your finger on, made from Simla, and from the hills, and the only money that leaves the hills to go back to the plains is mtiney taken down in small quantities by small traders, or taken, perhaps, by domestic servants. 1138. What proportion of the total amount sent to Simla do you estimate reappears in this way?— That is the weak point in the estimate, but I thought, and the eentleman who made the estimate thought, that one-third would be a very liberal allowance. 1139. So that in 25 years two-thirds of 6,640,000/. worth of silver have been absorbed by the native population living in Simla ?— I should not say absorbed by the population living at Simla, but living at Simla and in the hills. A good deal of it goes a considerable way into the hills. , , . , ^ i, 1140. Have you any ground for thinking that the inhabitants of that district are more given to habits of hoarding than the people in other parta of India ? — I think the people in the hills are rather more given to hoarding than the people in the plains, and I think the people in the neighbourhood of Simla have had special opportunities for hoarding in recent years ; of the money which has remained in the hills quite an inconsiderable proportion Is in circulation. 1141. You say that hoarding is less practised in the plains than in the hills. Is that owing to the fact that the people in the plains are more civilised, more advanced as a community ? — That may be the case ; it may be from that reason. 1142. Then do you anticipate that any change is going on in the habits of the people of India which will greatly diminish this habit of hoarding ? — I do not think any change is going on which will greatly modify the habits of the people in any time to which we can at present look forward, but it is a fact that, since the institution of our system of Post Office savings banks, a considerable amount of money has been coming into the savings banks, and it is a fact that capital owned by natives of India has been pretty largely invested in cotton mills in the Bombay Pre- sidency. But I think the habits of the great bulk of the people are the same as before. 1143. If this question is considered from the point of view of the relative prices of gold and silver, I imagine that if the natives did cease to hoard, and threw their accumulations upon the market, the result would not be to alter the prices of the two metals, since the amount of hoarding of the two is about equal ? — It is very difficult to say what the effect would be, because if that money was brought forward on account of a change in the habits of the people, it would probably be invested in industrial enterprises of various sorts, and it would bring about a sort of revolution in commerce. 1144. I will put my question in another way. The demand made by the population of India upon the metallic supplies of the world does not affect the relative prices of gold and silver, because it is about equal of the two metals ? — That may be the case. 1145. Can you give us any facts which tend to show that hoarding on a very important scale goes on at the courts of the native princes ? — Yes ; it came to notice recently, on the death of the Maharajah of Burdwan, that there was a large hoard. How much gold and silver is hoarded I cannot say, and probably no member of the family could say. I have got a letter here which contains the whole of the infor- mation available on the subject. In recent years 230,000/. of silver was withdrawn from the hoard of the Maharajah, but that was not the whole amount. The silver coins withdrawn must have been coined before 1835, because they were Sikka rupees, of which none have been coined since 1835. {See Appendix V.) 1 146. What is a Sikka rupee ? — It is a rupee which was formerly current, and it was of a higher value than the rupee of the present day. As the rupees withdrawn were Sikka rupees it may be inferred that they were hoarded a good many years ago. 1147. That confirms the conclusion to which you came on other grounds that an immense amount of the hoarding in India is anterior to the year 1835-36, at which your statistics of the import of the precious metals began ? — No doubt there was hoarding before 1835. I have also got a report made by an officer of the Post Office in 1886, which shows that a native prince is at present hoarding gold at the rate of 40,000/, or 50,000/. a year, and on the death of two native princes recently it was believed that they had left 4,000,000/. each. The best evidence I could get went to show that they had left 4,000,000/. each, but the evidence is not very good. They certainly left large hoards. I cannot say how much was in gold and how much in silver ; but I may say, as an illustration of the tendency to hoard, that one of those princes took a loan from the Government of India in 1877 of 500,000/., and at that time he must have been in possesion of a large hoard himself. But it is very' Mr. D. M. Barbour. 8 Deo, 1886. 60 BOTAL COMMISSION ON GOLD AND SILVER : 8 Dec. 1886. Mr. D. M. often a point of honour with the family not to break Harbour. ^^^^ ^^^ hoard, and they prefer to borrow rather than to touch the hoard. 1148. (Mr. Fremantle.) It is of the nature of settled property? — Well, it is treated like a family picture, I think, not to be sold if possible. The whole of the loan taken by the prince to whom I have referred is not repaid yet; but last year, when he had to make a payment to the Government of India for a purpose in which he was interested, and he was asked when he could make the payment, — a payment of 150,000Z.,— he said " at any moment." That is, he had no diflSculty in paying 150,000/. at a moment's notice. 1149. ( The Chairman) You tell us that in times of famine hoards are invaded? — That is certainly the case. 1150. Have you any estimate of the amount which was extracted from these hoards in any given district during a period of famine ? — It is quite impossible to say. All that we know is that certain amounts were brought to the Bombay Mint for coinage, a certain amount in the form of ornaments, but that must be very much less than the amount that was brought out of the hoards, because the man who drew silver from his hoard would ordinarily pledge it in the first in- stance with the native banker or money-lender, and the native banker might either sell that silver again, if he obtained final possession of it, or he might send it tc the Mint. {See Appendix V.) 1151. And that excludes gold .iltogether ? — The return for the Bombay Mint excludes gold ; but we know that in the years of the great famine in Madras .ind Bombay, a large amount of gold was sent from India to England, and I think Sir H. Hay said he received a quantity of gold from India which was evidently composed of ornaments melted down. 1152. {Sir T. Farrer.) And this does not include hoards in the form of rupees ? — Certainly not. 1153. {Sir J. Lubbock.) They would then be coins of a certain age ? — Do you mean those that were brought to the Bombay Mint ? They might be coins of some age or they might not. Many of the native states have the right of coinage to the present day. Their coins are not legal tenders, as a rule, in British India, but they might not be very old coins. 1154. {Mr. Birch.) To what do you attribute this system of hoarding, because generally the stable government we are supposed to have in India just now would bring them out. Can you give me any idea ? — Well, I ascribe it to the same cause as Sir C. Trevelyan, who says it arises from habits induced by ages of mis-government. 1155. Then with good government it is to be hoped the hoards will come out. You said just now, I think, that you cannot raise loans in India ; that it is very difficult indeed except at a high rate of interest ; but you see the French Government got hold of a good many hoards by offering loans at a tolerably cheap rate, not a high rate of interest, and in very small amounts. Has that ever been tried in India ? — That has been tried in India in recent years. It was tried in 1882, but was an entire failure. 1156. Then it is difficult to know how to get at them. With regard to the gold in the native states, it is not a legal tender, but it circulates, does it not ? — I should say it does not freely circulate, but no doubt a native banker, or a man dealing in gold, or dealing in gold and silver ornaments, would take gold at a certain price. 1157. "An Indian" says: — "A portion of gold " and silver imported into India is no doubt exported " by land routes to Afghanistan, Persia, Nepaul, &c. " But the import of gold into India is mainly caused by " the large body of the Anglo-Indians who are tem- " porarily residing in India and by the steady stream " of Anglo-Indians coming to and leaving India. " Being naturally apprehensive of a further fall and " uncertainty of silver, they try to collect as much " gold as possible and take it with them when they '' leave India for England, When they come to this " country they come with hands quite empty, but " they leave India after making due provision for the *' remainder of their life. What is more probable " than that they collect a part of their savings in gold " while they reside in India for utilising at home ?" That, of course, is very largely exaggerated ? — I do not think there is any foundation for it at all. An Anglo-Indian does not accumulate gold in India. I never knew anybody who did. 1158. {Mr. Fremantle.) Nor does he take gold with him ? — Nor does he take gold with him. If he has saved any money he buys a bill, or employs any of the ordinary means of remittance. 1159. {Mr. Birch.) Do the exchange banks in India hold ajarge quantity of gold in deposit ? — No ; so far as my information goes it is not the case. 1160. Because, to a certain extent, that would be utilised ? — I am not aware of their holding gold on deposit. It is possible that a wealthy native merchant might take a loan from a bank, pledging gold or gold ornaments. 1161. Could you give us any idea as to whether, with respect to labour, the value of silver has decreased in India? — I do not think I could give you any information except of the most general nature ; it is, perhaps, not worth while taking my evidence on this point, but I can give you the opinion I have formed from certain inquiries I have made. 1 162. ( The Chairman) I think you might give it in a general form ? — Well, I think that the wages of labour have risen in the large towns and along the railways, and in places where large manufactures have been started, and especially the wages_ of skilled labour. As regards the great mass of the people, I do not think there has been much change, and very often the labourer is paid in kind, paid by produce, so that one could not say that the money wages had risen or fallen. I have made some inquiries as to the cost of carrying the mails by runners ; I applied to the head of the Post Office, who obtained from the auditor of the Post Office accounts a statement of the wages paid to what are called postal runners, and I found very little change in the rates. I will put in a paper giving those rates. It goes back for a con- siderable number of years. There is a rise in the rates up to, I think, about 1870 or so, and since that there has been very little change^ — a slight tendency to rise. {See Appendix V.) 1163. {Mr. Cohen.) Would you attribute this hoarding to a deficiency of banking system in India in the remoter towns away from the capitals of each Presidency? — I do not think that the introduction of facilities for banking would much affect the habits of the people in this respect. \ 164. Is there a system in India which obtains in this country, and all the other countries of Europe, of taking money on deposit by the different banks ? — The European banks certainly do so. 1165. From natives? — They will take them from anybody. 1166. Yes, but do they get them from natives, I mean ?— WeU, I think the hoarding as a rule is by men who hoard so little individually that no bank would accept their deposits, nor would they them- selves be willing to deposit their money in a bank. 1167. I have understood, — perhaps you will correct me if my question is wrong,— I have understood that the post offices throughout India have the same system of investment in Indian Government securities that the English post offices have in English Govern- ment securities, and also for taking money for savings banks ; is that the case i* — I do not know precisely what the English system is, but the Indian Post Office takes money for savings banks, and it will invest money for the public in Government paper in small sums. 1168. Has it had any effect at all in diminishin" the tendency to hoard ?— The deposits in the savings banks have increased considerably in recent years but I do not think that the system has had much MiNUTfiS Oi^ EVIDENCE. 61 effect upon the habits of the people generally in the matter of hoarding. '■ r o j 1169. Do you think that the people would accept notes payable in silver throughout the country ? — There are notes payable in silver at present. 1170. Not of small denominations? — They go as low as five rupees. 1171. And it has had no effect in diminishing the tendency to hoard the metal ?— I think it has had very little effect. 1172. Do you think it would have any effect if the Indian Government were to do away with the seigniorage for coining metal which is now two per cent. ? — I do not think that would have any effect. ^ 117.3. It would not promote the circulation of money and prevent hoarding, you think ? — I do not think so. 1174. Do you think it would have an influence upon the disposition to hoard if there were a currency common to India and the rest of the world, either by general bi-metallism or by giving India a gold cur- rency ? — I do not think it would have this effect to any material extent, because the hoarding depends on the disposition and habits of the people, and by intro- ducing one form of currency rather than another you do not change the habits and disposition of the people. 1175. Can you say that the disposition to hoard has increased or decreased of late years by the spread of railways and the opening up of communications. Is there any diminution in the tendency to hoard ? — We know that the deposits in the savings banks are increasing, and we know that capital owned by natives of India has been invested in cotton mills and other mills, and I should say that the tendency was for the habit of -hoarding to diminish ; but so far as regards the great mass of the people the effect has been quite inconsiderable. 1176. You will agree that this is a very serious question, because vdth the increased productive capa- city of the country they may hoard all the money in the world if they go on at the rate you speak of, You do not think that any of the suggestions which I have mentioned would diminish this tendency ?— Nothing I think will diminish it but time and good government. 1177. Turning from that to another subject, I have alluded to-day to the movements of prices in this country oscillating with the movements in the silver market. I think you have prepared a diagram iilus- trating that very well. Would you have any objection to put that in ? — I will put it in. (See Appendix V.) 1178. It gives the price of silver in European markets as compared with the general prices of com- modities in our markets for the last 25 years ? — If you will allow me I will explain how it was prepared. It gives the general prices according to the index numbers of " The Economist " for the 1st of January in each year, and the price of silver for the 1st of January of each year in the London market. 1179. The last question I would ask you is this. You have seen the tables prepared by Mr, Palgrave as regards the purchasing power of silver in India for the last 25 years. Do you agree in their being correct ? — I have not specially tested them, but there is no doubt, speaking generally, that prices of the ordinary commodities, of the ordinary articles of food, for instance, are now as low as they have been on the average of past years. 1180. (Sir T. Farrer^ You know how they were collected, do you not, the figures in those tables ? — I have a ceitain amount of information regarding them. 1181. And it is such as to lead you to think that they are generally correct ? — I think that they are sufficiently correct to give a good indication of the general course of prices. I should not like to say that they are correct in every individual instance. Mr. Giffen called attention to the great difference in the prices of Jowar, as shown at Surat and Ahmed- nagar, when he was examined the other day. I was not at the time able to explain the difference from Mr. D. M„ personal knowledge, but I have consulted a gentleman Barbour. who is familiar with those places, and the reason he gave was that Ahmednagar, when prices were very * ^®°- 1^^^- low, had no good means of export, while export from Surat by sea was easy and cheap. This was the case up to the year 1880, I think, when Ahmednagar was connected with the system of railways, and sinjie 1880 the difference in prices between Surat and Ahmed- nagar is much less than before. He also added that he found, from his experience in India, that any con- siderable import of grain from one place to another often had a very marked immediate effect on prices, and it did not follow because there was a con- siderable difference in price that a man could safely undertake a speculation in grain. That explains the particular point brought to notice by Mr. Giffen, the difference in piices in Surat and Ahmednagar; up to 1880 there was practically no good means of com- munication between the two places, and since 1880 the tendency has been for the prices in the two places to be equalised. 1182. And that rather confirms your notion that the tables may be generally relied on ? — As indicating the course of prices they may be generally relied on. 1183. In regard to this hoarding, do you think that these hoards are kept by the persons who make them. They are not lent out to local people, are they ? — They would not lend out a hoard. Very often a man has saved money and lends that out. 1184. But would that be included in what you call hoarding ? — No, I should not call that hoarding. 1185. You would call that in circulation? — Yes, in circulation. Of course the rapidity of circulation varies very much. 1186. But there is a great deal of local money- lending ? — There is a great deal of local money-lend- ing on a petty scale, but it is not always done in coin. A money-lender advances to a cultivator so much grain, and the understanding is that he is paid back in grain with a certain addition at harvest time. 1187. That mode of lending rather interferes with investments in public securities, in loans, does it not ? — Oh ! certainly, because the rate of interest obtained in that way is much higher. 1188. So that the persons disposed to invest, invest rather in these loans than they do in the public loans ? — Certainly. 1189. What belongs to these money lenders is something entirely different from the hoards of which you have. been speaking? — ¥"68, 1 call that different from the hoards. 1190. {Mr. Fremantle.) Can you form any estimate of the capacity of India for hoarding ; that is to say, what is likely to be the addition to the hoards yearly ? — I hg,ye thought of that, and I think it very much depends upon the abUity of India to purchase the precious metals. The desire of the people to possess gold and silver is very great indeed, but their means of paying for the two metals is limited. 1191. But their desire to hoard is only limited by their capacity to pay for the precious metals ? — Well, their desire for money is like that of other people. 1192. Could you give any estimate of the importa- tions of sovereigns into India ? — No, I could not ; but there is a considerable import of sovereigns, and always has been, I think, for many years. 1193. Do you think that the people who hoard have any marked preference for gold or silver? I think as they get wealthy they prefer gold. A wealthy man will prefer ornaments of gold for his family rather than silver, and the very poorest classes use ornaments made of some base metal, neither goM nor silver. There may be some sQver in it. It is very much a question of the position of the family as regards wealth. 1194. But the persons who hoard largely would naturally prefer gold ?— If they could afford it I should say they would. 1195. ySir T. Farrer.) The wealthier the country gets, unless there is some change, the more likely 62 Royal commission on gold and silver ; Mr. V. M. Sarbour. 8 Dec. 1886. they are to take gold?— I should say the wealthier they are the more likely they are to take gold. 1196. {Mr. Fremantle.) If the gold price of silver rose, would not there be a strong temptation to part with the silver and substitute gold in hoarding ?— I think that there would be some tendency in that direc- tion. Some people say that the fall in the gold price of silver has led to the larger hoarding of gold, and if so, and if the opposite took place, I suppose it would lead to less hoarding of gold, but I do not attach much importance to these speculations myself. I think that if the gold price of silver rose, there might perhaps be for a time an increased demand for gold. I do not think it would last. With reference to this matter, I may mention that silver is rather more convenient than gold for hoarding, so long as it is the standard and the currency of the country. That is, if a native of India hoards rupees, they are more easily made use of in case of necessity than gold would be if he had hoarded that metal, because he would have to sell the gold, while he can put the rupees in circulation at once. 1197. But if that superiority on the part of silver were removed, gold might be hoarded in larger quan- tities than at present ? — ^By making the standard gold, or by making gold a legal tender as well as silver, I think the tendency to hoard gold rather than silver would be increased. I think that could be the ten- dency, as hoarded gold could be more easily thrown into circulation than at present, and would therefore be more convenient as a reserve. Adjourned till to-morrow. Sixth Day. Thursday, 9th December 1886. PRESENT : The Right Hon. A. J. BALPOUE, M.P., the CBtiiRMAN, presiding. Mr. D. M. Barbour. Mr. J. W. Birch. Mr. L. L. Cohen, M.P. Sir T. H. Farrer, Bart. Mr. C. W. Tremantlb, C.B. Mr. W. H. Houldswobth, M.P. Mr. &E0. H. Murray, Secretary. Prof. Roberts Austen, F.R.S- 9 Dee. 1886. Professor Roberts Austen, F.R.S., examined. 1198. {The Chairman.) I think you are Chemist and Assayer to the Mint, Fellow of the Royal Society and Professor of Metallurgy in the Royal School of Mines ?— Yes. 1199. You are acquainted, are you not, with the general scope of this part of the inquiry upon which the Commission are engaged ? — ^Yes. 1200. And you have drawn up a paper, which I have read, dealing with the details of the cost of producing silver by the various methods in use ? — ^Yes. 1201. Perhaps you will be good enough to put in the paper with which you have furnished me. It will be printed in the Appendix to the evidence, and I will try and get out in the course of examination any illus- trative facts and arguments which you may be able to lay before the Commission ? — If it is printed I should like to supplement it by additional details, if I may be permitted to do so. (;S'ee Appendix VI.) 1202. Certainly. You deal here with four processes by which silver is produced from the state in which it occurs in nature, and added to the stock of the precious metals of the world ? — Yes. 1203. I suppose it would be convenient to divide those methods from our point of view into those in which silver is produced as a bye product, and those in which it is the real object of the industry, whatever it may be ? — Certainly. 1 204. Evidently there is the greatest difference in the cost of production, according as it is a bye product which perhaps, strictly speaking, may cost nothing, or according to whether it is the main product, in which case, of course, the miners would require at least the ordinary commercial profit upon their industry ? — Exactly. 1205. Your first section deals with silver as it is obtained in the refining of native gold, and, without going into details, the conclusion you come to is that the cost of silver by that process may be esti- mated at the official chai'ge which the American Mints make for extracting silver from gold which is sent to them ? — Yes. 1206. Namely 2^d. an ounce ? — I cannot see that there is any incidental charge other than this one, namely, the cost of parting and refining. 1207. Is it necessary before the gold is used for currency or other purposes that the silver should be extracted from it ? — It is not absolutely necessary. In some cases a small per-centage of silver might be allowed to remain, but in practice it is always parted before gold goes to the Mint. 1208. Supposing the silver was absolutely worthless, would the owners of the gold still pay this 2Jrf. per ounce in order to get rid of the silver ? — No, not necessarily, but as a matter of fact it is possible to treat argentiferous gold and auriferous silver together in the same operation, and the result is that silver is always extracted. 1209. However, practically, I suppose it would be admitted that, in the first place, the amount of silver so obtained bears such a small proportion to the total silver produced in the world that it may be neglected ? — I think so. 1210. And in the second place in an investigation which is directed towards discovering the causes which alter the relative values of the two metals, gold and silver, we need not take into account a method of production which involves, as one of its results, that for every 5s. worth of silver an enormously larger value of gold shall be at the same time produced. I hope I have made that question clear ? — Perfectly clear. This amount certainly may be ignored in the relative estimate. 1211. It is clear that however much you may pro- duce in this way you will not depreciate silver in rela- tion to gold, but rather the contrary ? — Yes. It is merely placed in the table as a means of accounting for that amount of silver, in order to complete the evidence so far as may be possible. 1212. I then come to the second process with which you deal, according to which silver is obtained from lead. I understand your method of investigation to be this, you first take the lead ores which are richest MINUTES OF EVIDENCE. 63 in silver, which are those produced in America?— 1213. You calculate the cost of mining a certaip quantity of lead. You then calculate the amount for which that lead would sell in the Chicago market ;and then you find out how much silver must be produced from that lead in order to make the transaction one which would involve no loss to the producer ? — Pre- cisely. 1214. And the result of your calculation is that taking one mine with another, taking the average, that IS to say, between a rich and a poor mine, both being fairly typical cases, you find that 95 ounces of silver must be found on the average in each ton of lead as a minimum, in order to prevent the transaction being one of loss to the producer ? — [ do. 1215. But as a matter of fact, the mines in question instead of producing 95 ounces produce about 200 ounces of silver, roughly speaking ? — ^'es. The small amount of gold they contain being counted for the sake of convenience as silver in this particular case. 1216. So that, without taking into account minute corrections, you may say that about twice as much silver per ton of lead is produced in these American mines as is required to make the transaction one involv- ing no loss ? — That is the conclusion to which I have arrived. 1217. And as a direct arithmetical deduction from that you conclude that silver is produced in the American lead mines at the rate of about 2s. an ounce ? —I do. 1215;. That, of course, assumes that silver is worth in the open market about 4s. an ounce ? — 4,e. an ounce. 1219. In considering these American mines, it is often hard to say, I suppose, whether silver is the bye product of lead, or lead is the bye product of silver. It is a kind of middls case between that of silver produced from gold which we have just considered and that of silver ores which we are about to consider? — Well, it would be very difficult to divide the American mines which produce lead which do pay from those which do not, and this is about a mean ; it may at least be taken as a mean between the two. 1220. I suppose that if the lead did not contain silver the lead ores would not be worked in these mines ? — In some cases, certainly not, in other cases it would. 1221. And if the lead was unsaleable the mines would hardly be worth working for the silver alone ? — Certainly not. 1222. So that you cannot say, speaking broadly, that load is a bye product of silver, or silver a bye product of lead ? — No. 1223. They must be considered together ? — And that very greatly increases the difficulty of taking account of the silver coming from such sources. 1224. In order to make it perfectly clear by what method of deduction you arrive at the conclusion that in these lead mines in America silver is produced at about 2s. an ounce, let me recapitulate what I under- stand to be your statement. You prove, in the first place, that if about 100 ounces of silver go to each ton of lead it will not' be a loss to extract that lead from the mines. But as a mattei' of fact not 100 but 200 ounces of silver exist in each ton of lead, there- fore, if silver be worth 4s. an ounce it is quite clear that the silver is produced at half that cost ; in other words at 2s. ? — That is my conclusion. 1225. {Mr. Cohen.) That is the cost of producing the silver, the actual expenses ; but you have not allowed anything for capital, have you ? You are speaking of the actual working expenses ? — The actual money out of pocket, if I may use such an expres- sion in this relation. 1226. (Chairman.) Turning then from the American mines to the European mines, the richness in silver of the European lead mines is considerably less than that of the American mines ; is that not so ? — Un- doubtedly. o 24358. 9 Deo. 1886. 1227. In the. United Kingdom instead of 200 ounces Prof. Roberts per ton the amount is only about eight or nine ounces Austen, F.R.S, per ton ; is that not so ? — ^Yes. 1228. In Spain instead of being 200 ounces per ton as in America, it is about 36 ounces ? — Yes, but some of the rich ore is exported from Spain. 1229. In Italy it is about 67 ounces a ton? — Yes. 1230. And I think you have not given us the precise figures for Austria and Germany ? — No, I have not. The question there is complicated by the importation of foreign ores. It is rather difficult to say what the pei'-centage of the precious metal in the native ores would be. 1231. But on the whole the . conclusion you have arrived at is, that though these ores are so much poorer than the United States ores, nevertheless the cheapness of labour, and the nearness of the mines to the maiket, almost make up or quite make up for these disadvantages ?— ^I do. 1232. And you are of opinion that 2s. an ovmce represents the cost of production in Europe very much as it does in the United States of America? — I am. 1233. But however that may be, the European pro- duction is very little more than one-third of that which comes from the United States from lead ? — Yes, ujbout 8,000,000 ounces from the desilverisation of lead. 1234. Your third section deals with the method of obtaining silver from copper ? — It does. 1235. But I understand that that process dififers from the process of obtaining it from lead inasmuch as the silver in this case is a true bye product ? — In nearly all cases. 1236. And that it would not be worth while work- ing the copper in order to get the silver ? — I may safely say that this would seldom occur. 1237. And the only question is, not whether it is worth while working the copper mines to obtain the copper, but whether having obtained the copper it is worth going to the cost of extracting the silver frcm it ? — Precisely. 1238. And in a large number of cases it is not so worth while. Is that not the conclusion to which you have arrived ? — It is certainly true of a large propor- tion of the copper ore smelted in Swansea. It contains silver, but it does not pay to extract the silver. Many works altogether avoid treating argentiferous ore. 1239. Then the cost of obtaining silver from copper is simply the cost of desilverismg the copper ? — Exactly. 1240. You do not include in the cost the expense of extracting the copper from the mine ? No. The expense contemplated is that incidental to the desilveri- sation of the copper. 1241. You consider the silver is so purely a bye product of the copper, that the only cost you have to take into account is the cost of extracting it from the copper after the copper has been taken from the ore ? — Yes, essentially desilverisation charges. 1242. And on that estimate you make out that the mean cost of desilverising copper is about Is. lid. per ounce of silver ? — ^Yes, I do. The details of that estimate of cost are rather complicated. The Claudet process, for instance, produces silver at a very cheap rate ; but that does not refer to a very large quantity. The silver extracted by that process only costs about 5d. for the ounce. 1243. But that process is not applied to copper unless the copper happens to be very rich in silver ; is that so? — The process is applied usually to the residues resulting from certain chemical operations, so that it is an incidental amount rather than an important amount. 1244. So that the amount of silver-bearing copper to which this process can be applied is a very small proportion of the whole copper which is desilverised ? — It is. 1245. You do not pretend, therefore, that this estimate of Is. lid. is more than a rough approxima- tion ?— No. K 64 ROYAL COMMISSION ON GOLD AND SILVBE : 9 Dec. 1886. :Prof. Sobetts 1246. But as a rough approximation, you think that Austen, F.R.S. q^ ^he whole it may be relied upon ? — I believe it to be fairly accurate, but I am of opinion that this is the most difficult section to estimate with accuracy. 1247. On the other hand it is one comparatively un - important, representing not quite one-twelfth of the total amount of the silver produced ? — Exactly. 1248. We now come to section 4, which deals with the most important of all the sources from which silver is obtained, namely silver ore. I suppose you would admit that there is an extraordinary variety in the fertility and ease of working the various mines in America from! which these silver ores are chiefly extracted ? — The details of the processes are very varied, but the processes themselves do not differ very much. 1249. I was rather referring to the fertility of the mines than to the processes of treating the ore after it comes from the mines ? — The per-centage of precious metals varies very greatly. 1250. And the depth of mine ? — Very greatly. 1251. And the nearness to the markets varies very greatly ? — Yes. 1252. So that when you talk of the fertility of the mines of America, it is very much like talking of the fertility of the land in England ; of course it varies very much from one district to another ? — Yes. 1253. And all you can do is to attempt a rough approximation, an estimate ? — Certainly. 1254. Now having to deal with such a variety of cases, what has bean your method of arriving at an average ? — ^You have taken, have you not, one special mine as a typical example, " The Bonanza King " ? — A.S an example of a deep mine, a mine 520 feet deep. 1255. Then would that represent what I am describing as the mine of least fertility, by which 1 do not mean the mine producing the least rich ores, but the mine in which the cost of extracting a certain amount of silver in the rough was the greatest ? — Well it appeared to me to be the best mine concerning which I could obtain evidence as to cost. I should not like to say that it was an ideal mine for my pur- pose, but I was unable to get other details. 1256. Do you imagine that mines of greater diffi- culty of working still pay ? — ^No doubt ; but this is a fairly typical case. But I think it is fair to say that mines of greater difficulty would pay. 1257. And on one side, therefore, of this mine there is a large number of mines more difficult to work, and on the other side there is a large number of mines less difficult to work ? — Certainly ; many less difficult and some more difficult. 1258. So that this does not represent the average mine ; it is more towards the difficult end of the scale ? — It approaches the difficult end of the scale probably on account of its depth and the difficulty of haulage. 1259. But you have compared the results obtained by comparison of the working of this mine with that of a large number of other mines mentioned by the Director of the United States Mint ? — I have. 1260. And the conclusion you have come to is based on a comparison of all these different examples ? —Yes. 1261. You say that it would appear reasonable to accept the results deduced from the working of this mine as representing approximately the average rich- ness of the ore treated and the cost of mining and milling ? — Yes ; the cost of rnining and milling, but not the average richness. 1262. That is not perfectly consistent is it with the statement you have just made, that this mine was nearer the more difficult end of the scale ? — T did not mean to imply that I thought it was not fairly typical, but, on the whole, I should be inclined to say that it leant towards the difficult rather than the easy side. 1263. But on the whole you are of opinion that it does not so far differ from the average as to be mis- leading if taken as a specimen mine ? — It would, I think, in no way vitiate the result. 1264. If then it is to be so taken as a typical mine we may conclude that the cost of extracting silver from an American silver mine amounts to about Is. an ounce ? — Yes. 1265. (Sir T. Farrer.) That is the cost on the spot, I suppose, not after bringing it to the market ? — It does not include transport in this case. 1266. {The Chairman.) But the transport of the precious metals is not a very heavy item I imagine, is it ? — No ; not when the metal is acfualJy exported in the state of ingots. 1267. {Sir T. Farrer^ And is this ore extracted on the spot ? — Yes, not far off, about two miles from the mine. 1268. ( The Chairman?) I suppose the amount of silver extracted from silver mines in Mexico and South America is not now of very great relative im- portance ? — I have given in table I the amount of silver extracted in Mexico, and I have taken the year 1883 not because these were really the latest figures, but because it referred more nearly to a period for which I could obtain data as to cost. 1269. But in that table you have simply given the gross produce of Mexico and South America without distinguishing whether the silver comgs from silver mines or from lead mines ? — In the case of Mexico it would be mainly from silver mines. 1270. So that the amount is really very important? — Exactly, and the treatment would be mainly a merourial one, as distinguished from lead treatment. 1271. Is the method of getting silver out of silver ore always a mercurial treatment ? — No. So called " wet " methods are increasing in importance to a very large extent in America ; but the wet method hardly applies to Mexico. 1272. Is that because the Mexicans have not had the enterprise to adopt the latest improvement in mining? — Water and fuel are very scarce, and the Mexican ores lend themselves better to mercurial treatment than certain ores in America which may be more suitably treated by wet methods. 1273. Is the wet method much cheaper than the mercurial method ? — ^No ; on the whole I am inclined to think it is not, but very few details have been published. 1274. I suppose it depends on the amount of water on the spot and on the nature of the ore ? — On the nature of the ore essentially. You would have to go through certain preliminary operations in order to convert ore suitable for treatment by mercury into ore that could be treated advantageously by a wet method. 1275. 1'he general conclusion you have arrived at therefore is that the mean cost by all these methods ■ amounts to about \s. 8d. ? — I do, but I should like to add that I think it is the mean of successful mining and metallurgy. 1276. You have arrived . at the mean simply by taking the mean of the cost of the four operations ? Yes. 1277. That is to say the mean of 2iJ., 2s., Is. Ud., and Is. 5d. ? — Multiplying by the amounts which I have assumed to be produced by the respective processes. 1278. In getting your average you have taken notice not merely of the cost entailed by each process, but also of the relative amount of silver which each process produces ? — I have. Always assuming that it is justifiable to refer to the total amount produced, the actual cost adopted for each particular operation. 1279. Would you explain that qualification? — In the sense that the 2s., for instance, might not apply to the whole of the 30,000,000 ounces included in the second section, but I have assumed that it is fair to calculate that as the mean cost and multiply the total amount by it. 1280. In fact, the Is. 8d. is an average of certain averages ? — Certainly. 1281. Now I think it is very important that you should explain to the Commission exactly what you mean by the cost of production. There is a state- ment that I find on the first page of your memorandum to the effect that the business of silvei- minino- is one MINUTES OF EVIDENCE. 65 of uncertainty and risk, and taking one year with another the expenses no doubt equal, if they do not exceed, the production. You will observe that there IS a certain apparent discrepancy between that state- ment made on the authority, I think, of Dr. Linder- man, and the conclusion at which you arrived, according to which the mean cost of producing silver is very decidedly less than one half of the value of silver eveu at the present depressed price of silver? — I believe that that mean cost of production, as given in the concluding paragraph of the paper, relates to successful mining and metallurgy, because in the case of unsuccessful works tlie details as to cost are not published, and it is very diHicult to' get at an estimate in the absence of such published data. 1282. If in any other manufacturing business you found that the cost at which the product could be sold was very decidedly more than twice what that product cost the manufacturer, you would immediately anti- cipate that a vast amount of capital would flow to that employment, that the production would enormously increase, and that that process of increased pro- duction would go on until the price fell to such a point that only the ordinary market profit was ob- tained ? — I should. 1283. Now what I want to get at is the reason which, in your opinion, prevents that going on at this moment in the silver industry ? Is it because, making a survey of the whole industry, it really is not a safe and profitable industry, which would appear to be Dr. Lindermaii's opinion, or is it that the people who have these mines practically find themselves in pos- session-of what economists would call a natural mono- poly ? I do not know that I made that clear, it is rather an abstract point, but it is the root of the whole question really ? — I quite understand, i do not know whether my reply will fully answer it. My impression is that as improved processes are introduced, and as more accurate knowledge is brought to bear on mining operations, you would approach an ideal price;, and that at present a great deal of money is wasted in ignorant search, badly directed search, and in the adoption of ill-advised processes. 1284. There .are observers who maintain that all the precious metals are produced at a loss ? — Especially Del Mar. 1285. Do you concur with that opinion ? — The con- siderations set forth in the early part of my memorandum make me reluctant to express an opinion on that point. 1286. Of course I do not wish to go into the specu- lative question raised by Mr. Bagehot, though I would ask you whether it is not your opinion that the fac;t that so much silver is a bye product and is not the main object of the industry which produces it, does not to a certain extent vitiate the broad and known doctrine which Mr. Bagehot very accurately lays down ? — My opinion is that on the whole the produc- ■ tiou of silver is profitable. My attention has been directed to a question asked of Mr. Griffen, No. 620, and I may mention that I entirely agree with him. 1287. Would you read out the question ? — You asked him, " Then, there are two very important points " connected with this branch of our inquiry which I " believe you are not prepared to give us any infor- " mation upon. One is the total of the precious " metals in circulation in the world available for the " world's use, and the other is as to the cost of pro- " duction of the precious metals." His answer was : " As to the cost of production I can tell you nothing, " and of course the one difficulty I should have in " the matter would be that if I were making the " inquiries I should like to know not merely the cost " of production in a sort of average way, but the " facts as to the point to which you called the atten- " tion of witnesses yesterday, viz., the cost of production " at which certain mines would stop, and matters of " that kind. And then with reference to the cost of " production also it must be considered that that is a " thing which of itself may be continually changing " just as all other things arc changing. If you have " a rise in wages in one locality, that raises the cost of " production, and if you have a fall in wages, the cost Prof. Roberts " may fall; and you have always to consider that the ^'usten,F.ii.S. " whole thing is changing, — you may have a mine .„ " " which is always losing one day, and if you put a [ ' " better manager over it, it may be making a profit.'' I entirely concur in that answei-, and I am fully conscious of the difficulty, but I think I have arrived at a probable approximation to the cost of production in the case of the successful mining and metallurgy of silver. 1288. Then if Dr. Linderman's observations be just, it is not because mining operations in actual work are otherwise than profitable, but because such a vast amount of money is wasted in the preliminary stages before you can say that the mine is a going concern ? — Yes, and in the ill-advised search for the precious metals. 1289. In this estmiated average cost of Is. 8d. you make no allowance I understand for interest on capital ? —No. 1290. Or the cost of buying the land?— No. I have been quite unable to arrive at any conclusion on that point. 1291. You can give no estimate as to the prelimi- nary charges ? — I could not attempt to make any estimate, because money may be given for a mine, and that may be wasted, and then another company may come to work the mine, and you cannot say what ha» become of the original cost at all. It is difficult to say how far the initial cost should be brought to account at all. 1292. And I suppose the amount of capital em- ployed in the mine must vary according to the depth to which you would have to go before you reached the rich ore, and according to other local circumstances, about which no geneial rule can be laid down ? — Pre- cisely ; and again according to the particular favour with which the mine is viewed in commercial circles. 1293. Then apart from the cost of sinking the shaft and other expenditure of that kind, is the actual capital required for carrying on a mine very large in proportion to the output? — No, not when the actual works intended to open up the mine are complete and working satisfactorily. 1294. To put the same question in another form, can you give us any estimate of the relation that what economists call the fixed capital bears to the circula- ting capital in working a mine ? — Not at the moment. That is a question rather for the miner than the metallurgist, and 1 have examined this mainly from the metallurgist's point of view. 1295. But you will observe it has a very important bearing upon your conclusions, because wheu you say that it costs so much to produce silver, I suppose you include a fair interest on the circulating capital, that is to say, on the wages and so on ? — I have in- cluded the mining charges, 1296. But by the mining charges you do not mean charges of fixed capital, but current exoenditure i* — Yes. 1297. (Sir T. Farrer.) When you say fixed capital, do you mean steam engines and boring ? — All fixed plant. Boring for mere exploration is not included. 1298. ( The Chairmati.) That would be included in my calculation ; not mere exploration, not mere pro- specting, is that not the technical term ? — Prospecting generally refers to a new district. 1299. {Mr. Howldstoorth.) Did I understand you to say that you take interest as one of those charges ? — No, not interest on fixed capital. Such interest as would apply to capital employed in plant connected with the mine or works should be included, and a fair allowance is made for it. 1300. {Mr. Birch) That is in arriving at the prices you have stated ? — Precisely. 1301. {The Chairman.) But how is it under those circumstances that there is not an enormous augmen- tation in the production of silver if you can sell it at 4«. the ounce, and if you can produce it out of the silver mines at l.s. 5c?. uuder class 1 ? You would naturally expect that a trade so obviously profitable K 2 66 UOYAL COMMISSION ON GOLD AND SILVER: Prof. Roberts Austen,F.R.S. 9 Dec. 1886. would be one to which an enormous amount of capital would flow, and that that would lead to an enormous augmentation of production ? — Well, I am afraid I can add nothing on this point to my answer that my figures only I'elate to successful operations, not to failures. 1302. You think it is not also due to the fact that practically the happy possessors of rich silver mines are really monopolists ?— Thai is an economic ques- tion. I can hardly answer that question without giving it more attention. 1303. (Mr. Fremantlc.) But is it not the case that an enormous amount of capital is employed, and that the return for that capital is comparatively small ? —Yes. 1304. {Mr. Barbour.) Is it not the case that the amount of silver ore from successful mines is limited i —Yes. 1305. {Mr. Cohen.) You cannot expand the silver mining industry unlimited ly ; it is limited by the number of mines discovered ? — Yes. 1306. ( The Chqirman.) In that case the happy owners of the mines are practically in the possession of a monopoly ? — In one sense tiiey are. 1307. {Mr. Cohen.) In the sense that the supply is limited ? — Yes. You cannot expand it indefinitely. 1308. {The Chairman^ Let me put the case in this way. If coal were suddenly to double in valuo you would practically have an enormous infiux of capital into the mining industry. There is no limit to the number-of mines you could open and the amount of coal you could raise for a certain period ? — The limits would be very wide. 1309. But silver mining, I understand, is not in that condition ?— Certainly not ; it diSers very widely from the deposits of coal or even of ironstone, which are bedded as distinguished from vein deposits. 1310. Those who have the luck to find mines make a very big profit, but practically their profit is not inter- fered with by e.\;cessive production simply because they have a practical monopoly of the silver mines ? — Yes, in that sense a limited stock. 1311. ('Sir T. Farrer?) And some persons have made vfjry great fortunes by silver mines ? — Yes ; undoubtedly. 1312. {The Chairman.) So that if we could imagine that silver doubkd in value, tbe amount of silver raised would not neoessaril)' augment in anything like that proportion ? — No, not necessarily. 1313. The profits of those who own silver mines would increase enormously .' — Yes. 1314. But practically the amount of silver thrown upon the markets of the world would not probably be very greatly increased ? — Possibly not, but the question is very complicated. 1315. {Sir T. Faner.) Is it the case that -there area number of silver mines not being worked at present which, if the price of silver were doubled, would come into operation ? — Yes ; I have no diita as to the number of mines, but no doubt there are very many in the Western States. 1316. {The Chairman.) But still you are of opinion that thougli new mines would undoubtedly be v/orked which are now neglected, the quantity produced from them would not be very important ?— They would be essentially poorer mines that, owing to unfavourable circumstances, are now not working. A mine in California occurs to nie from which ore containing 50 ounces to the ton is simply stored, while richer ore, up to 100 ounces, is worked. In such a case the additional quantity produced would probably be very important. 1317. {Mr. Cohen.) Of course that does not include new discoveries ? — By no means. 1318. ( The Chairman.) I do not know whether as a metallurgist you have directed your attention to the probability of large new discoveries being made ? — No. That again is rather a question for the miner than the metallurgist. I think it is possible that there may be great discoveries in the Western States ; there is much speculation in the San Francisco market at this very period, based on rumours the truth of which I have no means of ascertaining, that the Comstock is open again. 1319. {Sir T. Farrer.) Is there any knowledge existing as to the comparative probability of the in- crease in the production of gold, and the increase in the production of silver ? — Not that I am aware of. I am of opinion that there will be a large supply of gold from Africa, but I do not know whether that beara on your question. 1320. {The Chairman.) Is that a question on which you have made independent investigations ? — No, not for the purpose of this inquiry. 132). {Mr. Barbour.) These successful silver mines, as a rule, after a time get worked out ? — Yes. 1322. So that the whole capital spent on them would have to be spread over the production ? — Precisely. 1323. {Mr. Cohen.) I notice that you estimate the production of silver at 88,000,000 ounces. Have you seen this^book of Mr. Sauerbeck ? — Yes ; I have. I have taken the amount of silver produced in 18S3 merely because it refers to a period for which I could obtain data as to cost of production. 1324. You know Mr. Soetbeer's figures ? — I know them, of course. » 1325. He estimates tbe production for tho same year at 101,000,000 ounces ? — The figures I. give are taken from the Report of the Director of the American Mint ; they represent fine silver, and nearly correspond witk Mr. Soetbeer's figures expressing standard silver. 1326. You estimate the cost of production at Is. 6d. an ounce, the average throughout the world. Mr. Pixley, when hy gave evidence the other day, esti- mated it at 3s. 6d. I suppose the difference allows for interest on capital, those charges that the Chairman has alludeil to ? — My impression is that Mr. Pixley refers only lo some limited areas in Mexico. 1327. {The Chairman.) Doyouthinkyou could frame a document on parallel lines with this dealing with gold ? — I will do anything the Commission wish me to do. In fact I had begun such an inquiry already. It will be more difficult because the mining of gold is complicated, and the metallurgy comparatively simple, but I'will do whatever I can. 1328. {Mr. CoJien.) You have brought out facts which are very important as regards the cost of the production of siver, and as regards the field of the production of silver, both of which have an important bearing on our inquiry, and the same principles would apply to gold ? — Yes. They would to some extent. 1329. {The Chairman.) Undoubtedly it is most important for our investigation that we should have the facts as regards gold ? — I might just say, as indi- cating the kind of difficulty to be encountered, that, in the case of gold washed out of gravel, one part in' a million will pay to extract. If on the other hand hard quarfz has to be crushed a rich deposit may be un- profitable. The cost depends so much on the difficulties attending the mining and the mechanical preparation of the ore. 1330. But is not the process of washing one which is only possible in the very early discoveries of gold .' — By no means. 1331. After you have don^ the surface washing you have to resort to quartz ? — Not if you take the case of " bydraulicing," as (he Americans call it in California, where you have huge masses of earth and rock washed down by hydraulic power. In such cases a very small per-centage of gold will pay to extract. 1332. {Mr. FVemantk.) If you would look at page 3 of your memorandum, you will see that in the second paragraph you mention the cost of the Horn Silver Mining Company in Utah. I think it would be desirable to tell us what the annual outturn of that Company was? — Speaking more or less from memory, that is a very important mining company, and their outturn amounted to 1,400,000 ounces • at any rate, these are very large and important works. 1333. And at the Eureka Consolidated Mining Com- pany which is alluded to shortly afterwards, was that a large amount ? — That was not so important as the MINUTES OV EVIDENCE. 67 Other, but it dealt with some 500,000 ounces of silver containing gold. 1334. Have you seen any statistics or papers pre- pared by Mr. Norman on the subject of the cost of production ?— Yes ; I have seen a great number of papers. Mr. Norman has devoted an immense amount of time to the investigation, but for the pur- poses of this inquiry I cannot quite accept his figures, because he has not in my opinion taken the averages quite correctly. Comparing the yields of gold and silver ores he gets at a ratio of J 34 parts of silver to one of gold from calculations of his own, and a proportion of 63 parts of silver to one of gold a*i the result of information obtained from Mr. Buchanan, President of the Colorado Silver Alliance. 1335. What would be the deduction that you would draw from the whole consideration of the subject of the production of silver ? — It seems to me safe to conclude that as silver falls in price, and as the less successful, less well managed mines are closed, you would tend to approach more nearly to these somewhat ideal prices. Prof. Bobertt Austen, F.B.S. Dec. 1886. The witness withdrew. Mr. J. W. Birch examined. 1336. ( The Chairman.) A good many questions have come up in the course of examination of other wit- nesses en which, as an ex-Governor of the Bank of England, you can give us information ; and the first question I should like to ask you relates to the economy of the precious metals through an extension of banking facilities. Could you tell us anything either in addi- tion to or as qualifying some evidence given by Mr. Griffen on that subject, with regard to the extension of banking facilities ? — ^A return which 1 produce shows .1 great extension of banks within the last 20 years. This extension has chiefly been in the direction of branches and sub-branches in districts not formerly occupied. In 1865 the total number of branch offices in England, Scotland, Ireland, and the Channel Islands was 2,417 ; in 1885 it was 3,886, showing an increase of 1,469 ; and banking facilities have thus been brought to persons of moderate means, small shopkeepers, far- mers, and others whose transactions were formerly carried out in cash. Thus, small cheques take the place of coin in numerous instances. I notice that wiiere my own bailiff formerly paid in money for sheep or produce he now brings a good many small cheques. The system of country clearing amongst bankers facilitates the use of cheques for the trans- mission of small amounts. Where the recipients keep banking accounts these return quickly, but where ttiey do not, the cheque is often paid away again, and may be used instead of coin in more than one trans- action. Probably ttie use of postal orders, in itself a species of banking, to some extent also economises the use of coin. These notes have now attained iin issue of about 100,000 a day. Some time ago the Bank of England obtained a very large economy of notes by the establishment of a cotton clearing in Liverpool. The economy in notes was something like lo0,000Z. a week. 1337. I suppose that some of these branch banks supply banking facilities in towns where banking facilities already existed adequate to the needs of the inhabitants ; in other words, that it is a competition which may affect the profits of banks, but which does not affect any saving in currency ? — It saves to this extent, that formerly in country shops they kept a certain amount in their tills, but now they pay it at once into the bank if there is one. In some places tliey have a bank open once, twice, or three times a week, and in others they have established a regular branch. The money in the neighbourhood is thus drawn in and then it is transmitted to the head estab- lishment in London, and goes immediately into employ- ment. 1338. But let us suppose that in some country town there is already established a branch of the London and Westminster Bank, and that the London and County Bank subsequently put a branch of their own there ; that may affect the profits of the two banks respectively, but it does not add materially to the bank- ing facilities of the community in that town ?— No ; therefore I am referring more especially to small places where there were formerly no banks at all. Now you have these sub-branches opening everywhere, all over the country. 1339. But this increase of 1,469 banks is not solely in places where there were no banking facilities before ? — Certainly not. 1340. Some of them are in places where banks were previously established ? — Yes ; and in such places the effect would to a certain extent be, as you said, to draw business from the one to the other, stimulate opposition, and at the same time encourage the de- velopment of banking. 1341. Are you of opinion that the limit has now been reached, or nearly reached, of the extension of banking facilities ? — I never like to prophesy. I think it is impossible to say. Various means are cropping up for economising money, and a great deal is econo- mised by simple transfer; you cannot tell to what extent. 1342. Y^ou heard a witness yesterday explain to us that, in his opinion, telegraphic transfers saved the use of currency less than bills of exchange ? — What he stated, I think, was that these telegraphic transfers obliged people to keep larger balances than they kept formerly. That was the commercial way in which he put it, and I called his attention to the fact that people do not keep their money in their tUls, and that they keep it generally vsdth brokers or bankers at what we call " at call." When a party has advice of a telegraphic transfer, he immediately calls in the sum requisite, and passes it to his account at his bankers to meet the payment. The money so paid in passes again into use, and at the end of the day the operations are balanced. 1343. But still you would admit that the witness was accurate when he said that a bill of exchalige requires no ciish to back it, but that a telegr.aphic transfer does. Whether that cash be " at call " or not, it must be there ? — No, I ,do not think so, because whether a bill has a month to run or three months to run, its day of payment arrives just the same as with the transfer ; it is only a payment deferred, for which provision has to be made. It operates in another way, that there are not so many bills offering to discount as there were before. 1344. Do you think that in great commercial cities any further saving of coin is possible ? — This depends upon various circumstances. 1345. So that the whole saving that we must look to in England consists in the extension to the pro- vinces of a machinery already used in London, Liver- pool, and elsewhere ? — There appears to be an extra- ordinarily small amount of coin current in all our large towns compared with the large sum of our operations. Hardly anybody carries any considerable amount of money in their pockets. If you look round the table we shall probably be found with very little cash in our pockets because we have got our cheque books by which we can draw what we want. 1346. And that process of economising coin can go practically no further than it has already gone ? — You cannot tell. I think we see year by year that the economising has gone on increasing on a par with the increase of the population. 1347. I do not know whether you have any in- formation which you could give us with regard to the extension of banking facilities in other countries than England ? — No, not sufficiently accurate for public Mr. J. W. Hirch. 68 ROTAL COMMISSION ON GOLD AND SILVEK : Mr. J. W, evidence ; but between this and wben we meet again Birch. J gjjg^ii p^t ^ijat in training to see what I can do. qoITTsse It is a very complicated inquiry. __ 1348. Have you any information that you i,ouH give us as to the total stock of gold in this country in the form of currency?— Various estimates, you know, have been made from time to time. Mr. Miller, a former chief cashier of the Bank of England, made inquiries some years ago, and the late Professor Jevons subsequently made an estimate, but I think we ought to tr} and get further information on this head. It is very difficult to arrive at any accu- rate information, but possibly an approximate estimate might be arrived at through information at the various banks. At all events an attempt might be made in the same way as Dr. Soetbeer sought informa- tion ; and as regards England we have more command over the sources of information than he had, and we should not rest content without an attempt. ^ The Bankers' Institute being in correspondence with all the bankers in the kingdom might lend valuable assistance, and I produce a letter I have received from the president, Mr. Tritton, tendering the services of the institution. 1349. You are aware that one of the points brought very prominently before the attention of the Commis- sion is the drain made upon the gold resources of the world by the alteration of the Italian coinage from a silver to a gold standard. In order to carry out that operation gold necessarily poured into Italy betweea the years 1881 and 1883. Have you any information to give us as to the source from which this gold was derived ? — ^Yes ; I produce a statement which was fur- nished to me by Messrs. Harabro, the contractors for the loan, showing the form in which the gold was eupplied, and from whence it came. (See Appendix.) 1350. Can you tell us in a few words the sources from which it came? — 104,000,000 lire came from England; Italy itself furnished 105,000,000 lire ; the greater portion apparently from coin, and only a small proportion of new gold. J351. Are you of opinion that ihe amount that came from Italy was drawn from hoards ? — I should think so to a great extent. 1352. But you have no evidence of that? — No absolute evidence. 1353. The rest of it was drawn simply from the gold circulation of other countries ? — Principally from the gold circulation of other countries. I see that Australia only supplied about 10,000,000 of lire. 1354. Have you any information of a corresponding kind to give us with regard to Germcny ? — 'No ; but from inquiries I have made amongst men who ought to know something about it, they seem to be of opinion that about two- thirds of that gold was from French hoards ; and in illustration of that I heard this of one of the leading French bankers, who at the time of the siege of Paris left Paris to go and look at his estate in the neighbourhood. He went up to one of the peasants and told him that he was just come out to look after affairs, that he was very anxious to pay his people their wages, but he had no money disposal under the circumstances. The peasant said : " If 40,000 " francs are any good to you I have got them in a " stocking under my bed, and I will go and fetch " them," and he went and fetched them, and they were in gold coin. The French by their system of issuing rentes at what appeared to be a low price, and giving the advantage to people who applied for five franc rentes, attracted these hoards, and these people rushed in with thek money and got the allotments partly with a view to obtain the premium. I think a great deal came in in that way. 1365. But there was no special advantage given to the owners of hoards by the proceedings of the French Government? — Yes. These hoards are generally held by small people all over the country, and the French Government gave to everybody who sub- scribed for five franc rentes in preference to those who subscribed for 100. l-36(i. You will notice that the point is one of vital importance to our inquiry, because one of the points strongly brought before us is that the appreciation of gold is very largely due to the strain made upon the gold resources of the world by the introduction of a gold currency into Germany ; but if two-thirds of ihat currency were drawn from hoards, or in other words practically came from an entirely fresh supply, that argument to a great extent falls to the ground ? —Yes. 1357. Could you therefore put us in the way of getting authenuc evidence or further evidence on that point ? — Well, I will do my best. 1358. Then without having made. any very close investigation yourself o;i the point, you are still con- vinced, after conversing with competent authorities, that more than one half of the 80,000,000/. required for Germany was drawn from hoards, and not from the circulation of the world ? — Well, as far as the circulation of the hoards goes, it was cash, and it would appear to be circulation, but it was not in regular circulation because it was locked up, and these people would only use it when they required it. 1359. Then you would draw a distinction between the hoards of the French peasants and the hoards of which we were told yesterday in India, which practi- cally are quite removed from circulation ? — That is a very difficult point to arrive at. A man may have a large sum of money locked up in his house in coin, hardly with the intention of hoarding it, but still keeping it out of circulation ; whereas in India they lock it up with the intention of hoarding it, and no other intention. The effect is the same for the time. 1360. But still if this money had practically been withdrawn for many years from circulation, and if it would not have come into circulation again but for the alteration of the German currency, for the pur- poses of our argument, we may consider those hoards as hoards in the full sense of the term ? — Yes, I think so. 1361. (Mr. Houldsworth.) The point is that, ac- cording to your information, one half of the amount re- quired did not come from new productions of mines ? — No. 1362. {Mr. Cohen.) I suppose you would agree that the amount of circulation in the United King- dom practically remains almost unaltered throughout the year with the usual inflations at the end of the quarterly periods. The amount of notes in circula- tion throughout the kingdom is about 25,000.000/. ? — Yes, but that might vary under many circumstances. 1363. It does not vary materially from year to year ?— It does not vary very materially. 1364. What I want to arrive at is this, that any addition to the circulation of the United Kingdom is not likely to take place when you find that the variation in the note issue is perhaps not more than 2,000,000/. or 3,000,000/. in the course of any one year ; that you are not likely to have any circum- stances that require or call for any large alteration in the circulation of the precious metals ? — I should not think so, but J should not like to answer this without a little consideration. 1365. If you put out more notes you displace metals, and if you call in metals you require notes to take their place ? — Yes, as a rule, you would. 1366. (The Chairman.) I think as we are discussing hoards it would be convenient if I were to ask you a question with regard to a reply given by Mr. Giffen as to the effect of raising the rate of discount on the supplies of gold in the country. Mr. GiiFen stated that he was rather inclined to think that raising the rate of discount above a certain point tends not merely to attract gold from foreign countries where the rate of interest was lower, but also to attract gold from hoards in this country itself ? — If I recollect rightly he did not state that as a positive opinion, bui as a conjec- ture which he thought was rather plausible. There are various circumstances connected with this question. In the spring and again in the autumn there is a flow of gold from the Bank to Scotland, Ireland, and the provinces, but we can calculate more or less when it will MINt3TES OF EVIDENCE. return, and, therefore, under ordinary circumstances, we do not attempt to check this outflow by raising the rate of discount; but if simultaneously with this drain, and on a low reserve, we find the foreign ex- changes against us, we endeavour to check the foreign demand for which perhaps a rise of ^ per cent, will suffice ; and this extra ^ per cent, acts also as a pressure to draw back as early as possible the amounts I refer to as going down to the provinces in the usual way. At other times the rates of interest are high in the countries from which we expect to draw gold, and we have to raise our rate until the object is achieved. With regard to what Mr. Giffen said about attacking the hoards, what I suppose he has not seen quite clearly is this, that at times money is absolutely unlendable by the brokers in London. You cannot get even ^ per cent, per annum for your money. Then the bankers, I imagine, would leave their money in the country, not to have the expense of sending to London. A considerable sum might thus accumulate. Another | per cent, or 1 per cent, makes money lend- able to the brokers, and then the bankers of the country send it up to employ it. At times you see quoted in the papers the Bank rate as 2 per cent, or 3 per cent., but the real rate may be 1 per cent, at which people are discounting bills, and the brokers will not take money sometimes at any price, ft remains in the country, not to have the expense of sending it up to London, and a very small amount in each bank would produce a large amount in the aggi-egate. 1367. Your view is not that the hoards are touched, but that the reserves of the country banks are aifected? — Yes, I do not believe in English ])rivate hoards. 1368. {Mr. Houldsworth.) Mr. Giffen specially mentioned that when the rate got up to a very high point, 8, 9, or 10 per cent., he noticed that there was a new flow ; would that apply to the banks ? would not the banks send up their reserves before 8 or 9 per cent, was reached ? — Naturally, an exceedingly high rate might induce country bankers to send up all thsy could lay hands on. The flow, when it gets to anything like that is not so much from the countiy as from abroad, because, at exceptionally high rates, the Bank of England affects, or has done hitherto, the gold markets abroad, and bankers abroad prefer to hold first class bills on London ; it is the best security that they can hold, because they know that those bills at maturity will be paid in gold. i368o!. {The Chairman.') To return from the question of hoards to the question of the movement of gold, could you give us any particulars as to the amount remitted to the Argentine Republic. Buenos Ajres, Brazil, and Portugal, either on account of loans or for any other purpose ? — In the printed tables you gave us the other day I was struck with the movements of gold. This paper that you have given us groups together South and Central America, including Mexico, and the West Indies. Well, several of these countries are producers of gold, to a more or less limited extent, while others are users of it, and I thought it better to try and make a more detailed statement to see what • countries took gold from us. I have onlj' had time to get these reports for this last year, beginning at the 31st of December 1885 till the 1st of December in the present year, but I have asked the Chief Cashier of the Bank to make them out for a longer period. Probably you will be rather surprised to- see that the amount sent to Buenos Ayres in these 11 months amounted to 3,352,000^. in English gold coiji, to Brazil 243,000/., and Portugal 1,464,000/. It is rather an important feature, you see, and you cannot get it from your memorandum. 1369. Has that gold remained in the country to which it was sent ? — It remains for some time. Ap- parently it goes into the banks there, and they do not like to let it out. It does dribble back by degrees, but in very small amounts in comparison with the amounts that go out. 1370. But would you consider this drain as one of the permanent requirements of the world for gold currency, or is it not rath'er to be classed with the ebb and flow of the precious metals constantly going on between the civilised countries ? — No, it is not the ebb and flow in the ordinary sense, because these exports are principally on account of loans made in this coun- trj' and the interest and capital of these loans will either have to be paid in commodities produced by the countries or in the gold returned to this country, not at all in the ordinary sense of the circulation. ■ Portugal for some years Jias used our gold coin, and so has Bi'azil as their currency. We coin it for them gratis, and they make use of our coin. That is why 1 wish to point out the peculiar position of those countries. 137 L Have you made any investigations into the amount of gold coin used in the arts and manufactures of tho United Kingdom ? — In 1877, 1 think it was, the Bank of England started some inquiries with regard to that. We began with Birmingham, and in Birming- ham we found that about 10,000Z. a week was used by the manufacturers, and that they took light gold coin, which we sold to them at weight. They knew exactly the standard, and it suited them best because they could take it in any quantity they liked. But from information I have received during the last few days it would appear that they are now rather taking to buying fine bar gold, and I have asked the staff oi' the Bank to make inquiries with regard to that and ascertain what facts they can, and I have also requested Mr. Tritton to set the Banking Institute to work in the same direction, with the view to see whether it is possible to come to' anything at all accurate with regard to England itself. We must do whnt we can. 1372. Have you noticed that in recent years, fay from the year when Grcrmany began to require gold for her coinage, and the Latin Union ceased to bo purely bimetallic, an alteration in the English Bank rate has not produced the accustomed effects ? — It has produced the same effects. 1373. There has been no difference? — It may be necessary to raise the rate higher when gold is at a premium in the gold currency countries, as at the pi'esent moment happens with France. 1374. But there is nothing in the fact that ihs country is using gold as a standard which should make gold at a premium in it, is there ? — Well there is the double standard you know in Prance, gold or silver. You can pay to any extent in gold or silver ; the same you may in Germany, the same you may in all these European countries. 1375. {Mr. Barhour.) And to secure gold you pay a little extra ; if you pay a little extra they give jou gold ? — Yes ; you would probably obtain it. The Bank of France could not charge you a premium upon gold coin, but upon bar gold, yes. 1376. {The Chairman.) Can you give us the exact par of exchange between England and other countries from which gold is attracted by raising our rate of exchange ? — In France the par is considered to be l/.=fcs. 25.22^(25.2215), Berlin l/.=marks 20.43 (20.4294), New York i;.=^4.865 (4.89). 1377. Can you give us the present rates of ex- change ? — I think iustead of taking the par of exchange I can tell you the specie point, which is by far the best way. There are two ways of describing what is the par of exchange. Taking France for instance, if you put the specie point at which it can come from Paris, and at which it can be sent from here to Paris, it is best. 1378. I believe you have some information from private sources with regard to the present circulation of the precious metals, and also of paper currency in France, Germany, Italy, Belgium, and Switzerland ? — ■ I have got that and I will put it in, and the informa- tion I have received from Messrs. Rothschild. {See Appendix VIT.) 1379. I think you told us just now that the Bank of France was holding a very large stock of gold. Could you give us any information as to the amount, and as to the increase, and as to the cause ? — I have a statement here which was made up in the middle of September, so I have not altered it. On the 1st of September the Bank of France held 54,000, OOOZ. of Mr. J. Wi Btrch, 9 Dec. 1886, 70 Royal commission on gold and silver: Mr. J. W. Birch. 9 Dec. 1886. ^old, and 23,000,000^. of silver, aad in 1880 she held 32,000,000/. gold, and 51,000,000/. silver. (See Appendix VII. A.) 1380. The main point is that whereas it was 59,000,000/. ill 1876 it sank to 32,000,000/. four years afterwards, and has risen again to 54,000,000/. Is there any conclusion which you draw from those figures ? — That evidently she is drawing in gold and giving out silver instead ; that she is apparently to a great extent what we should call hoarding her gold. 1381. But the amount of gold slieholds now is not greater than it was 10 years ago ? — Exactly, but then look at it with regard to the silver. 1382. Is there any conclusion that you draw from that bearing upon our inquiry ? — Simply that she has had no difficulty in increasing her stock of gold when fihe wished it. 1383. But I suppose you would not say that any country has any difficulty in increasing the stock of gold if it chooses to raise its rate of discount ? — Oh, yes, certainly, in my opinion. 1384. Would this country have any difficulty ? — This country ; but then this country is per se. Other countries would have a certain power, but not so much as England. 1385. Would not Germany attract money if she raised her rate? — She would attract money. A country can attract money as long as there is great confidence in it, and it pays in gold, but supposing there is war you might go to any rate and not be able to draw it. 1386. As long as there is peace a civilised country would be always able to attract money by raising the rate ? — In Spain for instance I do not think it would produce that efifect, nearly to the extent I have indi- cated just now. 1387. Spain is not sufficiently commercially ad- vanced ; there is no great confidence in her ; no great market ? — There is no great market for large stock exchange operations, which is worked upon here as well as in France and Germany. Now Berlin has become a very large centre of operations, and so can do it. 1388. Is there any information that you could give us about the Spanish currency relative to our inquiry ? — The Deputy Governor of the Bank of Spain has sent me a very interesting account. It goes to prove that gold is being replaced by silver, and out of the very large amount of gold coin in Spain during the last 10 or IS years a very large portion of it has found its way into France, and been replaced by silver, although the balance of trade would probably be in favour of Spain. 1389. What is the legal tender in vSpain, gold or silver ? — It is strictly bimetallic, and it has not ioined the Latin Union, and the Government buys silver by tender and coins it, and makes a profit. 1390. (Mr. Barbour.) It is a gold standard country, practically ? — No, you can pay in the one or the other. Both gold and silver are legal tender in Spain, and at a fixed rate. 1391. The Government will receive either gold or silver in taxes ? — In payment of taxes, yes, either tlie one or the other. 1392. Is there any gold in circulation ? — There used to be a good deal, and there is some now. I was talking the other day to the manager of the Rio Tinto Mines, and he told me that they had no difficulty in paying their workmen who can earn as much as a gold coin, in gold. 1393. ( The Chairman.) Is there not a free coinage ? — No, no free coinage ; the Government coins both. 1394. The Government coins both, but would they coin both in unlimited quantities if you brought it ? — No, they would not ; they buy their gold and they buy their silver. It is simply bimetallic. 1395. (Mr. Cohen.) I would ask you a question on a point that has not been touched, and that is the question of hght gold. Uo you think that the light gold held by the banks constitutes in any way an addi- tion to the items causing scarcity in this country ? — Well, if there veas a scarcity it would. If it was locked up because people did not want it, it would not go into the circulation. 1396. You have heard the amount put at 10,000,000/. sterling ; would it be so much as that ? — Well, it might be a great deal more. 1397. It is only the English banks that would lock it up because the Irish and Scotch banks issue notes ? — I do not think a very large amount is locked up. 1398. Do you think that if 1/. notes were issued it would economise the use of gold, or simply displace an amount of gold, and have it sent abroad ? — That would depend upon what security you gave for your 1/. notes. If 1/. notes were issued against gold it would economise the wear and tear of the gold, and if against securities, they would displace gold to the extent they were put into circulation. 1399. Tou do not think that it would displace the gold to send it abroad ? — It would, of course, displace it. I mean if you allowed the notes to be issued with- out a backing of gold the gold would go abroad and you would have the notes. 1400. (Sir T. Farrer.) Do you know what the ratio between gold and silver is in the Spanish currency ? — 1 to 15^. 1401. And you say gold is leaving Spain ? — Yes, it has been leaving. 1402. The cuireucy both of Austria and Eussia is paper, is it not ? — Yes, I believe so. 1403. Their currency is practically paper with a .silver standard P^Witli a silver standard. I see also in the memorandum from Italy that gold was drawn from Russia to Italy, and of course would have been replaced by paper. In the Bank of France they hold 99-8 of bullion and the notes in circulation is 107. 1404. (The Chairman.) But is not that a larger proportionate reserve than is usual against note issue ? — It is extraordinary. 1405. Of course their liabilities are not purely note liabilities. That gold'reserve is also a reserve against ordinary banking liabilities, is it not ? The Bank of France do not divide the issue department from the banking department as the Bank of England do ?— No, they do not. 1406. Therefore their whole liabilities must be taken into account before we say their gold reserve is a large one, IS that not so ?— They are not bound except by the law of 1884, which provides that they must net issue more than some enormous amount which they have never done. There is a limit. Adjourned till Tuesday, 1st February 1887. MINUTES OE* EVIDKNOE. 71 Seventh Day. Tuesday, 1st February 1887. The Right Hon. A. Mr. D. M. Babbour. Mr. J. W. Birch. Mr. J. Chamberlain, M.P. Mr. L. L. Cohen, M.P. PRESENT : J. BALFOUR, M.P., the Chairman, presiding. Mr. L. Courtney, M.P. Sir T. H. Pakrer, Bart. Mr. C. W. Fbemantle, C.B. Sir John Lubbock, Bart., M.P. Mr. Geo. H. Murray, Secretary. Mr. Samuel Montagu, M.P., called and examined. 1407. {The Chairman.) The question which the Commission is anxious to investigate, with your assistarfce, is how far the demand for gold is likely to diminish in the future through the increase of banking machinery either in England or on the Continent, and for that purpose we thought you could give us infor- mation drawn from a large number of countries ?^ The result of the information that 1 have here would show, what every City man knows, that the bank- ing facilities for London are certainly superior to anything that you can find in any other part of the world. When you come to the facilities for the transfer of funds from one part of the kingdom to the other, there we are behind other countries. Por instance, the Bank of England has only nine branches outside of London, and in Germany the Imperial Bank has 184 branches ; and even Holland and Belgium have far superior facilities for the trans- mission of money to and from private individuals to those which- we have. 1408. Do I understand you to say that England is less fully banked than Holland or Germany ? — Of course there are more private bankers iu England, and there are certain facilities afforded ; but for the general public the facilities are far greater for the transmission of money in Germany. For instance, you can pay in money to any extent at any one of the ] 84 branches of the Imperial Bank in Germany, and it is paid out next day without any charge, whereas the Bank of England makes a charge of Qd. or Is. per \OQl., except in certain cases under special arrangements. 1409. But what your evidence so far indicates is, that the Bank of England is not on a level with the Imperial Bank of Germany and the Bank of Holland in the matter of branches ; but that is quite a different question, is it not, from that which we have to determine in trying to come to some conclusion as to whether England is more or less "banked"? — Yes. But I may mention with regard to the Bank of England that we have to withdraw gold to send periodically to Scotland and to Ireland, which does not occur in other countries. Bank of England notes being limited to England and Wales they are not legal tender in Scotland or Ireland. This limitation neces- sitates the transmission of gold, and therefore there is no economy in the circulation of gold like there is abroad. 1410. You mean that from a banking point of view Ireland and Scotland are foreign countries to England ? Almost ; it is not precisely that the bank note does not circulate, but it is not a legal tender. 1411. But at all events specie has to be transmitted from London in payment of debts to Scotland and Ire- land, whereas in Germany they would transmit instead bank credits ? — They would pay into the giro conto as it is called ; and the system prevails also in Italy, Belgium, and Holland; that is that the bank will transmit money, without charge, to all the important towns in the kingdom. That constitutes a great economy in the use of bank notes and gold. 24358. 14] 2. Then do you deduce from that that Germany and Holland do with a smaller quantity of gold currency than the United Kingdom ? — Yes, in pro- portion to their numbers. 1413. In proportion to the number of transactions ? — Both to the number of inhabitants and to the number of transactions . There is also a great facility which I should like to point out in regard to the collection of small bills for tradesmen and others through the Post Office, which prevails in France especially, and in Germany also. 1414. Then do I understand your opinion to be that in England the banking machinery, which is to a certain extent a substitute for the use of currency, is less perfect than on the Continent ? — In regard to the small transactions and to the small tradespeople. 1415. That is not the common view, is it ? — I think it must be, because there is no facility, say for a small tradesman who has no banking account, to deal with other parts of the country which there would be if we introduced here the system prevailing in Germany and France of collecting accounts through the Post Office. 1416. But if the machinery by which debts are paid in distant parts of the country is more perfect on the Continent than it is here, is it not true, on the other hand, that in England almost every man has a banking account, which results in an immense economy of the precious metals to which there is no parallel on the Continent ? — Yes, I think that the facilities for banking in London, as I said before, are vastly superior. 1417. But would you not extend the same proposi- tion to the country ? — There is no system of clearing in the provinces generally-. I'here is a little in Liver- pool, I think, but there is no clearing generally, and I think that for the conduct of very small transactions we are behind the Continent. 1418. Would not every tradesman in -Newcastle or Birmingham have a banking account ? — ^Not the very small tradespeople. 1419. But at all events more than in towns, of a similar size on the Continent ? — ^Yes. 1420. I quite understand that your evidence goes to show that for the payment of debts between one centre of industry and another in England, we are behind the Continent? — Especially for small debts; not so much for important amounts. 1421. I perfectly understand that ; what I wish to know is whether that is not more than compensated by the economy of the precious metals, owing to the national habit of keeping banking accounts which does not prevail to the same extent in any foreign country ? — I think so. I am only pointing out a defect in the system, not that the system is inferior, taking it as a whole. In fact, I believe it is vastly superior. 1422. Then which of the two systems has the greatest effect in economising the precious metals ? — ■ With the exception of the periodical transfer of gold to Scotland, and occasionally also to Ireland, I think that this country economises gold fairly well. If the L Mr. S. Montagu, M.P. 1 Feb. 1887. 72 KOYAL COMMISSION ON GOLD AND SILVER: Mr. curreucy were in a proper condition. What I was ■S- Montagu, particularly anxious to call your attention to was the ■ facilities for small transactions, which are extraor- 1 Feb 1887 dinary in Germany, such as collections through tlie [ ' post and postal telegrams. You can telegraph a pay- ment of 400 mai'ks in Germany through the Pobi- Office at a very small cost, and you can also insure registered letters. 1423. We have nothing lilic that here ? — I have made inquiries in Austria, Germany, Belgium, Prance, Italy, and Holland. Those are the six countries in which I have found greater facilities, and especially Belgium, where you can insure a letter up to 400Z. at a ridiculously low rate ; it is equal to 2s. per 1,000^. 1424. Is that done by Government intervention ? — Yes; through the Post Office, which is imder the control of the Government. 1425. It is not done through the machinery of the National Bank ? — It is under the same control, I believe, as the National Bank. The governor of the National Bank in Belgium is also in the Post Office administration. In Germany the charge for sending 20/. through the post is 40 pfennig, or 5d., which is the cost of a postal order, and then they charge a commission of 6c?. up to 20/. ,■ but if the telegraph and post office are not in the same building, there is an extra charge oi' 3c?. It costs about Is. to send 20/. by telegram through the Post Office. 1426. In every town of any size in England, and still more in Scotland, you will find either a bank or a branch of a bank ? — Yes. 1427. Is there anything like that condition of things to be found in any foreign country except America ? — Yes, in France the different financial establishments, the Credit Lyonnais and the Societe Ginerale, have branches in almost every town, and they give great facilities for the transmission of * money and' cheques. Also in Italy there is a great nnraber of private banks, and, as I said before, there are much greater facilities there for the general public, because it is not necessary to keep a banking account to transfer money, but the person who receives it must have an account with the Imperial Bank of Germany. 1428. But these French institutions of which you speak, do they correspond exactly to our banks? — ■ Almost. They correspond very nearly to our joint stock banks, not to the private banks. 1429. Is it the habit of every trader in France to keep a banking account ? — ^No, certainly not. 1430. They keep the money necessary for carrying on their transactions in their houses ? — They do so considerably more than in this country. 1431. And that necessarily leads to a considerable waste, or at all events to a considerable increase of the amount of the precious metals which are required to carry on the work of the country ? — Yes. 1432. You have no means of saying whether the loss which foreign countries undergo by the absence of the habit of keeping banking accounts, compensates for the superiority of the machinery which you have just been describing, for payment of small debts at a distance ? — I should think there is as much economy of gold, taking it as a whole. I think they are developing their system of banking so as to economise currency, and with their other advantages they might pass us ; but I should think, taking it as a whole, the economy of gold, if gold were of proper weight, would be greater in this country. 1433. A large number of authorities are of opinion that England cannot be better " banked " than it is ? — I quite agree that the general system of banking is superior in this country. •■ , _ .. .^ 1434. And that no great economy of the precious metals in the future can be looked for by any improve- ment in our internal machinery ?— Yes, by permitting the Scotch banks to have their excess of notes covered by Bank of England notes, instead of by gold. A large amount of gold goes periodically from London to Scotland^ and comes back again, most need- lessly, and those withdrawals have an effect upon the money market. These gold movements periodically to and from Scotland and occasionally to and from Ire- land are quite unnecessary considering that ours is a United Kingdom. 1435. England.now requires about, say, 90,000,000/. of gold sovereigns to carry on the transactions of the country. Do you think that that amount is likely to be diminished by any alteration which we may antici- pate taking place in the banking machinery of the country ? — Yes, certainly, it could be diminished.- I think it is greater in proportion to the number of inhabitants than in any other country. 1436. In proportion to the transactions, or only in proportion to the inhabitants ? — It is not necessary if you had the suggested improvement with regard to gold movements in Scotland and Ireland, and if you had 1/. notes for England you would not require any- thing like the circulation, of gold that we have now. 1437. Have you made any estimate of the amount per head required by England, as compared with that required in France, Germany, and Italy ? — No. I only know that we commonly understand that there is a considerable amount of gold in France, but not very much more than in England, and there the country is larger. The amount in circulation in France I do not think is materially greater than in England. That is the general opinion, but it is very difficult to ascertain. ^ 1438. Should you think that the reason of that is that the French have contrived to improve their method of payment of debt between towns ? — ^No. I think they have not yet acquired the habit of using it; they never had the gold in circulation to the extent that we have. We have had the luxury of a gold circulation for so long that it has been rather abused. 1439. The amount of currency, not of gold alone, per head in France, is not greater than it is in this country ? — No. 1440. It is only in the small transactions that there is anything to imitate in any other country ? There is nothing except for small commerce. 1441. Do you see any signs on the Continent of an approach to our system, by which similar economies may be obtained in the currency ? — Yes, in France and in Italy ; also in Germany and Belgium they are copying us as rapidly as they can, and the cheque system is becoming more and more developed; in later years and even in later months there is a marked difference. 1442. Then do you expect an economy in the use of the metallic stock of the world which would really be of importance from a monetary point of view ? I do not know that it would be very important. It will faciUtate transactions which are now somewhat hindered, and I suppose it would reduce to some extent the metallic circulation; but to a greater extent it would economise the use of bank notes. 1443. Let me put the same question in another way. One contention with which you are familiar is that gold has appreciated and prices fallen through the great strain that has been placed upon the gold circulation of the world, through various causes which I need not enumerate ; do you think that the facihties which are being gradually adopted in France, Italy, and Germany will have any material counter- acting effect ? — ^Not with gold. 1444. But gold is now the circulation of Germany, Italy, and, more or less, of France ? — Yes ; but it has not got into very much use as yet, they have so many small notes which they have always been accustomed to use. In Italy you see no gold ; in France you see more^old ; but in Germany you see little gold in cir- culation, and if Germany were to prosper materially, I should think they would require more gold in circula- tion. What I mean by cheque facilities is for the transaction of business, and saving the transmission of notes to and fro rather than of gold. I do not think the Germans have in proportion anything like the quantity of gold in circulation that we have, and there- fore, if they could afford it, it would rather have a tendency to increase, the same as in the United Statea. MINUTES OT EVIDENCE. 73 I do not think you will economise gold. You may perhaps^ prevent further appreciation through economy. Otherwise I think it would go on appreciating. It is very recently that Germany has acquired a gold circu- lation, and you see very little in traveUing. They have still small bank notes in circulation. 1445. But you would be prepared to hold that it is an advance to substitute gold for notes ? — ^No, I do not. It is an advance to Germany, because it is only recently that they have been able to have gold instead of silver. It is something like 12 years. 1446. At this moment, of course, notes in Germany can be changed for gold at sight ; it is a convertible paper currency ? — It is ; but gold is not obtainable in large quantities for exportation. 1447. But do you anticipate that the Germans ever will take to using more gold than they do ? will they not adhere to notes like the Scotch ? — 'No, I think that they will not. I think that they have been used for a great number of years to notes, and they are gradually getting out of it. They have notes as low as 5s. ; and they have no occasion if they can have a gold circulation to have notes so small. 1448. But the Americans, I am given to understand, are taking to notes of that value from preference ? — One-dollar notes. Since the disappearance of gold in America, when greenbacks alone were current. It takes a good many years to make the change, but I think the tendency is to get rid of very small notes all over the world, because they are not so desirable as coin, 1449. But the genuine Scotchman prefers a dirty pound note to a clean sovereign? — A 1^. note I do not consider a very small note. 1450. You think anything under 1/. would gradually disappear? — Yes. In fact the Bank of France has withdrawn all its 20 and 25-franc notes. They have in Prance nothing smaller than 50 francs. That is a case where a great country like Prance has prac- tically withdrawn its small notes. 1451. Do you know the grounds on which they have adopted that policy ? — I think it did not quite pay the banker to have them so small. The expenses of the circulation, and also their desire to get more metal into circulation, were given as reasons. I do not know that they have acted quite rightly in taking away the 25-franc note, because other countries rather preferred them, but certainly the tendency of civilised countries is to get rid of the very small notes. 1452. Then may I summarise your evidence in regard to the Continent in this way : that there is a tendency towards the economy of the precious metals through the increase of banking facilities on the model of England, but that this tendency will be to a certain extent — perhaps completely — counteracted by giving up their small notes and substituting for them metallic currency ? — Yes. 1453. (^Sir T. Farrer.) Silver or gold for the smaller notes? — I should think that they would be more likely to use silver for the very small notes. 1454. {The Chairman.) So that this change would not affect the question which I put to you a few minutes ago regarding the strain on the gold currency ? — No, I do not think it would. I think the tendency to take more gold into circulation in Germany is only because . they have not been in the habit of having it, and the novelty of it may perhaps induce them to take more into circulation, but it is a very dif&cult point to deter- mine. I do not think 1 should like to pledge myself to it, but in Germany one account is that they rather like the 20-mark note, but I do not know whether they hke the 5-mark notes. The Treasury only issues notes as low as 100 marks, which is 51. Besides these notes there were still in circulation at the end of 1885 about 138,000,000 of Eeichskassenscheine of 5, 20, and 50 marks each, which are very useful to the jiublic. 1455. Do you think the public would prefer gold circulation to that?— No, I should think not. I should think the 20 and the 50 mark notes they would keep. They would prefer to use silver rather than Mr. the 5-mark notes. - '•>'• Montagu, 1456. So that, m far as the small notes are coiv ■^•^• cerned, which you think will be given up by these pirTaor nations; there would be no increased demand for [ ' gold ? — No, I should think not. 1457. And, therefore, there would he nothing to compensate the economy which would be produced, according to your investigations, by the adoption of English banking methods in those countjies ? — No, I do not think it will have a material effect upon the gold. 1458. Do you think that any economy in the use of gold or silver is likely to occur from increased international facilities of exchange ? — From all coun- tries the reports are that the postal orders are very insignificant, and that the bullion transactions with the Continent as a general rule have diminished, with the exception of Germany and France, in which they continue on a large scale. 1459. I suppose a great deal of the bullion trans- actions is simply due to the fact that the holders of bullion think that they can make rather more in France than they can in England, the rate of discount being higher in Paris than in London ? — For the settlement of the balance of transactions. 1460. It is simply that there is no other cause ? — And also the exchange is worked by the arbitration of stocks, and by a larger interest in one place than another. The balance of trade, is brought about by the transactions in stocks, and also by the higher price given for money. 1461. Then may I take it that for many years past bullion has only gone from one country to another to settle the balance of trade ? — Except in the case of America, Italy, and Germany, which have only recently introduced gold into circulation. There is an important item in Germany which, I suppose, you are aware of, that is the war chest of gold, about 6,000,000/. sterling, which is kept as a war reserve. 1462. {Mr. Birch.') It is much larger now ? — No, that is the present figure. In Germany it is not believed that there are any large amounts of precious metals hoarded, with the exception of the amount the Government and the " Notenbanken " keep, and the " Keichskriegsschatz " (German Empire war treasure) of 120,000,000 marks in the « Juliusthurm " at Spandau. 1463. {The Chairman.) That is insignificant com- pared with the gold the Bank of France has, is it not ? — Yes, the Bank of Prance has generally between 40,000,000/. and 50,000,000/. sterling. 1464. Have you any ground for thinking that no economy is likely to occur, through the improvement of banking machinery, in the amount of bullion required to settle international transactions ? — No, I think not. 1465. Have you any other facts you would like to lay before the Commission ? — I do not know whether you wish to touch upon the question of international bi-metallism, I mean an arrangement with foreign countries with regard to fixing a ratio between silver and gold. 1466. That is a question that will occupy the attention of the Commission, but we have hardly reached the point at which we could discuss it ? — Very good. 1467. {Mr. Barboter.) Is it not the case that in America notes for very small amounts are rather coming into fashion than otherwise ? In the eastern part of America, at any rate, there is no tendency to give them up .?— I was in America two years ago, and my experience was that most people would dislike very much those one-dollar notes, many of which you could hardly read. I saw a great many dollar pieces and occasionally gold. The fractional notes, as you are aware, were given up a few years ago, and I do not think the one-dollar is coming into favour. 1468. You think the use of the paper dollar is not extending ? — ^No, I think not. L 2 74 KOYAL COMMISSION ON GOLD AND SILVER: Mr. 1469. {Mr. Birch.) Did I understand you to say S. Montagu, that the receiver of the telegraphic transfer in Ger- ^■■^- many must have an account at the bank ? — No, the ^ w'b^887 I'eceiver in the Giro account for the transfer of money \ ■ not by telegram. The transferee must have a banking account. You pay in at Hamburg, and if the man has an account with the branch of the Imperial Bank at Bremen he will receive the money the next day free of charge. 1470. It is not necessary that the sender should have an account. I pay in 5Z. at Bremen which I want to be paid at Hamburg, I need not have a bank account, but the man who receives it at Hamburg must have an account ? — Yes. 1471. It is a facility, but it is only half a facility ? — Yes. I believe in Italy and in Belgium there is no occasion to have an account with the National Bank. They give the cheques out at a very small cost. In Italy, I think, it is 50 centimes, equivalent to 5d., for any amount. 1472. Though the Bank of England has only nine branches, and the Bank of Germany has 184, we • have of the joint stock banks something like 2,400 branches, which would render every facility it is alnfiost possible to conceive in the shape of paying in money ? — You could send money from London. You cannot bring it to London free of payment, because money available in London is always in demand in the country. It is worth, you may say, a premium, there- fore you can send "money away from London, but you cannot bring it back except by paying a commission. 1473. There is a convenience in London being the great centre where all these operations are arranged through the clearing-house. I should imagine we are pretty well " banked." Then you have post office orders here for any amount you like, perhaps not quite so cheap as in Germany ? — No, I beg pardon, you cannot send by telegram through the post here, as you can there, and you can collect bills through the post iu Prance and Germany. You can protest bills and clear bills through the Post Office at a small charge. 1474. With regard to the note circulation, it appears that people prefer notes. If you look to the Bank of JFrance you will see that of late it has held about the same amount of precious metals that it has had of note circulation. The other day they had 100,000,000^., and they only had 110,000,000^. of issue? — '['heir maximum is 160,000,000/., their deposits are three milliards and a half, that is 140,000,000/. The maximum was raised in 1872. It has been raised from 2,800,000,000 fr. to 3,-500,000,000 fr. In 1871 it was raised from 2,400,000,000 fr. to 2,800,000,000 fr., and in 1872 to 3,200,000,000 fr., and in 1872 it was again raised to 3,500,000,000 fr. 1475. I heard yesterday that there is vetjiv little silver circulating in Italy ? — Exchange on France is at a premium of about 1;^ per cent, in Italy, therefore it must be that they cannot get even 5-franc pieces. They cannot get g;>ld, and 5-franc pieces musir be scarce. The exchange is higher now than it has been since the resumption of specie payments, and has moved up very much in the last few days. 1476. It would appear that there is room for a little silver to go there? — The bank will not part with gold or silver excepting in very small quantities. They ought to part with their silver and gold because the exchange is so much against them. The ex- change has risen from 25.30 to about 25.70, which is the present exchange. 1477. Therefore if it was possible to tap the Bank of Italy there would be no difficulty in making a profit on exchange ?•— The National Bank will not part with its coin. The Italian 5-franc pieces will not be taken currently in France. They will be taken mixed. They will not take them alone ; one-third may be Italian, one-third Belgian ; that is the maximum proportion. 1478. {Mr. Cohen.) You spoke of ll. notes in this country. You are aware, of course, that the circula- tion which we have in England varies but slightly from 24,000,000/. to 26,000,000/. Is it not the case that if we issued 1/. notes there would be a displace- ment of gold to the extent of the 1/. notes which would be issued ? — ^Yes ; the gold would go to the bank. 1479. It would go abroad, would it not ? — Not necessarily, unless the balance of trade was in favour of other countries, 1480. What economy of gold would take place by the issue of 1/. notes ? — That gold would not circulate but ll. notes would. 1481. The gold would remain in the Bank of England ? — To be utilised if needful by the bank. It would not be worn in circulation. 1482. Is it not the case that in America they have ceased to coin gold coins of less value than 5 dollars ? — I am not sure. They have 2|-dollar pieces ; but it may be as you say, I do not know. 1483. They have ceased the last few years to coin 2-^-dollar pieces which are equal to our half-sovereign ? — No ; I think not. 1484. You made a statement in the House of Commons, to which I think I may refer, as to the light gold constituting a lock-up, and therefore an outlay to this country to the extent of 10,000,000/. sterling, that 10,000,000/ of gold was useless in this country in consequence of the quantity of light gold held by the banks. Do you consider that has any bearing upon the question of an appreciation of gold ? — I think it has a bearing. I have mentioned that in the House of Commons. I originally fixed it at about 5,000,000/., but from information I have collected, and from my own experience in the years that have passed since then, I am inclined to think that quite 10,000,000/. of gold are held in excess of the require- ments through the coins being light. I have had it put at even a larger sum, but then it was from an Irish bank, and I believe in Ireland the light gold is a very excessive proportion of the circulation. 1485. You spoke of the practice of sending sovereigns backwards and forwards at term times to Scotland. Does not that " sweat " the sovereign, to use a common expression, and reduce its weight ? That is only because the Bank of England has a great number of sovereigns which only just turn the scale. It is not worthy of notice if it were not that when the sovereigns come back some are cut in consequence of the amount of wear by being sent backwards and forwards. Excepting that our sovereigns wear away quicker than others on account of their composition being softer than most other gold coins, it is very unimportant. The Bank of England must possess many miUions of gold that can barely pass the scale. Of course if they weigh them again they would cut some of them, or ought to do so. If you take them out and send them anywhere and bring them back again there would be some light, because they are already in many cases on the verge of disqualification. 1486. {Mr. Courtney.) As I understand your evidence, the outcome is that there is a movement in the economy of metal abroad by the development of banking? — I think it is more an economy in the use of bank notes than of metals, because, having bank notes, they would very rarely send metallic money from one part to the other. 1487. You spoke about the Credit Lyonnnis having branches throughout the country, and of tradesmen having accounts with these branches. Do the trades- men draw cheques on the branches ? — Yes. 1488. In payment of the sums payable within their own area ? — Or they will give cheques on the different branches at very trifling cost. 1489. But before that usage would not they keep a store of coin and make payments in coin ? Bank notes. They would not necessarily keep coin when they have Bank of France notes of every denomina- tion. The economy of all trading facilities is in making the use of bank notes necessary rather than of actual coin ; where they have convertible paper. 14&0. Substituting cheques for bank notes ? Yes and movements in Germany through Giro Conlo. That is so important a facility that it prevents the MINUTES OF EVIDENCE. 75 transmission of bank notes from one city to the other. 1491. Is there any observable contraction in the issue of notes ?— I do not think so. There may have been even an extension in Germany on account of trade having improved. The German foreign trade has very largely increased. 1492. But confining our attention to Erance, where these societies have their branches, is there any observable contraction in the issue of the notes of the Bank of France? — I think there may be some variation. In 1884 there were 3,101,000,000 issued, and in 1886, 2,913,000,000 francs. There is a slieht diminution in 1886, something like 3,000,000Z. sterling. 1493. That might be attributable to other causes ? —Yes. 1494. You do not notice a general contraction going over many years ? — No. 1495. With respect to the small notes, which you say have been withdrawn in France, when were they first issued ?—l can only speak from memory. I think the 25 franc notes have been withdrawn some three or four years. 1496—7. When were they first issued ? — They had been issued a considerable number of years previously. 1498. 50 francs is the lowest now ? — Yes. 1499. You think that the 50-franc limit is not a recurrence to an old limit ? — In fact, in the time of the First Republic, they had only paper assignats. 1500. Is the usage in Germany for merchants selling to retailers to draw bills ? — ^Yes, and in France especially. For any sum, however smaU, the seller draws on his l)uyer however distant he may be, from one part of the kingdom to the other. He will draw a bill, and the bill may be collected through the Post Office. 1501. But bills with a certain amount of time to run ? — Yes, generally. 1502. I.s the usage to have them payable at one centre ? — No, it is quite the reverse, because almost all over the Continent you will find more bills drawn on a city which is not a capital. For instance, there are more bills drawn on Hamburg than there are on Berlin ; there are more bills drawn on Marseilles than there are on Paris. 1503. There is a decentralising inflaence in bank- ing in France and Germany.' — Yes; also in Belgium. There are more bills drawn on Antwerp than on Brussels. 1504. Having regard to the economy of currency, whether coin or notes, would not there be a great economy if there was one centre of liquidation esta- blished ? — Yes, there would ; but on the other hand there is a certain reserve in money being held in each city which makes the transactions more solid. Credit is not used up to the hilt as it is in this country. 1505. Quite so. That is a confession that there is a capability of economy ? — ^Yes, but it has its draw- backs. 1506. If we had all payments in coin there would be great solidity ? — Yes. 1507. Is there any movement in favour of the establishment of a centre in Germany ? — I think not. I very rarely see bills drawn made payable in Paris in preference. They are drawn on the places to whicli the goods are shipped, such as Havre, Bordeaux, Marseilles. They would be drawn on those cities and they would very rarely be made payable in Paris. 1508. With regard to that phenomenon to which you drew attention, the periodic transmission of bullion from London to the sister kingdoms, is not that due to the fact of the establishment, in a large degree, of a common centre of liquidation ? — It is due to the law that requires that the banks should hold gold against the excess of their note issue in Scotland. 1509. Quite so ; but how has the coin got to London ? — It simply travels twice a year. There is no neces- sity for the coin in Scotland at ordinary times. It is simply on those occasions twice a year when there is a large demand for not^s. The Scotch banks, as a rule, have the gold in the boxes and simply send ;t back again, pay the freight to and fro, and cause a .^''■ disturbance of the money market. ^- -^"'"S'"' 1510. Yes ; but if there existed in Scotland and Ire- " land, the United Kingdom in fact, many centres of i j'eb. 1887. liquidation of bills, as in France and in Germany, you would have retained stores of coin at these different centres as the means of liquidation, and there would not be this periodic sending to and fro ? — I think that periodical sending to and fro is so abnormal that you cannot deduce any argument from it. It is peculiar to the relations between Scotland and England. i think if there were centres, as 3'ou say, in different parts of the country, they would retain still only the coin that they would require for their ordinary use, and they would not keep for four or five months in the year what they would only require to use for one month. It would be a waste of interest. 1511. One of the directions in which you indicated that we might have an economy of currency of coin was the avoiding this periodical transmission ? — Yes, that would be a certain and complete saving if they could issue their excess of notes against Bank of Eng- land notes, and the Bank of England kept the gold. There would be no special movement of gold at all. 1512. In order to carry that out, In Scotland, it would be necessary to have Bank of England notes of 11., would it not ? — No ; because they issue 11. notes against sovereigns, and the sovereigns are not used at all. It is simply a foundation for their excess issue of notes. 1513. In order to have a guarantee fund against their issue, must not they have the means of liquida- tion in the same denomination as what they issue in ? — That is if there was any cliance of a run on the bank. They would, of course, require to have a currency that would be alone receivable in Scotland, but this is not an occasion of people applying to them for cash for notes, but solely for notes on credit. 1514. And then they have to get cash in order to meet the possibility of their coming back again ? — Yes, quite so. 1515. With respect to this easy means of trans- mission of money in Germany, is that machinery self- sustaining ? — It cannot pay ; there is no charge at all in Germany or in Belgium. There is 5d. charge in Italy, but that is nominal. It is for any amount. You might have 100,OO0Z. transferred for 5d. 1516. This is in fact a service undertaken by the State gratuitously? — It is undertaken by the bank, and, no doubt, to its ultimate advantage, because it induces or enforces almost everybody to keep an account there. Otherwise they cannot receive the monpy. 1517. Is the bank required by the State to give these facilities ? — I should think that it is required by the State, because most State banks now are doing the same. The Italian bank has only recently adopted the same system. They can transmit money through- out Spain by means of the Bank of Spain, without charge or at a very small charge. 1518. You have no means of telling us whether a particular bank either gains or loses by these trans- actions ? — I think the country gains, and the bank ultimately derives advantage by attracting customers. 1519. (The Chairman.) Would the system which yon are recommending be consistent with the free development of private banks. I include, in private banks, the joint stock banks ? — I should think it would be an interference with their business, decidedly. 1520. It is only consistent, in fact, with a state of things in which one national bank does almost the whole banking for the community ? — It is so. 1521. (Sir T. Farrer.) When you speak of notes, i. suppose in most of these countries a certain amount of bullion is kept against the notes ? — Certainly, in every case, or else it would be a forced currency. 1522. Then the economy which is caused by the notes is an economy in the sending about of the precious mcstals, not an economy in the actual quantity of precious metals used? — Excepting that it is not 76 ROYAL COMMISSION ON GOLD AND SILVEE :- Mr. S. Montagu, M.P. 1 Feb. 1887. usual to keep the full amount of notes issued in specie and the balance is utilised profitably. 1523. Are you aware that in America they are now making a fresh issue of small silver notes, what they call silver certificates against silver?— Yes, I know, but it is most absurd to make a distinction, because, if they are a legal tender, you can change your silver notes against gold notes, and what is the object? As a matter of fact they are at full gold value now. They must be interchangeable and there- fore useless. 1524. There is complaint of the large silver dollars P —They want the half dollars. My own impression is that it will not be many years before the Americans will do away with their one and two dollar notes, perhaps only the one-dollar, and retain the two-dollar notes. 1525. Did I understand you to say that stocks are now largely used to settle international balances ? — They are not used with that object, but they do furnish the means. For instance, it may be that we might owe a large amount for wine to France, and if Fnance brought foreign stocks in London they would not require money for their wine. 1526. That is a process that largely economises the use of gold and silver ? — Yes. 1527. Have you any information as to the hoarding of the precious metals in foreign countries ? — The general opinion is that there is nothing of importance hoarded in Austria, Belgium, France, Germany, Hol- land, and Italy, with the exception of the 6,000,000^. war treasure in Germany. 1628. {Mr. Fremantle.) To return for a moment to the question of sending gold to Scotland at stated periods, is not that transmission due to the fact that the circulation of gold coin is very limited, and 1/. notes largely used, and that therefore the only way to obtain gold to show the Government inspector is by importing it, so to speak, from England ? — That is so. 1529. And that would have to be done under any system of banking, would it not ? — If, for instance, a Scotch bank, instead of receiving 50,000/. of gold, had a certificate from the Bank of England that they held 50,000/. at their disposal in the bank, it ought to answer a similar purpose. 1530. But as matter of fact, in banking, to hold bullion generally means actually to have bullion in stock, does it not ? — Yes. 1531. Can you tell the Commission whether there is any agio on gold coin in France as against silver coin, or whether they are freely interchangeable all over France ? — Not in general circulation. The general circulation in France is indifferent ; you receive gold and silver indiscriminately. 1532. I think you said that in America there was certainly no premium as between gold and silver notes ? — I take it there cannot be, because the moment they are declared a legal tender, then if there is a plentiful supply of all kinds of legal tender, they must be interchangeable. 1538. It would depend upon the supply. If the supply of silver notes were very large they might go to a discount as against gold notes ? — No, because you see the currency is only at a premium for abnormal uses. Gold is at a premium for exportation or for hoarding ; therefore, unless there was a panic or something in favour of gold, you would not have gold tender notes at a premium, because gold would only be at a pre- mium for exportation. 1534, Could you tell the Commission whether you think the transmission of coin could be largely saved by an extension of the postal order system in this country ? — I do not think so ; postal orders are very useful, and I think the charge is moderate ; but it is very seldom I think that large amounts could be sent through the post in the form of coin. 1535. {Sir John Lubbock.) Have the reasons which have induced the Bank of )''rance to withdraw their small notes been placed upon record ? I can only speak from memory. But I believe it was because they were badly made, and consequently were more frequently forged than the larger notes. All over Europe, and perhaps all over the world, the 20-franc, or some similar note, is very much used. 1536. Can you tell us whether it is the case that in Italy there has been found to be much forgery of very small notes ? — I have particulars about forgeries, and they are very insignificant as a rule. 1537. Could you put in any particulars on that point ? — Yes, I could. I have the fullest information with regard to the cost of small notes and with regard to forgeries. 1538. I had understood that there was a con- siderable amount of forgery of the small notes of the Banca del Popolo ? — I believe you are right, that the private bank notes have been forged. They are badly- made notes. 1539. Then with reference to the facilities for the transmission of money from place to place in this country. You are aware that, by means of the country clearing, if a person in Birmingham, for instance, has to make payments in Liverpool, or any- where else, he can draw a cheque on his bank and transmit that through the post to the person to whom he has to make payment, and no charge is made for the transmission ? — If he has a banking account. 1540. So that practically the facilities for banking are as great as those in Germany ? — Yes. 1541. As regards other transactions, they can be effected by means of postal orders, as you yourself said, at a moderate charge ? — Yes, but there is no provision made in this country for a man who has no banking account dealing, say, vsdth a manufacturer in London. Unless he had a banking account he would have no machinery for collecting his account, there- fore, for the small trader, the facilities are not so great in this country. 1542. But most small traders have banking ac- counts ? — I should think a great number of small traders in the East end never have a banking account. Small transactions for 1/. or 21. could not take place with the same facility in this country as they could in France or Germany. No banker would care to be troubled with such small amounts. 1543. But your case is this. A very small man who has not a banking account has IZ. owed to him by a person, say, in Sheffield. If they both had banking accounts and the man saw fit to have his account paid at once, the man would 'get his cheque immediately. If they had no banking accounts the man who owed the money could get a postal order at once and the other would receive the money ? — It is easy enough for a man to pay his account by means of a cheque, but it is not so easy for a small man to collect what is due to him. 1544. I quite understand if the man in Sheffield does not wish to pay there might be difficulty in forcing him to pay, but if he did wish to pay there would be no difficulty by a postal order ? — Except that there is delay. If a bill is presented to a man through the Post Office he would pay it at once rather than have it returned protested. One of my correspondents in France says that there is an enormous amount done in small commerce between different parts of France by small traders, who ai-e assisted immensely by the Post Office. : 1545. Then would you advocate that the moment a person owed another person money, that other person might be able to draw upon him without notice through the Post Office ?— It depends on the neces- sities of the case. 1546. With regard to insurance. You are aware that letters transmitting valuables in this country can be insured for a very small sum ? — Not so small as I mentioned in the case of Belgium. 1547. Is there much difference ? — I should think that the lowest charge in this country would be Qd. per cent., 5s. per 1,000/., and in Belgium it is 2s. per 1,000/., less than half. I3ut I must say that in France it is 2s. per cent. It is only in Belgium that the charge is so moderate. MINUTES OF EVIDENCi:. 77 1348. Now, with regard to the question of the Scotch banks and the amount of gold sent down, I think you have already stated that you do not attach any impor- taTice to the wear and tear of the gold sent down and coming back, because that is practically very slight. Your allegation is that the fact of the Scotch banks having to transmit gold down to Scotland, absorbs gold and disturbs the money market ? — In some degree, yes. 1549. But supposing that they were to take bank notes. Under the present law the Bank of England is required to hold gold for all notes over and above a certain amount, and therefore, practically (except as regards the matter of wear and tear, which you say is immaterial), for that purpose the notes and the gold are the same, and would it not have the same effect on the money market whether the Scotch banks sent down 2,000,000/. of bank notes or 2,000,000/. of sovereigns ? — No, it would not have the same effect, because it might diminish the reserve of the bank, but the bank would know where the notes were, and the exact time of their arrival, whereas very frequently the bank rate has been raised because 500,000/. of gold and even less has been taken out. 1550. Then you consider that though the bank is required to hold gold against all the notes, it still makes a great deal of diflference whether gold is taken or not taken ? — It makes a great difference. 1551. But would not the Bank of England know just as well where the notes are going as they know where the gold is going ?— -I do not think the bank would consider the drain of gold to Scotland serious to the same degree as a drain to the Continent, but stiU the effect of diminishing the small quantity of gold held by the bank is much greater than a dimi- nution in its reserve. 1552. But my point is not as between the trans- mission of gold to Scotland or the Continent, but whether you actually thought it made a difference so far as the money market is concerned, whether the 2,000,000/. that went down to Scotland went down in the form of notes or gold ? — Some difference. 1553. Do you think it would be a material dif- ference ? — It would make an appreciable effect on the money market at certain periods. The effect would not be produced if they took bank notes. 1554. Do you think from your experience that there is any case in which the Bank of England have raised the rate of interest because the Scotch banks sent dowu gold to Scotland, and would not have raised the rate if they had sent down notes? — If the notes were withdrawn instead of gold, and the money market was not thereby so much disturbed, then the Bank of England would only be in a better position by having the notes sent than the gold sent, and I think that the discount houses would not look upon notes withdrawn with the same degree of feehng as they would with gold being withdrawn. They might apprehend an advance in the bank rate, and so cause it. 1555. That would be, however, an error on their, part, would it not ? — It Avould be, in fact it appear* to me, very childish altogether to send gold simply to bring it back again. 1556. I now gather that, in your opinion, it may produce a different effect on the money market, but under the existing law you think it ought not? — It ought not. I am quite of your opinion. 1557. There is no doubt that if we had an issue of 1/. notes in this country the stock of gold would be materially economised ? — Certainly. 1558. But I gather from your evidence that, apart from the issue of notes of a smaller denomination, there is not likely to be further economy in the use of gold in this country ? — ^You might have notes of 2/. 1559. If we issued notes for less than 51. I have no doubt we could economise gold, but there is no other way in which you could economise gold in this country ? — No, I think not ; 1/. notes would be better. 1560. Is it not the case as regards coinage that practically no gold coin worth less than 10s. has ever been found to be popular P — It is so. The five-franc pieces in Prance have been a mistake. They are still in existence. They are costly ; they wear out very much more readily in proportion, and it is a great mistake to my mind to have gold coin under about 10s. 1561. (Mr. Frematitle.) Is it not a fact that the coinage of gold five-franc pieces has been discontinued by the last Convention of the Latin Union ? — I believe they have discontinued coining them, but they are to be had. IVIy firm had a large quantity recently. They are used, I think, more for ornament than for use. 1562. (Sir John Lubbock.) Therefore you do not think gold pieces of less than 10s. are ever likely to come into extensive use ? — That is my opinion. Mr. a. Montagu, M.P. 1 Feb. 1887. The witness withdrew. Adjourned till Friday, February 4th. Eighth Day. Friday, 4th February 1887. PRESENT : The Right Hon. A. J. BALPOUE, M.P., the Chaikman, presiding. Mr. D. M. Barbode. Sib T. H. Farker, Bart. Mb. J. W. BiECS. Mb. C. W. Frbmantle, C.B. Mr. J. Chamuerlain, M.P. Mb. W; H. Houldsworth, M.P. Me. L. L. Cohen, M.P. Sir John Lubbock, Bart., M.P. Mr. L. Courtnex, M.P. Me. GrEO. H. Mueeax, Secretary. Mr. Henry Waterfield, C.B., was called and examined. 1563. (The Chairman.) ^ You are Financial Secretary, are you not, at the India Office ? — I am. 1564. And you come here as representing case of the Government of India ? — Yes. the Mr. H. Waterfield, C.B. 4 Feb. 1887. 78 ROYAL COMMISSION ON (JOLD AND SILVEiE ; Mr. H. WaterfieU, C.B. 4 Feb. 1887. 1565. The difficulty of the Indian Government in one word is that they have a certain number of fixed charges to pay in England in gold, that they receive their taxes in silver, and that therefore they suffer heavily by any fall in the price of silver relative to gold ?— Yes, that it enhances the number of rupees that they have to pay. 1566. Could you give us the figures of the Indian Budget illustrating that position ?— According to the budget of 1886-7, the gross revenue is estimated at 75,798,700;. (I may say that, in speaking of pounds, I mean tens of rupees, unless I expressly say that they are sterling figures.) That figure of 75,798,700^. includes the railway and other departmental receipts of all kinds, which are more strictly a set-off against payments than real revenue. 1567. I suppose railway receipts mean the receipts from the traffic on 'railways belonging to the aovern- ment? — ^Belonging to, or guaranteed by, the Govern- ment. 1568. But what are departmental receipts ?— I may take as a case the contributions by the officers of Government towards their superannuation. That is a receipt under superannuation, which is a set-off against the charge for superannuation. It is included in the gross revenue, but is more strictly a deduction from the charge for superannuation. In the Indian accounts all the figures are entered gross, and, when I apeak of the revenue being 75,798,700^., I am including all receipts of any kind; but, in order that the Com- mission may understand the real financial position of India, I shall proceed to explain it on the net figures, by deducting from the amount of the principal heads of revenue the cost of collection, and by deducting from the expenditure the receipts in each particular group. For instance, there is a receipt from interest on loans by the Government -which comes in as a credit, but which is set off against the charge for interest. That kind of set-off runs through almost every head of the accounts. 1569. Quite so. You deduct, of course, the cost of working tlie railways ? — In the case of the railways (which appear on the side of net expenditure), I deduct their receipts from the cost of working them (including the charges for interest) ; in the case of irrigation, I deduct the sums received from those who take the water, the water rents, from the charges ; and so in every case. Under army, the sale of stores is a receipt, but I treat it as a set-off against the charge. 1570. Estimated in that manner, what is the net revenue ? — ^The net revenue is 44,249,900/., of which nearly 2,000,000/. is appropriated to local purposes. 1571. That is to say, it is paid back to the pro- vincial governments? — No, that is another point altogether. I mean by locai purposes that it is only received by the Government on condition of being spent within the district in which it is raised. 1752. In fact, they are what we in England should call local rates raised by the central government ?— Quite so. 1753. All this revenue is received in silver ? — Yes, the whole of it. 1574. What has been the increase in the last 10 years in the net revenue ? — In 1 876-7 the net revenue was 38,215,000/. ; in 1886-7 it was estimated at 44,250,000/., so that the increase in the 10 years has been 6,035,000/. 1575. Would you explain under what heads this increase should be classed ? — The land revenue has increased by 2,180,000/., but the receipts for 1876-7, owing to the famine, were less than in the previous year by 1,650,000/., so that the true increase of the land revenue in the 10 years may be taken as only 530,000/. 1576. Perhaps you will explain to us, before we go further, how that increase has taken place ? The land revenue is chiefly under settlement, is it not ? — ^It is under settlement. In the case of the great province of Bengal it is a permanent settlement. In the larger part of India it is settled for periods of 20 to 30 years. 1577. Is this 530,000/. increase merely an increase of rents during that time, then, in the rest of India ? — In some of »the districts the settlements have expired, and have been resettled, involving a larger payment to the Government. In some cases of estates under permanent settlement, default has been made, and the Government have taken possession of the estates and received the revenue, and in that way been able to raise it. But, as a rule, it comes from a fresh settlement having been made on the expiry of the old settlement. 1578. An increase of rent at the end of a lease, in fact ? — Yes. 1579. Would you go on with the several heads } — Under excise there is an increase of 1,596,000/. Under assessed taxes and provincial rates there are increases of 1,385,000/. and 984,000/. respectively, owing to the special taxation imposed in the years 1877-8 to pro- vide a surplus for insurance against famine, and imposed this year to meet the additional military expenditure. 1580. This additional taxation to meet these t-n'o ex- ceptional causes of outlay is derived from assessed taxes and provincial rates wholly, is it not ? — Yes ; I have put these two cases together, because they are the only two in which additional taxation has been imposed. 1581. What are provincial rates ? — They are levied on the land and usually collected with the land revenue, but applied to local purposes, such as education or hospitals, or the construction of roads, in the district, and in Bengal there is a rate for public works through- out the province ; but at the time when the special taxation was put on to meet the charges for famine, a provision was made that a small portion, not to exceed 10 per cent, of the funds, might be taken for general purposes throughout the province, and a further rate varying from 1 to 4^ per cent, on the annual value of the land in Northern India was imposed to meet the charge for famine throughout India. 1582. Is that paid into the provincial exchequer or to the central exchequer ? — The whole of the revenue of India is collected by the provincial governments for the central government, and the allotment between the central and provincial governments is a special arrangement which the Commission, J think, need not trouble itself about, because for the purposes of Goverment it may be considered as all general revenue. 1583. Provincial rates are in fact a land tax put on in addition to the fixed land revenue ? — Yes, but on condition that it shall be appropriated to specific pur- poses. It is not available for expenditure on general purposes. 1584. Would it have been supposed to have been a novel interference with the contracts entered into be- tween the Government and the cultivators of the soil if it had been applied to general purposes ? — It would have been, except for the very special purpose of pro- vision against famine, and there it was justified on the ground that, as it could not be said in what district a famine would occur, it was fair that the whole pro- vince should contribute towards the famine charges throughout India, but with that exception the pro- vincial rates are appropriated to expenditure within the district or province in which they are raised. 1585. The distinction seems rather a subtle one; however, it is hardly within our province? — If the Commission would like it, I would give a short ex- planation of the provincial system. 1586. It seems to me to have some bearing on the possibility of raising future taxation, so I think per- haps you had better ? — The Government of India felt that the only way to keep down expenditure was to give the provincial governments an interest in the collection of the revenue and in the expenditure of the money; and in Lord Mayo's time, about the year 1870 the system was begun of giving to each provincial MINUTES OF RVIDENCE, 79 government the responsibility for the expenditure under each particular head, according to its budget for the year, and also the advantage of the revenue which it could collect under each particular head, according to a certain proportion settled in the budget. For instance, to take the case of excise, the excise revenue is necessarily collected, entirely I raay say, by the provincial government, the central government could have no influence over the larger or smaller collection, and the revenues are allotted between the Imperial and the provincial governments. 1587. I understand that the land revenue was settled in perpetuity or for fixed periods ? — Yes. 1588. But in addition to the land revenue there is a land cess which is not fixed permanently or for long- periods. Could that in your opinion be increased and applied to general purposes by the Government ? — The land cesses which were put on to meet the pro- vision for insurance against famine are additional to the rent which is paid by the landholder. They were put on by special legislation, for the specific pur- pose of providing a surplus of revenue over expendi- ture which shall be available to meet the charge that was anticipated on account of famine relief ; but the revenue so derived was not appropriated merely to the charge for famine reliefin any particular year, because it was felt that that charge would occur at irregular intervals, and that what was necessary was not to put on taxation in the year in which the charge occurred, but to have a surplus year by year which should be used either in reduction of debt or in construction of works that would keep down this charge, so that, when a famine occurred, the reduction of expenditure occa- sioned by the appropriation of this surplus should be equal to the charge that then arose. It was estimated that, on a series of years, 15,000,000/. might have to be spent in 1 years, and accordingly provision was made for raising taxes or reducing expenditure to the extent of 1,500,000/. each year. But the Govern- ment of India, in so appropriating it, never earmarked it for any specific purpose, because from the nature of the case that they had to meet it was impossible to do so ; still I do not think that it could be said that the Government could at any moment appropriate that money to meet general purposes, unless they could satisfy themselves that they had already applied a sufiicient sum to the purposes for which the additional taxation was imposed. 1589. Will you continue your enumeration of the items in which there has been an increase ? — I think the stamp revenue is the next, in which there has been an increase of 803,000/. 1590. That is simply due, I suppose, to an increase of trade ? — An increase of litigation, I may say, almost more than trade, for the larger part of it is received from stamps for civil justice. The remainder of the increase in the net revenue is caused by comparatively small improvements of 296,000/. tinder opium, which is rather a reduction of the charge than an increase of the revenue, of 253,000/. under forests, of 80,000/. in the salt revenue. 1591. Is the 80,000/. increase in the salt revenue due to increased consumption on the part of the people or to increased taxation ? — Increased consumption, for there has been a reduction in the taxation. 1592. Would you go on with your enumeration ? — An increase of 61,000/. under registration, and of 17,000/. in the tributes from native states. The latter are fixed payments made by the native states, in some cases for the maintenance of a force to keep order in the state, in some cases rather as a tribute to the paramount power, but they do not vary from year to year, except that perhaps occasionally a small sum may be commuted, or there may be fees paid on succession. 1593. (Mr. Barbour.) They are generally made under treaties, are they not ? — Yes. 1594. (The Chairman.) The trifling increase is owing to alteration of treaties or expiry of old treaties ? Yes, or to accidental circumstances m the year. 1595. Do the registration receipts imply increase of commerce :>— It is an indication of the extent to o 24358, which the people of India have availed themselves „ vJ^^'j; u of the power of registering their records of title, on the "ate^field, payment of a email fee for doing so. _J ' 1596. Would you now enumerate the items on 4 Feb. 1887. which there has been a reduction ? — The customs revenue shows a reduction of 1,242,000/. due to the re- mission of all import duties except those on salt, arms, and liquors. (I may say that the salt revenue is not credited under customs, but under the separate head of salt.) And the refunds, and assignments and com- pensations, have increased by 378,000/., chiefly in consequence of the payments connected with the ar- rangements made for the salt revenue in certain native states. 1597. What are refunds, assignments, and com- pensations ? — I have classed them together as being deductions from the revenue, but they are distinct. The refunds and drawbacks are on account of over- charges under customs or under any other head iji which the payer proves that he is not liable to the charge, and the excess is then refunded to him. The assignments and compensations are, mainly, payments made to the native states as compensation for giving up their right to levy a duty on salt or transit duties on goods passing through their states, and the increase of 378,000/. is to a large extent to be accounted for by the arrangements made in connexion with the salt revenue. 1598. Which of these items, in your opinion, is susceptible of increase to meet any sudden emergency ? — I may perhaps begin by saying what is not sus- ceptible of increase, in my opinion. The land revenue, which is settled in perpetuity or for fixed periods, and the tributes from native states, together amounting to 19,831,700/., are not susceptible of increase to meet a sudden, emergency ; and also it is not possible to reduce the payment of 1,301,000/. for assignments and compensations, which has to be deducted in order to arrive at the net revenue, so as to obtain the figures in the manner in which I am giving them to the Commission. The duties from salt, stamps, excise, provincial rates, (which last head, however, is mainly appropriated to local purposes), customs, and assessed taxes, together amounting to 18,616,500/., might, perhaps, be increased if absolute necessity arose, but the Government of India have stated their opinion that such a measure at present is open to the gravest objection. 1599. The objection being, I suppose, the discon- tent that would be aroused if taxation were increased ? — Certainly ; and also I must remind the Commission that it is not possible to put on taxes and take them off" again, as the exchange fluctuates from time to time. Therefore I hold that such taxes can hardly be held as capable of increase to meet a sudden fall of ex- change. The net receipts from forest and registra- tion are petty, amounting to only 526,200/., and are of an administrative character, not being exacted for purposes of revenue, though the charge for registra- tion could be increased within certain limits. There only remains the opium revenue, 6,576,500/., which it has sometimes been supposed would improve with the fall in the price of silver ; but the payment per chest at recent sales in Calcutta has been lower than at any time during the last seven years. 1600. The fact being, I suppose, that silver has not fallen in India ? —I think to a great extent it is due to that cause, but at the same time the opium revenue is, owing to the ari-angements with China, in what I may almost call a precarious state. It is, perhaps, more likely to fall than to rise. 1601. From the precarious character of the treaty relations between the powers?-— I mean that the amount of revenue received from opium is dependent on the consumption in China, and is affected by the competition of the opium grown in China; and, fur- ther, the tendency of the recent treaty is to enable tlie Chinese Government to collect their dues more fully, for which reason the merchants exporting from Calcutta will be able to give a less price at the sales. 1602. So much for the revenue. Would yon now M 80 ROTAIi COMMISSION ON GOLD AND SILVER: ji^j.^ give us the heads of expenditure ? — The net expendi- H. Waterfleld, ture, by which I mean the expenditure excluding C.B. 4 'Feb. 1887. the direct demands on the revenues, that is, the cost of collecting the revenue, and the assignments and compensations, and also deducting the departmental receipts, amounted in the year 1876-7 to 4O,799,O0OZ., and in 1886-7 to 44,068,000Z. It increased, therefore, in the 10 years by 3,269,000/. 1603. Has this increase of expenditure been an increase in India, or in England, or in both ? — In India the net expenditure has been reduced by 324,000/. In respect of expenditure in England there is an increase of 3,593,000/., of which the sterling ex- penditure accounts for an increased expenditure of 1,081,000/., and the exchange is heavier by 2,512,000/. 1604. (Sir T. Farrer.) Is that 2,512,000 sterling or tens of rupees ? — It is not exactly either. The addition of 1,081,000 to the 2,512,000 will give 3,593,000, which is the number of tens of rupees that has to be paid for the expenditure in this country, but, if you observe, the figure that is added to the sterling is not exactly either sterling or tens of rupees. 1605. (The Chairman.) The sterling expenditure of India in England has increased by 1,081,000/., and the amount of extra rupees it has got to pay in order to liquidate that debt in gold is 3,593,000?— 2,512,000 has to be added to the 1,081,000 in order to find the amount of tens of rupees that the sterling expenditure costs. In order to defray the gold payments in Eng- land, it is necessary to remit from India 3,593,000 tens of rupees. 1606. Instead of 1,081,000/. as you would have had to remit, had there been no alteration in the exchange ? — Had the rupee been worth 2s. 1607. The rupee, I think, never has been worth 2s. ? — Not for nearly 30 years. 1608. So that in reality part of this loss by exchange implies no additional loss through the fall of exchange at all, part of it has always existed, ever since the rupee has been really worth Is. 10«?. whilst estimated to be worth 2s. ? — Part of the charge for exchange ; I would not call it loss by exchange. 1608a. (Mr. Cohen.) 1 think that 2,512,000/. is the increased charge in 10 years, not 30 years ? — Quite so. For nearly 30 years I said the rupee had not been actually worth 2s. 160SJ. 2,512,000/. is the actual increased charge from the fall of the exchange in 10 years. It does not go back to. the time when the rupee was 2s. ? — -It is the actual increase in 10 years. 1608c. (The Chairman.) What you give is the amount that has to be added to the sterling expenditure in order to give the tens of rupees which that sterling expenditure costs ? — Yes. 1609. How has this reduction of expenditure in India been attained? — The net military expendi- ture has increased by 1,531,000/., and the net charge for civil departments by 1,393,000/. On the other hand the charge for interest has been reduced by 1,679,000/., and the railway revenue account is better by 1,026,000/., while the charge for famine relief and insurance is less by 783,000/. Under the remaining heads there has been an increase of 240,000/., and the final result is a red uction to the extent of 324,000/. 1610. The diminution in the charge for interest, I suppose, simply corresponds with the diminution in the capital debt ? — That, again, I am sorry to say, is rather complicated. The practice with regard to the public works is to treat the amount of capital expendi- ture on railways during the year as debt borrowed for the public works, and to charge interest thereon in the railway revenue account. It frequently happens that the Government has not really borrowed to the full extent of the capital expenditure, but has defrayed part of it from revenue or deposits ; and, by dividing the debt into two parts, ordinary debt and the public works debt, adding to the ordinary debt the real amount of the loan, and withdrawing from it the amount of capital expenditure which is put to the public works debt, the ordinary debt may actually be reduced, and in most cases is reduced on the result of the year, so that the charge for interest on debt, as distinguished from that chargeable to the public works, has been reduced in the 10 years by 1,679,000/. There has been an increase, perhaps corresponding roughly to that reduction, in the railway and irrigation revenue account, which has been paid for by the receipts from the public works. 1611. Against the public works account? — The public works account, not the rail\vay account solely, but the public works account generally. The capital is charged against public works. The interest on that part of the debt is charged against the railway and irrigation revenue account. 1612. But the railway revenue account has improved, has it not ? — It has improved in the 10 years to the extent of 1,026,000/. 1613. That is due chiefly, I believe, to the increase of traffic ? — And also to the opening of fresh railways and the traffic on them. 1614. The diminution of 783,000/. for famine relief and insurance, how comes that? — The charge for famine relief itself in 1886-7 is very small indeedj happily, owing to the good harvests in India, there has been very little in the last few years, but in 1878 an arrangement was made by which 1,500,000/. should be provided from revenue to meet the charge for famine and insurance. In the year 1876-7, with which I have been comparing the present year, there was a very heavy charge for famine relief, amounting to 2,145,000/. ; and, as 1,500,000/. is now charged altogether, of which 138,000/. is debited to the rail- way revenue account, the charge under famine relief and insurance is 1,362,000/., or less by 783,000/. than in 1876-7; but, of that 1,500,000/. only 1,000/. is estimated to be spent on the direct relief of famine, and all the rest is set aside for the reduction of debt or construction of works calculated to relieve famine. 1615. The increase in the military expenditure is due, I suppose, in the main to recent events in connexion with the north west frontier ?— Yes, very largely. 1616. But part of it is directly due to the fall in the exchange, is it not ? — Owing to the practice of fixing the daily pay of the British soldier in sterling, and to the Treasury annually determining the rate of exchange at which that pay shall be converted into rupees, the rate being based on the gold price of silver during the previous year, a charge of 284,000/. has been included in the estimate for 1886-7, which would not have been incurred but for the fall in exchange. 1617. (Mr. Courtney.) Would there be no sum in 1876-7?— In 1876-7, the -soldier was paid at the rupee rate fixed for his pay which had existed for many years. A few years ago when the exchange began to fall so heavily, the soldier complained that he was not receiving in silver the equivalent of the rate of pay to which he was entitled as a British soldier; and, on that complaint being examined, it was agreed that the rate which was adopted by the Treasury in regard to Hong Kong, and other colonies where British soldiers are paid in silver, should be the rate of exchange used in determining the amount of the pay of the British soldier in India, and that his pay should be increased so that he should receive for his daily pay the gold value of the silver to which he was entitled under his contract. 1618. When was that made ? — This arrangement was made with effect from the 1st of January 1884. This is the fourth year in which the additional pay has been given. 1619. The fact is that the soldier's pay in India in rupees has been increased on the ground that the rupee does not go so far in India ? — No, that was not admitted, but on the ground that without a certain increase he did not receive the equivalent in silver of the gold payment to which he was entitled. 1620. (Mr. Birch.) He was entitled to the twentieth MINUTES OF EVIDBNCiS. 81 part of a sovereign ?— Yes, for every shilling due to him. 1621. {Mr. Courtney.) Then you hold that he gets more than he would have got ? — He gets more than he would have got under the former system, and he gets more rupees than he would get if the exchange had not fallen. 1622. Under this contract he really gets sub- stantially more, or what goes for more m India, than he would have been entitled to, if there had been no fall in exchange ? — Yes. 1623. {Mr. Birch.) Will you tell us what that exchange is ? — It varies. It is fixed on the gold price of silver in the previous year. The rate this year is \s. Id., but it is fixed for the year that is coming at Is. 5irf., the year beginning on the 1st of April next. It is fixed in January 1887 on the silver price of 1886. 1624. {Mr. Conriney.) The only point I wished to bring out is, that in your opinion the soldier in conse- quence of this legal contract is getting more daily pay than he formerly got ? — As measured by rupees, he is. He is getting the twentieth part of a sovereign daily. If that sovereign is worth 12 rupees instead of 10, he gets the twentieth part of 12 rupees instead of the twentieth part of 10. 1625. {Sir T. Farrer.) And the Indian soldier does not get that ? — The Indian soldier does not. In the pay of the native soldier there is no alteration. 1626. {The Chairman.) Could you give us the details of the increased expenditure in England ? — In the railway revenue account, that is, in the payment of interest to the railway companies, including the annuities granted on the purchase of lines constructed by them and interest on the stock issued in exchange for portions of the annuity, there is an increase of 634,000Z. 1627. Is that for guaranteed interest ? — The pay- ment of interest to the railway companies is the guaranteed interest ; but in some cases the Govern- ment have bought the lines which were constructed by guaranteed companies, and now own these lines on condition of paying annuities to the former share- holders. 1628. Win you go on to the next item.!" — In the interest on the debt not charged against railways and irrigation works the increase is 303,000/. 1629. That implies an increase of the ordinary debt ? — It is due to an increase of the oi'dinary debt. 1630. I thought you had been paying ofE that debt during the last 10 years ? — Not the sterling debt. We have converted some into debt bearing a lower rate of interest, but on the whole I am afraid there is no reduction. 1631. The next item ? — The charge for civil super- annuation in England is increased by 338,000/. ; and in other heads, except the army, the net increase is 11,000/., while the army charges are less by 205,000/. than in 1876-7. 1632. To what is due the increase in the civil super- annuation in England ? — ^Partly to the fact that the civil ofiicers not belonging to the covenanted civil service, who were engaged after the Government of India was taken over by the Crown, and when the country was being considerably developed, are now completing their service and coming on the pension list ; but the greater part of the increase is caused by the Government having closed the civil funds and assumed their liabilities, and also by the covenanted civil servants, who used to draw their annuities in India, having, when the exchange began to fall, preferred to draw them in England. They had that option, and tliey have taken the gold payment instead. 1633. They had the option of drawing them in gold ?_lThey received 1,000/. a year in' gold, or what had been fixed as its equivalent in rupees in India. 1634. {Mr. Fremantle.) What was that equivalent ? —10,666 rupees in Bengal, 10,650 rupees in Madras and Bombay. 1635. {The Chairman.) The army superannuation charges, I think, you stated were less by 205,000/. ? —Yes. 1636. Considering that the army expenditure is generally largely increased, is not that rather a remark-, able fact ? — It is due in a great measure to the excep- tional arrangement with regard to the non-effective charges. It used to be the practice for the Govern- ment of India to pay to the War (.(ffice every year the capitalised value of its share of the amount of non-effective charge that came on during the year, so that in any given year, 1880 we will say, they paid the capitalised value of the amount chargeable to India in respect of all the pensions of soldiers or ofiicers who came on the pension list in that year. The payment in 1880, therefore, wiped off for ever the pension charge for India on that account, and, taken ovet a series of years, it was not an unl'air arrangement. But the Treasury found that the arrangement for certain reasons did not suit them, and about two or three years ago they terminated that arrangement, aild now we pay not the capitalised vahie, but the estimated proportionate value of the charges for each year. The result was that, in the first year in which that occurred, instead of paying perhaps 800,000/, for pensions, we only paid 80,000/. In the second year we shall pay, perhaps, 160,000/., and after 10 years we shall be again paying our 800,000/. or more. But during these intermediate years there is a very considerable reduction under that head. 1637. But it is a purely nominal reduction ? — It is a nominal reduction due to the fact that the charges for this year were paid some years ago. 1638. Quite so ; it implies no economy in the home charges ? — It implies no economy. 1639. What has been the average rate of exchange at which remittances have been effected during the last 10 years ? — Remittances in 1876-7 were effected at approximately 1*. 8\d. the rupee. 1640. Supposing the sterling expenditure in England had remained unchanged during those 10 years that you have been dealing with, how much would the Indian taxpayer have been saved ? — If the sterling expenditure in 1886-7 had been the same as in 1876-7, but the rate of exchange had fallen from 1«. 8^rf. to \s. Qd. the rupee, the charge for exchange would have been increased by about 2,157,000 tens of rupees. The actual increase has been 2,512,000 ; therefore 353,000 is due to the increase in sterling expenditure, and 2,157,000 to the exchange. 1641. {Mr. Courtney.) The 1,081,000/. sterling expenditure by which the net expenditure in England has increased, has caused an increase altogether in tens of rupees of 2,157,000 plus 355,00?— Yes, the increase of sterling expenditure coupled with the fall in exchange. 1642. {The Chairman.) Does this increase repre- sent a real burden thrown upon the Indian Exchequer ? — I must explain that the symbol for pounds sterling is used in the Indian accounts, but that the figures are really tens of rupees, with the exception of the ex- planation 1 was giving just now regarding the expendi- ture in England. The receipts and the expenditure in India are in tens of rupees. The payments in England are divided into two columns, one being the sterling and the other the addition for exchange. The aggregate of the two columns headed England and exchange is in tens of rupees ; and the total is in tens of rupees, so that any increase in the number of rupees required to meet the payments in England is a real burden, whether it arises from a larger expendi- ture in sterling, or from an enhancement of the number of rupees required for remittance to defray a like amount of sterling expenditure. 1643. It represents a real burden upon the Indian Exchequer, but the figures do not represent exactly what that burden is ? — No, the increase of the figures will represent the increase of the real burden, but the whole figure put down under exchange must not be considered as a loss. 1644. Could you give us any illustration of the extent to which the burden affects the Indian Exchequer? — The net expenditure in England in 1876-7 was 13,230,000/. ; supposing that it had been M 2 Mr. H. Watfrfield. C.B. 4 Feb. 1887. 82 ROYAL COMMISSION ON GOLD AND SILVER : Mr. ff. Waterfield, C.B. 4 Feb. 1887. fixed at that amount for the next 10 years, and that the rate of exchange had remained at \s. 8|e?., it would have cost the Government of India 15,483 lakhs of rupees to pay in England the sum of 132,300,000^. sterling in thatperiod. At the rates which have actually prevailed, and taking the budget estimate of Is. Qd. for this year, the remittance of 13,230,000^. annually would have required 16,309 lakhs, so that 826 Iftkhs of rupees, or nearly 83,000,000 rupees, of taxation has been levied during the decade on account of the fall in exchange, apart altogether from what may have been needed in consequence of an increase in the sterling requirements. 1645. You would regard that as a very serious addition to the taxation of any country, and especially serious in the case of a country like India which iinds it extremely diflBcult to augment its taxation ? — Exactly so. 1646. Besides the embarrassment and difficulty in which the Indian Government are thrown for this reason, what effect on the practical administration of the finances of the country has this uncertainty pro- duced ? — I think it is the uncertainty which is almost a greater evil than the actual charge, although the actual charge is very serious. But, owing to the un- certainty, it is almost impossible for the Government of India to form accurate estimates of the charge which has to be met from year to year. 1647. Would you give us an example of that ? — Taking the two last years, — ^when the budget for 1 885-6 was under consideration, it was necessary to fix a rate at which the remittancea to England during the year should be estimated. In 1882-3 and 1883-4 the average drawing rate had been above \s. 7^d., and in the year then closing it had slightly exceeded 1*. 7^d. For the sake of prudence, however, it was taken at Is. Id., at which rate the amount needed to defray the net expenditure in England in 1885-6 v/as 1,788 lakhs of rupees. Exchange fell to an average of Is. 6\d., requiring for the same sterling expenditure 1,862 lakhs, so that the Government of India had to meet a charge of 74 lakhs (740,000 tens of rupees), entirely beyond their control, for which no provision had been made. Again, in framing the budget for 1886-7 exchange was estimated at Is. 6d., at which rate the nett expenditure in England, which only ex- ceeded the estimate of 1885-6 by 177,300/., would have required the remittance of 1,911 lakhs. Before the end of March, however, exchange fell below Is. 6d., and with very little intermission it sank till it touched Is. 4^rf. in the beginning of August. The average rate up to the present time is about Is. 6^^d., at which rate, supposing that it should prove to be the average for the whole year, the same sterling expenditure would require 1,976 lakhs, or an excess of 65 lakhs (650,000 tens of rupees), for which provision has not been made. 1648. This condition of things has, of course, occu- pied the attention of the Indian Government for some time past. What remedies have been proposed for meeting it ? — The first possiblq course for adoption, which has been under the consideration of the Govern- ment is, whether the levenue should be increased by imposing additional taxes ; but, as I have already said, snch a step is considered to be most impolitic, at the present time particularly. Secondly,, there is the question of whether the expenditure shall be met by raising a loan ; besides adding to the general in- debtedness, and consequently to the future charges, that remedy would, if the money were borrowed in England, aggravate the evil by increasing the remit- tances in subsequent years. The third remedy is to i-educe the expenditure; but I must point out that in that case the reduction, if it is to be at all large, can only be efEected by suspending public works, whicli implies the arrest of the progress of works greatly needed for the various branches of the administration, or the pro- vision of roads, or other material improvements; throwing out of work bodies of labourers who have been collected at considerable expense, and rendering idle the highly paid supervising establishment, so that much money would be wasted. The fourth possible course is to suspend the operation of the famine insurance, that is to say, to take the revenue which is annually devoted to the redemption of debt incurred on account of famine, and to the prosecution of rail- ways and canals designed to protect the country against famine, and to use that money in defraying the addi- tional cost of making the remittances to England. 1649. We have already discussed to a certain ex- tent the policy of the last course, but I understand your view to be that it would have the double evil of preventing that process of paying oflf the debt for famine which is now going on, and also of being something in the nature of a breach of faith with the people of India ? — It is open to both these objections, although it would perhaps not be right to siiy that it is literally a breach of faith, because no exact promise has been given ; but certainly the understanding was that the additional taxation, which was put on for the purpose of defraying the recurring charge for famine relief, was to be devoted to meeting the specific charge caused by the increase of famine expenditure. 1650. Is that understanding one that obtains merely in Government circles, or is it one to which the Government and the people are parties ? — It is one which was not merely recognised by the Govern- ment, but very greatly pressed by the native members of the Legislative Council at different times when the question has been under consideration. 1651. And I suppose the fact that, as you have already explained to us, this land cess for faiuine purposes is rather an exceptional kind of tax, brought home to the people of India the fact that it is ear- marked for this particular purpose ? — Quite so. It is viewed to a great extent by them in that manner. 1652. And they would not tolerate what is practi- cally an addition to the land tax for general purposes, except -on the conditions which you have already stated ?— It is vei-y doubtful whether- it would be accepted without great discontent. 1653. How has the uncertainty in the ratio which obtains between silver and gold affected the borrowing power of India ?— As long as the ratio of value between gold and silver was stable, the Government of India was able annually to borrow in rupees the sums it required for the prosecution of public work.=, though, doubtless, a large part of the loans may have' been subscribed by capitalists in England. When the fall occurred in the price of silver as measured in ■gold, and with it in the gold value of the rupee and of rupee securities, and the uncertainly of the future sterling value of such investments became apparent, the Government of India reported their inability to raise the requisite sums in India ; and consequently in recent years recourse has been had to borrowing in sterling. It is evident that the burden of the interest on loans contracted in sterling continually increases as the exchange falls. 1654. Has that impediment to borrowing affected private enterprise in India as well as Government transactions ? I understand that the English capitalist now entirely declines to lend to .India, except under contract that he shall be paid the interest in gold ? As a rule that is so. . 1655. Has that fact impeded the English capitalist lending to private enterprise in India ?— I am afraid I can only speak from our experience with regard to local bodies, such as port trusts and municipalities. The port trusts at Calcutta and Bombay found them- selves utterly unable to raise money, even with the Government guarantee, in rupee securities, and the Government were obliged to borrow the money them- selves and advance it to them. 1656. I suppose that these local bodies would not have sufficient position in the English money market to borrow in London in sterling for themselves ? They could only do so at an enhanced rate, but I think that the Government would not permit them to borrow on their own account. It would be liable to so much conflict between the Government loans and the municipal loans, that I think it would probably not be thought right to permit them to come into the market Minutes of MviDENcil. 83 here. It would be preferable, if money was obliged to be raised here, that the Government should raise it at a cheaper rate and advance it to them. 1657. You would find it very inconvenient here to be competing in the sale of the bills with large Indian local bodies ? — Yes. 1658. {Mr. Barbour.) And the Secretary of State refuses to allow the local bodies to borrow money themselves ? — Yes, in England. 1659. {Mr. Cohen.) The Secretary of State has power to borrow in India without coming to Parlia- ment ; but if he borrows in London he must come to Parliament ? — Yes, that is so. 1660. ( The Chairman.) The result of that is that the debt of India has increased ; in other words, that the central government have been obliged to borrow in order to lend in their turn to the municipalities ? — Yes; I think I should have said the port trusts, because the loan raised last year was for them. 1661. How has the fall in the exchange affected the servants of the Government ? — In many cases the furlough pay is issued to the servants of the Govern- ment in rupees converted at the rate of exchange annually fixed for the adjustment of transactions with the British Government, which is based on the mean cost of sending a remittance to and from India at the time that the rate is fixed ; and, therefore, the lower the rate of exchange falls, the less is the sum which they receive as the equivalent of their pay in rupees. The pensions of civil officers, other than those in the covenanted civil service, are also paid in rupees in India, or, if drawn in England, are only convertible into sterling at the rate of exchange annually fixed in the manner 1 have just described. The family re- mittances which are authorised up to a limited amount to be sent through the Government are affected in the same manner. And all private remittances, in- cluding those of the accumulated savings of years passed in India, can only be brought to England at the price at which bills can be bought in the market. I may mention that the Government of India has recently forwarded memorials, of which 82 have been already received, from servants of the Government, praying to be allowed to make remittances at the rate of 2*. in the rupee. 1662. Is that i-ate the same as is adopted with regard to the payment of private soldiers ? — It is not fixed on exactly the same principle. The Treasury fix the rate for the payment of a private soldier solely on the price of silver in London for the previous year. In this case it is a rate for pay- ments of the Indian Government to the Treasury and by the Treasury to the Indian Government, and con- sequently it is based on the mean cost of sending a remittance to and from India, not only on the price of silver in London, therefore it is usually rather higherwthau the Treasury rate. 1663. The cost of transit is included in the estimate ? — Yes ; and the lower the exchange rate falls at which this furlough pay is to be issued, the less is the sum which the servants of the Govern- ment receive as the equivalent of their pay in rupees. 1664. Will you explain to us what is the distinction between a covenanted civil servant and another? — The " covenanted " civil servants are the civil servants who enter the service by public competition. They are appointed for the higher class of appointments, are paid at a much higher rate of salary, and have their pensions fixed in sterling. The " uncovenanted servants, or the portion of the civil service which is not known as " covenanted," is in principle appointed in India, although in some cases the IndiMi Govern- ment apply to the Secretary of State for officers, such as educational officers and engineers, but m principle they are officers appointed by the Government of India ^" 1665. Is it not a fact that whether these un- covenanted servants suffer a loss by the uncertainty of exchange depends really upon whether silver has fallen or on whether gold has risen ? In other words, if silver has not fallen, the covenanted servants get a Mr. If, on the ^- ^^'^-fi"''' great deal more than they bargained for; but the uncovenanted servants do not get less other hand, silver has fallen, the uncovenanted servants do now, no doubt, get less than they antici- 4 Feb. 18?7 paled? — I think I may give a general answer that that would be so. 1666. Have you any idea as to whether silver has fallen or gold risen in India? — So far as I can judge from prices in India, silver has not fallen. Prices calculated in silver have begun to fall quite lately; but till very recently I could detect no evidence of anv change. 1667. Has not that fact a very important bearing upon the question as to whether this additional taxa- tion, which is required to meet the fall in exchange, is a nominal or a real burden upon the people of India ? — It has a very important bearing on the position of the people of India, as distinct from the position of the Government, if I may say so. 1668. The Government of India would be in a difficulty in raising the nominal amount of taxation, whether the real amount was raised at the same time, or whether it was not ? — Yes. 1669. But supposing that silver has fallen in value, then, if they could get over the difficulty of raising the taxation, the burden on the people of India would not thereby be increased at all ? — Quite so ; if they could get over that difficulty, I only meant that there was that difficulty. 1670. But, if silver has, as a matter of fact, not risen but fallen, the burden thrown on the people of India, caused by what is called the loss by exchange, is not a nominal but a real loss ? — Quite so. . 1671. {Sir T. Farrer.) It is silver prices you are speaking of, not the value of silver, is it not? If the value of silver rises, silver prices fall ? — I meant the silver prices. 1672. Silver prices having fallen in value, and silver having risen in value, aggravates the real burden on the people of India ? — Yes. 1673. {Mr. Birch.) Would you say that a rupee, for insta,nce, would buy more now in India than it did a short time ago ? — Yes, to some small extent. 1674. {Mr. Chamberlain.) Therefore the rupee is worth more in India as a purchasing force than it was some time ago ? — Than it was two or three years since. 1675. That is exactly the opposite of what one would have supposed from the alleged depreciation of silver ? — No, that is not quite so. The fall in the gold price of commodities is so aggravated that it has more than overtaken the fall in the gold price of silver, but both have fallen. 1676. {Mr. Courtney.) Going back to the private soldier it would come to this, that he has a double advantage, one that he has more rupees given to him on the ground that the value of the rupee has fallen relatively to gold, and another that the rupee fetches more in the market ? — Yes. 1577. {Mr. Barbour.) Prices greatly depend on the seasons, and this special faU. may be due to good seasons in India during the last few years ? — Yes, there have been very good seasons. 1678-9. {Mr. Chamberlain.) I understand you to say that there has been very little change ? — I think, practically it may be said that there is no change, and that the purchasing power of the rupee in India is much the same as it was. 1680. {The Chairman.) But, if it has changed, it is a change in the direction uf an increase, and not in the direction of a diminution ? — Yes, in quite recent years. 1681. Can you put in a statement showing the amount of the remittances of the Government of India for payments on old or fixed contracts, and for payments on new or current contracts respectively ?— I put in such a paper, with a note explaining the principle on which I have prepared it. {See Appendix VIIL A.) 1682. Have you any opinion as to the infiuence which the recent fall in the value of the rupee esti- 8i ROYAL COMMISSION ON GOLD AND SILVEE : H. Mr. Waterfield, C.B. 4 Feb. 1887. mated in gold lias had upon the export trade o£ India? — The average value of the exports of mer- chandise from India in the 10 years ending with 1855-6 was 18,184,000 tens of rupees ; in the next decade it was 42,692,000 tens of rupees, an increase of 135 per cent. ; in the 10 years ending with 1875-6 it was 54,151,000 tens of rupees, an increase of 27 per cent. ; and in the last 10 years it has been 74,968,000 tens of rupees, an increase of 38 per cent, on the previous decade. 1683. There is no marked conformity between those figures and a theory which would make a fall in the exchange a great stimulating cause of export ? — No, i could see none. 1684. {Mr. Courtney^ How are those valuations made ? — They profess to be the real values. They are taken from the merchants' invoices, and to the best of the ability of the Government they are the real values. They have a legal power to check them, and do so as far as they can, but I have been in some cases testing them, and I find that the average value, deduced by dividing the values by the quantities, does not give the real value quoted in the markets ; that may, however, be due to the fact that the average values are taken at all ports throughout. the country, and that the value quoted in the prices current is the value at one particular port at the time of year to which they refer. 1685. But there has been no variation at all events in the method of valuation ? — There has been no variation in the principle, but for the last 10 years more pains have been taken to render the valuations more accurate than before. Formerly they were frequently taken from taritf valuations, which were usually an under-estimate. 1686. {Sir John Lubbock.) Do your investigations lead you to think that the actual amount is smaller or larger than the estimated figures ? — I think in the earlier years the tariflf valuations, generally speaking, were under the real value. 1687. Then in point of fact the apparent increase is larger than the real increase ? — I think so. 1688. {Mr. Barbour.) That would only be for the last 10 years ? — It would only apply to the last group of years. 1689. {The Chairman.) But on the whole you think these figures may be trusted ? — 1 see no reason for distrusting them generally. 1690. {Sir T. Farrer.) They are as good at any rate as our own in this country ? — I think so. 1691. {Sir John Lubbock.) And you apply that opinion as well to 1855 as to the subsequent dates ? — I apply the same opinion to all. But the Secretary of State in the year 1875 did call the attention of the Government to the importance of making these statistics accurate, and the Government of India promised and gave instructions to have special pre- cautions taken, so that I think there is reason to suppose that the returns of the last 10 years are more accurate than those of former years. 1692. {The Chairman.) What in your view has been the principal cause of this increase ? — In my opinion, the cbief cause is the great development of the railway system in India, combined with the facilities afforded by the Suez Canal, and consequent reduction of freight. In illustration of that, I may mention that at the beginning of 1856 the number of miles of open railway was only 273 ; in 1866 it had increased to 3,569, that is by 1,207 per cent. ; in 1876 it was 6,838, or 91 per cent, more than 10 years pre- viously ; and in 1886 it had risen to 12,376, or an increase of 81 per cent, on the open mileage of 1876. The railways, however, could not have facilitated the export of produce if there had not been surplus pro- duce to export ; and doubtless the abundant harvests of the last seven or eight years have greatly tended to the augmentation of the volume of trade. 1693. The fact, I suppose, that Indian exports are almost entirely of raw produce, and are bulky, and depend to a great extent upon seasons, rather supports the contention, that you have just laid before us ? — I think so. 1694. There are persons, are there not, who hold that a fall in the exchange gives a permanent stimulus to the export trade i" — Tes, that view has been advocated in India especially. 1695. You will probably be of opinion that, if the exchange remains steady, one particular ratio of ex- change is no better for the exporter than another ? — I think so. 1696. But there remains the question as to whether a change in the rate of exchaiige does temporarily, and while it is going on, afford a stimulus to the ex- porter. What is your opinion on that point? — I think that such a fall does give a momentary stimulus, and that a rise on the contrary would give a momentary check. 1697. Would you explain the mechanism of that, the exact mode in which a fall does stimulate export ? — A merchant in this country who wishes to bring home produce, sees that his gold will buy more rupees, and he is led to hope, therefore, for a larger gold return. He consequently gives an order for the export of produce from India, and, if the bargain is made, an it frequently is, by telegraph at fixed rates, he perhaps doe's make a profit ; but almost immediately it is found that, to meet the reduction of gold price which occurs through bringing home commodities to a large extent, some counterpoise is requisite. It may take place in the freight, or iu prices in India, or in exchange. When it takes place in exchange, where there is a fall that just countervails the reduction of gold price, the stimulus passes away at once, and the trade wiU then be in the position in which it was before the fall took place. 1698. Then the mode in which the stimulus acts is by exciting the hopes of the English importer ? — Yes. 1699. The merchant thinks that there will be a further fall, that what has happened in the past will happen in the future ; he counts upon that, and he gives a larger order to the Indian producer than he otherwise would do. Is that your view ? — I think so. 1700. But would the exporter in India not be quite as capable of making a forecast as the importer in England, and would he not discount the probability of that additional fall in exchange ? — I think that, as soon as the fall in exchange has taken place, and the gold price has been reduced, the fall in exchange on the one side, and in the gold price on the other, the trade then assumes its former position. If a fall in gold price occurs, the trade would be stopped, without a reduction in the exchange. A reduction in exchange is necessary in order to enable the trade to go on, and so far the trade is momentarily stimulated ; but I should rather describe it as the avoidance of a check in the trade, which would have occurred had the gold price fallen without a corresponding fall in exchange. 1701. By gold price do you mean gold price of silver or gold price of commodities ? — I mean price of commodities. In my opinion a fall in exchange does not occur before a reduction of the gold price, but as a consequence of the reduction of the gold price, of commodities. 1702. {Mr. BirchT) It has something to do with the demand surely for the commodities ?:-^The price has to do with the demand for the commodities, not the exchange, I think, except as a consequence. 1703. {The Chairman.) Your view of the nature of the stimulus given to trade is that it arises simply from the expectations of profit raised iu the breast of the English importer. Is that so ? — Yes ; the trade which would ordinarily go on, owing' to there being a large harvest in India, or a want of commodities here in England, would be checked but for this fall of exchange, and therefore the fall of exchange brings the stimulus to enable the trade to go on, and removes the check that otherwise would have occurred. 1704. Then what you rather mean is, that if the gold price of everything else fell, but the gold price MINUTES OF EVIDENCE. 85 of. silver did not fall, there would be a check to export ? — Yes. 1705. Therefore the stimulus to trade of which you spoke simply amounts to this, that silver follows the course of other commodities in falling relatively to gold ? — Yes, that is my meaning. 1706. And as that does happen, a dislocation of the market, which otherwise would occur, is avoided ? —Yes. 1707. The true account therefore is that a check to the Indian export trade is avoided by the fact that silver follows the price of other commodities, not that a stimulus is given to it ? — That is my view. 1708-9. {Mr. Barbour.) Over what period does your personal experience of the finances of India extend ? — I have been Secretary of the Financial Department for eight years, but in my position in the India Ofl&ce I have had frequent occasion to study the finances of India for years before that. 1710. And during that period I understand you to say that you have had practical experience of the em- barrassment and loss caused to the Government of India by fluctuations in the gold value of the rupee ? — Yes, constantly. 1711. And you think that the evil of fluctuations in the gold value of the rupee is one of great magnitude as aflecting the finances of India ? — Certainly. 1712. Do you think it would be good policy for the Government of India to submit, if necessary, to a considerable sacrifice, in order to get rid of future un- certainty regarding the gold value of the rupee ? — Yes, I do. I think they would be glad to do so. 1713. Have you actually known instances in which the Government of India hesitated to undertake the construction of railways required for the protection of India against famine, owing to the financial embarrass- ment caused by a fall in the rate of exchange, and uncertainty regai-ding the future of silver ? — Yes, the Government of India has been hindered in its policy of developing the system of famine railways, by the additional charge caused by the fall in the exchange. 1714. And is the policy of the Government of India in regard to these railways and public works generally frequently modified owing to the financial embarrassment arising from these causes ? — Yes, and I might almost say it is more than modified ; it is guided to a great extent by them. The budget has to be framed with the view to the possibility of such a fall occurring. 171.5. If there was a fixed rate of exchange between gold and silver, would it not be possible for the Government of India to undertake the construction of more railways and canals than they can safely do now ? — Yes. 1716. Than it could with prudence safely do now? — ^It is so, because it would then not have to fear the possibility of an extra charge occurring through a fall in exchange. 1717. And do you think that a large extension of public works in India would be beneficial to the people of India ? — Yes. 1718. Would not a large extension of public works in India also provide an additional market for iron, steel, and railway material generally ? — No doubt it would, for the construction of railways. 1719. And would it not extend the field for the profitable investment of capital ?— Yes. 1720. Would it not consequently be beneficial both to England and India ?— I should think so certaujly. 1721 Are the advantages to be derived from these sources'now limited by the instability in the relative value of gold and silver ?— Yes. 1722. And I think you said that the same cause tends to prevent persons whose capital is in gold from investing money in India ?— Yes, they wiU not lend money to the Government, if the return is to be in 1723. Is it the case that the silver securities of the^ Government of India are now brought to England in less quantities than before ? — ^Yes. 1724. And do you ascribe this result to an un- Mr. willingness of investors to hold silver securities ? — ^- 1^'«J'.^«'«j Yes, it is so. Within the last three years it has been _J__' marked. I could go further, and say that there has 4 j-g^. 1887. been a transfer of rupee securities back from England to India last year to the extent of 1 10 lakhs. 1725. And formerly it was the other way ? — ^^It was the other way. From 1876-7 to 1882-3 about 200 lakhs were brought over on an average every year from India to England. In the years 1883-4 and 1884-5 it went the other way, but very slightly; and in 1885-6 more than a crore went back again. 1726. I think you said that the uncertainty regard- ing the future value of silver compels the Government of India to borrow in gold, although its revenue is payable in silver ? — ^Yes, in the last two years. 1727. And do you think that the increase of the gold obligations of India is a great evil ? — Certainly it is, in my opinion. 1728. And if a great war or famine were now to occur in India, would not the Government of India have to borrow still more largely in gold ? — Yes ; they could not possibly raise money in silver, as far as can be foreseen. 1729. And that would be an increase of the evil ? — Just so. 1730. I believe the Government of India has recently undertaken to make reductions of expendi- ture ? — Yes, a commission was appointed for the purpose. 1731. Is it the case that the bulk of this reduction, so far as you know, will fall . on local or provincial governments ? — I believe it will fall very largely, almost entirely, on them. 1732. And I think the money at the disposal of the local and provincial governments is entirely set apart for the purpose of the internal administration ? — Yes, of the province to which it belongs. 1733. Can you say whether the reduction of expen- diture will be wholly or mainly a reduction of expen- diture that was unnecessary, or an expenditure that did not give an adequate return in one form or another ? — I have no reason to think that it was not an expenditure that was most desirable, though perhaps not absolutely necessary, and the reduction would fall on very desirable expenditure. 1734. This reduction of expenditure will involve the construction of fewer roads and bridges and the establishment of fewer schools aad courts of justice and hospitals, and will generally involve a check on the progress of the country ? — Yes, generally. Espe- cially I suppose it will occur in local public works. 1735. Is it your opinion that no, such check would have been necessary if exchange had not fallen below Is. ^d, per rupee, the rate taken in the estimates of 1882-3 ? — Yes, there would then have been sufficient surplus to render such a reduction unnecessary. 1736. It is generally said that a fall of \d. in the rupee imposes on the Government of India an additional expenditure of 10,000,000 of rupees. Is that state- ment correct, speaking generally ? — It is approximately correct. The lower the rate on which the fall is taken, the greater is the charge. A reduction from Is. &d. to \s. 6d. would be more than 10,000,000 rupees. At Is. Id. it was 10,000,000 rupees. 1737. Have you seen a calculation that a fall in the exchange from Is. 6d. to Is. 6d. per rupee would have made a diflference in the estimates of the current year of more than 11,000,000 of rupees, and do you consider that calculation correct ? — Yes, I think so. 1738. Do you find it possible to forecast at the beginning of each year, or from time to time, the probable rate of exchange six months ahead ? — No, certainly not. 1739. In the paper which you have placed before us you have put down the excess this year at 940,000 tens of rupees ? — I had so put it when I prepared the memorandum, but I have had occasion to alter that recently. 1740. In your evidence I think you said 650,000 86 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. Waterfield, C.B. 4 Feb. 1887. tens of rupees ? — Yes, or a difference of 290,000 tens of rupees. 1741. Why did you make that alteration? — At the time I drew up this paper, which was a few weeks ago, the average rate of exchange on the whole year had then been Is. 5^d., but the higher rate at which the bills have been sold during the last month or two has made a difference of \d. per rupee on the exchange of the year. 1742. This occurred in a fortnight? — No, I find that the former calculation was made about the 8th of December, so that the improvement has occurred in eight weeks. 1743. A difference of 290,000 tens of rupees ?— Yes. 1744. Do you find that the uncertainty caused by the inability to forecast the rate of exchange is a serious hindrance to any policy in India involving an expenditure of money ? — Yes, very great. 1745. I think you said that the Q-overnment of India is in a peculiar position as regards taxation. Do you mean that, as a foreign Government, it has to exercise special caution in regard to the imposition of taxation ? — Yes. 1746. The people of India are very conservative and suspicious in their ways ? — Yes. 1747. And fluctuations in taxation in India are specially to be deprecated on this account ? — I think so. 1748. Is not the Government of India also in a peculiar position regarding taxation, owing to the fact that it has to consult the wishes of two countries ? For example, a form of taxation to which the people of India would not greatly object might be very strongly objected to in this country ? — Yes, in the case of the import duties especially. 1749. Are not the finances of India specially liable to be upset by the periodical occurrence of droughts, and by the precarious nature of the opium revenue, which is derived from a tax on a drug consumed by a foreign people, and a drug which tliat people largely grow in their own country ? — Yes. 1750. Does not drought seriously affect the land revenue, which is in many respects of the nature of rent, and does it not from time to time involve the expenditure of large sums in the relief of distress ?— Yes, it does. 1751. And is not the state of affairs beyond tlie north-west frontier a cause of additional expenditure, and is not this a cause which may very likely lead to further expenditure from time to time ? — I am afraid so ; it certainly is such a cause. 1752. Looking, then, to the position of the Govern- ment of India as a foreign Government in India, and to the special and unavoidable causes of uncertainty whicli affect Indian finance, and to the great objec- tions to change in the amount and form of Indian taxation, is it not specially important to remove any ground of uncertainty in the future which it is prac- ticable to remove ? — Yes, it is very desirable that it should be removed. 1753. You have said that the revenue from salt, stamps, excise, provincial rates, customs, and assessed taxes might perhaps be increased in case of absolute necessity ? — In case of absolute necessity they might, perhaps. 1754. Are not complaints made at present that the existing rate of duty on salt prevents the poorer classes obtaining for themselves, and especially for their cattle, a sufficient supply of salt, and would not very great objections be raised to any proposal to in- crease the present duty? — Yes, that is so. In saying that those taxes might perhaps be raised, I wish par- ticularly to guard myself against being understood to mean that it was desirable that they should be increased. 1755. With regard to stamps, are you aware that niany people consider the duties too high .'it present, and that an agitation lias more than once arisen for the reduction of what are called court fees ? — Yes ; that applies to about two-thirds of the stamp revenue, I think. 1756. With regard to the excise, is it not the fact that the Government of India has never felt any hesi- tation about increasing the duties on drugs and spirits, that its policy has avowedly been to raise the maximum of revenue from this source consistent with not encou- raging consumption ; and is it not possible that any raising of the rate of excise duty might be followed by a decrease rather than an increase of revenue ? — I believe that would be the case. There has been a very remarkable falling off in the consumption of excise liquors in some districts in Bombay lately, and it seems probable that there will be a very serious loss to the revenue in that presidency. 1757. And the rates of duty have been largely in- creased there ? — The rates of duty have been gradually, but considerably, increased. 1758. Do not the provincial rates take the form of a cess on income from land ? — Yes. 1759. And might not any increase of such cess for general instead of local purposes be fairly held to involve an alteration of the land settlements ? — I think it would be open to that complaint, certainly. 1 760. In speaking of the customs, I suppose you refer to the duties on imports ? — In speaking of the possibility of raising them, I did. I do not take the export duty as being open to increase. 1761. Would there not be practically insuperable difficulties in the way of reimposing the import duties ? — I think so. 1762. Is there not at present a duty on the export of rice ? — ^Yes. 1763. And have not claims for its abolition been put forward more than once ? — Yes ; it has frequently been considered by the Government of India, and it is probably one of the first taxes that they would remove if they could do so. 1764. With regard to the assessed taxes, is not the present rate about 6d. in the pound on income ?■ — Yes. 1765. And have not strong objections frequently been taken to this tax in India ? — ^At various times there have been great objections taken. 1766. Have not the objections entertained to the income tax more than once led to its abolition ? — ^Yes, it was abolished by Lord Northbrook, and at an earlier date also. 1767. .And do you not think that any alteration of the duty, and especially any attempt to raise it, might provoke another agitation for its removal altogether ? — It is very possible. 1768. I believe the Secretary of State issues gold securities, on which interest is payable in gold in London ? — Yes. 1769. And the Government of India issues silver securities, the interest on which may be paid at the Bank of England by draft on India ? — That is so. 1770. Both these securities, I believe, are dealt with in the London market ? — Yes. ] 77] . Have you got any figures showing the price of the^e securities in the London market before the divergence in the relative value of gold and silver, and at the present day ? — The price of 4 per cent, rupee paper in Calcutta was in 1873 105 J, and last year 98. ^ In London in 1873 the price of the rupee paper was 97f, and last year it varied from 74 to 65. 1772. The gold securities have not fallen so much, have they ? — The 4 per cent, sterling stock varied in 1873 from 106 to 101, and in 1886 from 104 to \Q\\. The fall there was slight, and was due to the exceptional fact that they are liable to be paid off at par in 18 months from this time. In London the price of 4 per cent, rupee paper varied in 1873 between 98 and 93, and in 1886 between 74 and 65. 1773. {Mr. Courtney.) That just corresponds to the fall in the exchange ? — As nearly as possible. I believe it is valued from day to day. 1774. {Sir John Lubbock.) The gold security, however, is not tempting, as it is to be paid off so soon ? — I think the 4 per cent, stock is not MINUTES OF EVIDENCE, 87 tempting, but the 3^ per cent, has ranged in 1886 from 102 to 99, giving a mean of 100^, which is very little under the value of the 4 per cent, stock 13 years ago. The gold credit of the Indian (xovernment has clearly risen, I think. 1775. ( TAe Chairman.) That loan at 3^ per cent, is not payable off immediately ? — No, not for 44 years. 1776. (J/r. Barbour.) It appears that the silver securities have fallen over 25 per cent, as compared with the gold securities? — From the maximum to the minimum is 33 per cent., I think. 1777. Before 1872f the persons who invested money in these securities had no reason to suppose that silver securities would faU more than gold securities? — No, I think not. 1778. And does it not appear to you very unde^ sirable that the securities issued on the credit of the same Government, held by the people of the same empire, and dealt with in the London market, should be subject to such a great divergence in the relative value ? —It would certainly be very desirable to avoid it. 1779. Bearing in mind the fact that originally there was no ground for supposing that there would be any considerable divergence in the relative value, do you not think that either the holders of silver securities have been very unlucky, or the holders of gold securities have been very fortunate ? — Certainly one way or another a change has taken place. 1780. Are you of opinion that the currency arrange- ments of an empiife in which this change occurs are in a satisfactory state ? — No. 1781. I think you said that you do not think that the fall in the relative value of silver has specially stimulated Indian exports? — No, I do not think it has. 1782. Is it not the fact that, speaking I'oughly, India exports yearly about 85 crores worth of com- modities, with which she purchases 55 crores worth of foreign commodities, 8 crores worth of silver, and about 22 crores worth of gold, the gold being partly imported into India, but mainly used to discharge India's gold liabilities ?-^Including the payments in gold ; yes. 1783. That is how the 85 crores of rupees are dealt with ?— The figures, I think, are an average import of 4,000,000. of gold and an average payment of 18,000,000. tens of rupees in regpect of expenditure in England. That is about the same, 22 millions altogether. 1784. And in so far as India exchanges 55 crores worth of Indian commodities for 55 crores worth of foreign commodities, say wheat for piece goods, can you see how India derives any benefit from an altera- tion in the relative value of gold and silver ? — No, not as regards that portion of the trade. 1785. If the fall in exchange translates the gold price of the wheat which she sells into a larger num- ber of rupees, the very same cause and to the very same extent translates the gold price of the piece goods which she buys into a larger number of rupees, so that the gain exactly balances the loss ?— I think so 1786. And in so far as India purchases gold and silver with the commodities which she exports, the alteration in the relative value of silver and gold merely shows that, as compared with what was formerly the cage, India is purchasing her gold relatively dearer and her silver relatively cheaper ? — Yes, I think so, ■ ,. , 1787. And, as a matter of fact, has not India now to give as much produce for silver as she formerly did, and has she. not to give more produce for the gold which she requires ? — Yes, that is so. 1788 Do you see any special gain to India in that state of affairs ?— No, certainly not. 1789. I propose to ask you a few questions with regard to the system under which stores are supplied from England for the use of the Government of India. If the Government of India requires an article from o 24368. England, say a steam engine, I believe their custom Mr. is to ordei* it through the Secretary of Stale ? — Yes. -K WaterJieU 1790. And the Secretary of State purchases the C'.B. steam engine, say for 500/., and sends it to India ? — , ~ — Yes ° ' •' 4 Feb. 1887. 1791. And to obtain money to buy the steam engine the Secretary of State offers for sale in Lon- don bills payable in India in rupees ? — Just so. 1792. And if a merchant wishes to trade with India he purchases these bills by paying sterling in London, aod the amount the merchant will offer for the bill will depend on the quantity of Indian pro- duce he can purchase with the resulting rupees in India, and the price in gold for which he can sell that produce in England ? — Merchants take those two factors into their calculation. 1793. For example, a merchant will give SOOif. for 6,000 rupees, if he finer cent, in quantity and 27 per cent, in value; tea by 18 per cent, m quantity and 15 per cent, in value ; wool by 34^ per cent, in quantity and 28 per cent, in value; flax and linseed by 7 per cent, in quantity and 2 per cent, m value; and hides by 8^ per cent, in quantity, the value remaining unaltered. On the other hand, wheat Cell by 9 per cent, in quantity and 13i per cent, in value ; leather bv 6 per cent, in quantity and 4 per cent, in value; and rape seed by 40 per cent, in quantity and 47 per cent, in value. Turning to the exports to India, I observe in cotton piece goods an increase of 27 per cent, in the quantity and 19^ per cent, in the value; in cotton twist and yarn, an increase of 12 per cent, in the quantity and 9 per j^^_ cent, in the value ; while in the value of the exports JI. Waterfield, of iron and steel of all kinds there is a reduction of C.B. 7 per cent. 2523. The different articles vary according to their 15 Feb. 188 7. own different factnrs ? — Quite so. 2524. But on the whole there is no such rule as I have suggested ? — No. 2525. (Mr. Houldsworth.) Might I ask whether the figures of the export of bullion are included in the totals that you have given us ? — No, the totals which I gave for trade are the totals of merchandise only. 2526. (Sir T. Farrer.) Looking to the January number of the Trade Accounts for the present year, 1887, does it not appear that the figures are as follows for 1886 and 1886 in round numbers: Imports from India in 1885, 31,900,000Z. ; in 1886, 32,100,000^!. ? —An increase of 200,000/. 2527. While the exports to India were in 1885, 29,300,000/., and in 1886, 31,300,000/.,.or an increase of 2,000,000/. ?— That is so. 2528. As against the 200,000/. increase in tlie imports from India ? — Yes. 2529. That does not look as if there had been any very great restriction upon exports, or any stimulation of imports? — No. 2530. (The Chairman.) Is the diminution of the export of wheat due to an exceptionally small harvest in India? — No, the harvest was a good one. I think it was more dependent on price. 2531. (Sir T. Farrer.) Complaints have been made from Lancashire that the fall in exchange has specially injured the export trade in cotton manufactures, and especially to India. You have given some figures already. Will you cow turn to the first report of the Commission on the Depression of Trade, Appendix, page 143. In that there is a table giving the quan- tities of piece goods and of yarns exported to various countries, and the proportion the quantity exported to each country bears to the whole exports. Do we not find that in 1870 the cotton piece goods exported to India were 923,000,000 yards, and 28 '4 per cent, of the whole of the exports ? — Yes. 2532. Do we not find that in 1884 the number of yards of cotton piece goods exported to India was 1,791,000,000?— Yes. 2533. Or about double the actual quantity, and as regards proportion, 40 • 6 per cent, of the whole of the exports as compared with 28 per cent, in 1870 ? — That is so. The figures are taken from Messrs. Ellison's Review of the Cotton Trade for 1884. 2534. Then going to cotton yarns, of which I think we have heard even more than piece goods, do we not find that the exports to India in 1870 were 31,000,000 lbs. or 16 "5 per cent, of the total exports ? — Yes. 2535. Whilst in 1884 the cotton yarns exported to India were 49,000,000 lbs. and 18' 1 per cent, of the whole exports ? — That is so. 2536. Consequently, when it is stated that the export trade of England to India and other silver-using countries, and especially that of cotton, has suffered greatly by the fall in exchange, the facts shown by the returns do not bear out the statement, since the trade has increased very largely during the fall in exchange ? — No, they do not. 2537. ( The Chairman.) And has increased rela- tively more with regard to silver-using countries than it has with regard to the whole exports ? — So it would appear. 2538. But still that fact has not been actually worked out in figures ? — No, I have rather refrained myself from making a calculation in that way, owing to the difficulty in paying, what is a gold-using and what is a silver-using country. The countries are divided by different statisticians in different ways, and therefore in the figures I have given in reply to Sir Thomas Farrer's questions, I have calculated the pro- portion to the general trade. 2539. (Sir T. Farrer.) The state of the English export trade does not, therefore, from these figures appear to call for any violent remedy, much less for 124 ROYAL COMMISSION ON GOLD AND SILVER; Mr. any alteration of our currency laws^ -which would H. Waierfield, take from India such advantage, if any, as she may C. U. derive from her silver currency ? — No, I think not. Perhaps I may mention that I was asked last time to 15 Feb. 1887. prepare a table for the Indian trade with the silver- using countries, and I have therefore prepared this diagram showing the quantity and value of exports of Indian merchandise to the silver-using countries in the East, together with thfe rate of exchange. 2540. To turn back to the effect of the fall in exchange upon Indian manufacturers, it has been stated that Indian manufacturers have an advantage in competing with English manufacturers, because the fixed charges of the Indian manufacturers, being in silver, remain the same, whilst the fixed charges of the English manufacturers, being in gold, rise writh the rising value of gold. For instance, I do not know whether you have seen the evidence that, whilst the English manufacturer has to pay in gold his rent, his taxes, and possibly his wages, the Indian manufacturer has to pay no more rent, wages, and taxes, and therefore has an advantage. Do you agree with that ? — I think that Indian manufacturers of the coarser cotton goods have con- siderable advantages in competing with English manufacturers, for the China trade, for instance, in their proximity to the districts where the cotton grows, and in the cheapness of labour, and to these I should add the advantages to which you refer, in so far as it is a fact that the charges of the English manufacturers are fixed in gold. But, while I may take interest on capital, perhaps, as being so fixed, the price of the raw material, and, I suppose, also the rate of wages, must be taken as not so fixed, and, therefore, in that respect, I should say that the English manufacturer has no special advantage. 2541. At any rate, you would find it extremely difficult to ascertain what advantage, if any, to the Indian manufacturer is due to each of those factors ? — Quite so. 2542. {The Chairman.) The contention of the witness to whom you are alluding was that wages in England had not altered with the altering value of gold. Wages in England would, I suppose, sooner or later alter if the value of gold was altered ? — Yes, but they may not have so altered at present. 2543. {Sir T. Farrer.) It has also been suggested to the Commission that the Indian manufacturer has a further advantage from the fall of exchange in selling his goods, because in selling to a silver-using country the exchange is not altered by the fall, and because in selling to a gold-using country the buyer, for the same quantity of gold, gets a larger amount of silver, and, silver prices remaining steady, a larger quantity of cotton goods. Now I should like to ask you whether there is not a fallacy in this. The demand in either case being for a certain quantity of cotton goods, the purchaser in silver will give the same quantity of silver as before ; the purchaser in gold will give a smaller quantity of gold, but, gold having risen in value, he gives a smaller quantity for the same goods, but that quantity will be the same v^hether he has to buy silver to purchase the cotton writh or pays gold directly for the cotton ? — Yes. I think you are right. The gold and silver are only measures of purchase, and the holder of gold will give the same value of gold as before, though, perhaps, a less quantity, and the gold he gives will not be affected by passing intermediately through silver. If the argument were correct, there should be a large export of Indian manufactures to gold-using countries, which is not the case . 2544. It makes no difference to the gold purchaser, whether he buys his cotton direct with the gold, or whether he buys it by buying silver first, and then cotton. He gives the same quantity of gold and gets the same quantity of cotton in either case ? — YeiS. 2545. It is true, is it not, that the exports of cotton yarns and piece goods from India to China are in- creasing largely ? — ^Yes ; including Hong Kong, the exports of twist and yarn to China were 56,469,000 lbs. in 1884-5, and 68,499,000 lbs. in 1885^ ; and those of piece goods were 2,657,000 yards in 1884-5. and 3,222,000 in 1885-6. The total value was 2,115,000 tens of rupees in 1 884-5 and 2,443,000 in 1885-6. 2546. Now, I will ask you to turn back to the Appendix to the first report of the Depression of Trade Commission, page 143. You have already shown from that return that the export trade of Lancashire with India has increased largely during the fall in exchange. The same return contains an accoun|; of the export trade of Lancashire to China, Java, &c. Does it not appear from that return that the export from the United Kingdom to those countries of cotton piece goods had increased from 478,000,000 of yards in J.870 and 526,000,000 in 187^ to 600,000,000 in 1884.' — Yes, that is correct. The trcde increased even more largely up to 1881, but has declined since. 2547. And that the exports of cotton yarn to those countries had increased from 20,000,000 lbs. in 1870 and 29,000,000 in 1875 to 39,000,000 in 1884 ?— Yes, I find that the exports of 1884 were 14 per cent, in piece goods and 32 per cent, in yarn above thogc of 1875. 2548. So that, whilst India has been doing much, Lancashire has been doing more than she did before ? —Yes. 2549. Then I will ask you, do these figures justify the statement that the present state of things, that is, the fall in exchange, is causing the gradual transfer of the yam trade of China to India, that the exports from England have steadily declined since the fall of silver commenced, whilst those from India have enormously increased ? — The increase of the imports from India may, indeed, be termed enormous ; but it is not correct to say that the exports from England have steadily declined since the fall of silver com- menced ; and I think, as I have already said, that the fall in exchange is not the cause of the improvement in the Indian trade. 2550. A.t any rate, you would not see in these figures any reason for protecting Lancashire against India by a radical alteration of our currency system ? — No ; I should think it as objectionable as allowing any protection of India against Lancashire. 2551. So much for the English export trade to India. As regards the import trade from India, you have already given figures which show that, as a whole, it has not been unnaturally stimulated by the fall of exchange ; but a very general impression prevails that it has been so stimulated, and especially that the fall in the price of Indian wheat caused by the exchange is ruining English, French, and Airerican farmers. This view is supported by many authorities, and I should like to read to you what some of them have said. Let me read to you from an article of M. Laveleye in "The Contemporary Review" for May J 886. He says:— "The excessive fall in the " value of silver is a new and quite special cause of " suffering for the agricultural world. Barpn de " Soubeyran laid this matter before the French " Chamber in a speech delivered on Februarys, 1886 " in which he shows that Indian-grown com attains' " a premium of more than 20 per cent, when imported " into Europe. He thus expresses himself: — ' Silver " 'is the only legal tender in India. An ingot of " ' silver is bought in London at the current price, " ' 46f d., sent to Calcutta, and coined at the mint " ' there, and with the produce of the coining of this " ' ingot you purchase corn which you forward to " ' London or Havre. There this is worth about " ' 13-70 frs. the hectolitre, all expenses paid.. If " ' on the contrary, the silver ingot, instead of " ' costing 46|rf. or 170 frs. the kilogram, its present " ' price, cost 60|«?. or 220 frs. the kilogram, its real " ' worth, .the hectolitre of corn ought then to be sold " ' in London, Antwerp, or Havre at a price varying « ' from 18-50 frs. to 19-50 frs.; that is to say, that " ' in all these ports it would be from 4*75 frg. to " '5-50 frs. dearer than now.' " I y^W read you also a passage from the annual report of the Secretary MINUTES OF EVIDENCE. 125 of the Treasury of the United States on the state of \ the finances for the year 1886 :— " It is a direct con- "^ sequence of the monetary dislocation that wheat of ^1 India, which there fetched 3 rupees per quintal "14 years ago, and there fetches 3 rupees per quintal " to-day, can be sold in London (cost of transport " apart) for as little as the gold price of 3 silver ^" rupees of India in London to-day, a fall of 25 per '* cent. This fall has caused, of course, a correspond- " ing fall in the price of English and Irish home- " grown wheat in London. This lowered price of " wheat in London has had to be met by a lower " price of the American wheat surplus sold in London. " The price of our surplus wheat determines the " price of the whole wheat crop of the United States. " So that the monetary dislocation has already cost " our farming population, who number nearly one half " the total population of the United States, an almost " incomputable sum, a loss of millions upon millions " of doUars every year, a loss which they will coii- " tinue to sufiier so long as the Congress delays to " stop the silver purchase, and by that act to compel " an international redress of the monetary dislocation. " Another year's delay in stopping the silver purchase " is the loss of remunerative prices upon another " wheat crop of the United States ; is another year's " stimulus to India's competition for the foreign " markets of our agricultural product, and a reduction " of our ability to hold that market against any compe- " tition in the world (measured by a common " money)." Now that is an authoritative document. I should like to ask you whether you agree with it ? — I think that M. Laveleye's article omits to take account of the check in the first instance given to the exports from the East by the fall of the gold price in Europe ; in my view, the fall in exchange is the counterpoise without which the trade could not be carried on at the lower gold price ; but I see no benefit to the Indian trade in the low prices and low exchange. In the report of the Secretary of the Treasury in America it is said that the faU in exchange has caused the fall in the gold price of wheat, which appears to me to involve a confusion of cause and effect. 2552. Tou think that the fall in the gold price of wheat, and of silver, is the first thing, and the fall in Indian exchange a consequence ? — I do. 2553. I should like to ask you parenthetically whether there is any reason for supposing that Indian wheat rules the English market more than American, or Russian, or English wheat ? — I presume that the price is regulated by the wheat which can be brought into the market most cheaply in sufficient quantity ; but I am quite unable to say from what country it comes. 2554. And probably nobody can say ? — I should think not. 2555. When was the Indian export duty on wheat taken off ? — It was taken off" at the beginning of 1873. 2556. Was it taken off since this fall in exchange, or just before ? —No, just before. 2557. It was 5 per cent., I think ? — It was 3 annas on the maund of 82 lbs. ; which is about 4 annas a cwt. The average declared value of wheat exported from India in 1881-2 and 1882-3 seems to have been about 4 rupees 6 annas a cwt. ; so that the duty was at that time nearly 6 per cent. 2558. Do not the figures which you have given, and which are given in Mr. O'Conor's paper, show that there have been real causes at work in India, and in the cost of carriage on the ocean, which account for increase in Indian exports, and for the fall in gold prices ? — To a great extent it is so. 2559. I should like to take one illustration from Mr. O'Conor's paper. Does he not say that between 1872-3 and 1885-6 the gold price of Indian wheat in London fell 33-7 per cent. ?— Yes. 2560. And that in the same year the silver price of Indian wheat in Calcutta had fallen 26 per cent. ? — Yes. 2561. The fall in the silver price in Calcutta must have been independent of any fall in exchange ? — Yes. 2562. Does not Mr. O'Conor further tell us that since 1870 the sea freight of wheat from Calcutta to London had fallen upwards of 50 per cent., making a further reduction in the gold price of wheat iu London of 10 per cent, or over ? — Yes, I think he puts it at 10 to 13 per cent, since 1873. 2563. These reductions in real cost of production fully account for this reduction of the gold price in London, do they not ? — I think Mr. O'Conor himself does not admit that they fully account for it. They certainly account for a great deal. 2564. If you add the figures, they more than account for it ? — Yes ; but I have a paper of his in which he says that the reduction in the gold price greatly exceeds the reduction in the silver price plus the reduction in the cost of freight. 2565. Well, upon those figures, which I have taken from his paper, the difficulty is to understand how, taking into consideration the fall of exchange, the reduction of the gold price in London was not still greater than it was ? — Yes, but you are speaking of only one article. 2566. {Mr. Barbour.) In 1870 was there practi- cally no wheat trade between England and India ? — No, there was no trade worth mentioning until two or three years after the Suez Canal was opened, about 1873. 2567. (Sir T. Farrerl) But you agree entirely that there have been real causes at work for the reduction of the cost of wheat in India, which will account for a very large part of the reduction of prices ? — For a very large part, yes. 2568. I will not trouble the Commission with further details of prices, which are difficult and delicate matters to deal with, but I will put into your hands the following extract from a paper from a trustworthy source, with comments upon it, which seems to me to illustrate very well the way in which merchants are in the habit of attributing to the mere mechanism of exchange rises and falls in value which are really due to more substantial causes : " In June 1881 and June 1886 the price of Cawn- pore wheat in Calcutta was Rs. 2 • 9 per maund, but the rate of freight was 60«. a ton in 1881 and 30*. in 1886, a difference of 30«. a ton, or 6«. Qd. a quarter. " The cost of wheat in London was 42*. a quarter in 1881 and 31*; Qd. in 1886, or 10*. Qd. a quarter difference. Of this difference freights as shown above concede 6*. Qd. a quarter, which leaves 4*. a quarter to be contributed by the fall in exchange and other contingencies. " In June 1881 the rate of exchanges was about 1*. 7f(i. per rupee three months' sight, and in 1886 about 1*. ?>\d. per rupee three months' sight, which represents a reduction of 3s. %d. a quarter, leaving only about Qd. a quarter unaccounted for, and this further reduction is probably owing to the decline in the price of gunny bags. " From this it will be seen that in Calcutta prices were at the same level in 1881 and 1886, and yet apart from freight influences, we were able to sell in London at 3*. Qd. less money." The above is the statement made by the merchant, and his inference seems to be that the Indian ex- porter has made a profit by the alteration in exchange and has by that means lowered London prices. It is an interesting case and worth examining. The observation that 6*. Qd. out of the difference in price is due to lowering of freights is very suggestive. The fall in price in London has been 10*. Qd. a quarter, but the merchant who knows the facts does not state that the whole of this is due to exchange. He attributes two thirds of this to diminution in the cost of production and transit, leaving only 3*. 6rf. out of the 10*. 6<^. to be accounted for by exchange. But we have the means of tracing this a little further. Mr. O'Conor in the paper above referred to tells us ■that between 1879 and 1886 the charge for grain on the East Indian Railway between Cawnpore and Cal- Mr. H. Waterfield, C.B. 15 Feb. 1887. 126 EOTAL COMMISSION ON GOLD AND SILVER: C.B. 15 Feb. 1887. ^'•' cuLta (684 miles) had fallen from ■ 177 pies per raaimd U. Waterfield, ^32 Hjg") pgr mile to • 149 pies, which would amount to about 2s. a quarter. In this way 2*. out of the 3s. 6d. is accounted for without reference to exchange, and it may well be that more than 2s. wonld be thus accounted for. But for this diminution in the cost of Jndian pro- duction, the Calcutta price would have been so ranch the higher and the English price would have been higher also. As it is, the diminution in the cost of production in India, coupled with the diminution in freights, very nearly accounts for the whole reduction in English prices. The iigures do not correspond precisely with Mr. O'Conor's figures either in dates or in amounts, and they are not so striking, but they confirm the general conclusion that the fall in the price of Indian wheat is fo be accounted for in the main, if not altogether, by diminution in the cost of producing and carrying wheat, and not at all by gold. I will ask you to say whether you have any obser- vations to make on this statement ? — I think that the increased supply caused by the development of the country through the opening of railways, and the reduction in the cost of transport, have had a material effect on the prices of commodities in Europe; but I do not think that they fully account for ihe fall in those gold prices, or that the fact should be ignored that the supply of gold has not increased in proportion to the increased demands made upon it in recent years. 2569. I will only ask you further with regard to wheat exports from India, as I have asked you with respect to cotton goods, whether there is anything in these facts to justify either the American Govern- ment or European economists in demanding an altera- tion of our currency system in order to prevent the Indian ryot from competing with European and American farmers ? — ^No, I think not. 2570. Now I want to ask you some rather more theoretical questions with regard to the effect of the fall in exchange. Do you think it possible that an alteration in the par of exchange can make a perma- nent change in values or in real prices, or can perma- nently and seriously aficct trade? — Taking silver and gold money to be merely a means of conveniently effecting an exchange between the commodities of one nation or person and those of another, I do not think that an .alteration in the par of exchange between silver and gold can permanently afliect the real prices of commodities or the trade. 2571. For instance, in the case of a country possess- ing an inconvertible paper currency, a large over-issue would alter nominal prices and nominal exchange seriously, but the change would be nominal only ? — Nominal. 2572. There has, 1 believe, been lately a largo fall in the Russian exchange. Has that fall affected trade seriously, or stimulated the export of Russian wheat? — I have no knowledge of the special circumstances which aifect our trade with Russia, but I see from the returns that the exports from the United Kingdom to Russia fell continuously from 1880 to 1885, in which year their value was as low as in 1877, and only 57 per cent, of the value of such exports in 1880. The imports of wheat from Russia into England show remarkable fluctuations, and I can see no ground for thinking that they have been affected by exchange. Taking the later years, the number of hundredweights received was in 1880, 2,880,000; 1881, 4,047,000; 1882,9,576,000; 1883,13,347,000; 1884,5,402,000; 1886, 11,976,000; and 1886, 3,710,000. 2573. Then is there not this difference between a mere alteration in the par of exchange caused by depreciation of the coinage or an over-issue of paper money on the one hand, and the alteration caused by a fall in the value of silver, on the other, such as has recently occurred in America and Europe, — that in the former case the only change would be a change in nominal prices, whilst in the latter case silver would go from London or America to the East, and would have to be paid for by increased exports from the East ? — Yes, I think so. 2574. You have, I think, put in a table showing in detail the imports of silver into India. Have these imports corresponded with the fall in exchange, that is, have the larger imports of silver universally or generally accompanied or followed falls in exchange ? — I have not been able to see that there is any special agreement in that way. I hand in a table for the last two years showing month by month the exports of silver to India, and I have put, side by side, the sale of bills by the Secretary of State, and it appears to me that the quantity of bills which the Secretary of Stale puts on the market governs the amount of silver exported to India to a great extent. I have also added the monthly exports of cotton manufactures to India, as this may be useful to the Commission for the ourpose of comparison. (^See Appendix VIII. F.) 2575. Council bills or lelegi'aphic transfers are an order for payment of silver in India, are they not ? — Yes, payment of coined rupees. 2576. Consequently, for the purpose of remittance, they answer the same purpose as silver, and they are cheaper than silver ? — Yes, the freight and mintage is saved. 2577. Consequently, for the mere purpose of remittance, council bills will be preferred to silver ceteris paribus ? — Quite so. 2578. But if silver falls in value in London, that is to say, if it will fetch a smaller amount of commo- dities in London than it will buy in Calcutta, the silver will go from London to Calcutta, council bills or no council bills ? — If the silver is in London, it will go. 2579. That is to say, if the silver has become superabundant in London or America, so that it will purchase less in London or America than it will in India, it will go to India, council bills or no council bills ? — Yes, the silver will go to the place where it is most valuable. 2580. Coii«equently, we ouyht to find some in- creased export of silver to India when there has been a great fall in exchange, council bills or no council bills ?— Yes, that would be the natural tendency. 2581. {Mr. Cohen.) Would it not be the case that the holders of silver would not sell it at that price ; they would hold it back ? — You are speaking of holders of silver in London ? 2582. Yes ? — I think our experience is that they must sell ; that they very seldom can hold back, and they sell, therefore, under the price of the bills, and thereby force down the exchange. 2583. {The Chairman.) Any increase of the export of siher to India would, of course, be immediately followed by, in fact, would depend on, a corresponding increase of exports from India ? — Yes, it must be paid for. 2584. {Sir T. Farrer.) [ gather that in one case, 1876-7, 1877-8, a heavy fall in silver was accom- panied by a large export of silver to India, and a rise of prices, but that there was another cause at work, namely, the diminution in the council bills on India ? —Silver did go to the East to an exceptionally large amount in 1876 and 1877: and prices in India rose from 1876 to 1879, since which time, particularly in the last year or two, there has been a tendency to fall. I think, however, that the prices were greatly affected by the famine in 1877 and 1878, and that the exports of silver were mainly stimulated by the reduction in the Secretary of State's drav/ings ; during the three months from February to April 1876, in the height of the usual export season, only 53 lakhs of bills wei"e sold, and again in February and March 1877, the sales only amounted to 126^ lakhs. 2585. The council bills so affect the whole concern that it is very difficult to trace the real cause of the export of silver? — I think so. The amount is so large that it to a great extent rules the market for the moment. 2586. {Mr. Barbour.) You mean, rules the market for the time being ? — For the time being. 2587. You do not think on the whole it has ^ery MINUTES OP EVIDENCE. 127 much effect ?— No, in the course of a series of years it passes away. 2588. (Sir T. Farrer.) And it would not prevent silver going to India, if silver itself were more valuable in India than in London ?— No. The silver would go out, though, perhaps, not at the moment. 2589. I understand that in 1883-4, 1884-5, and 1885-6 there were large exports of silver to India, probably from the same cause?— In 1882 and 1883 the exports amounted to about 6,000,000 annually, in 1884 they rose to 7,500,000, and in .1885 were 7,000,000. 2590. Now will you turn to what happened this last year. There was a heavy fall in the gold value of silver, amounting to something like 2d. in the rupee. If this meant that silver had fallen in real value in London, you would expect a large export of silver to India as the consequence .' As a matter of fact, the exports of silver from this country, according to our accounts last year, were much less than in the preceding years, when there had been no great fall in exchange ? — Yes. 2591. From the paper you have put in it appears that there was no specially large import of silver into India in 1886 ; that the largest import took place in February before the fall in exchange, and that the amount of silver sent to India was two millions less than in the preceding year when there was no fall in exchange, and that, taking council bills and silver together, the remittances to India were half a million less than in the preceding year ? — About that. 2592. Consequently the fall in exchange had ap- parently no effect last year in sending silver to India ? Yes. 2593. This goes far, does it not, to support your view that the alteration in exchange is due to a rise in the purchasing power of gold, rather than to a fall in the value of silver ? — I think it does. 2594. You know what Mr. Bagehot has said on this subject. Has he ever given countenance to such a notion as is expressed in the extracts I read to you ? — Mr. Bagehot held that the fall in exchange would give a temporary, but only a temporary, encourage- ment to exports from India to England, and dis- couragement to exports from England to India. 2595. Did he not say, practically, that the imme- diate effect of a fall in the gold price of silver, arising from a superabundance of silver, would be an export of silver to the East, followed by a slight rise of prices in the East, and that then the trade would go on as usual ? — Yes ; he held that the fall in exchange would enable merchants to export goods from India with greater profit, while the exporter of goods from England would be at a disadvantage, that a void would thus be created in India which would have to be filled by silver, the consequence of which would be an increase of prices in India and a general improvement of trade resulting from this increase of prices, and that, when that rise of prices should take place, the encouragement to exports from India and discourage- ment of imports into India would cease, and all trade would go on as it did when it was at its old value. 2596. Did he not say that silver would under such circumstances ^go to^ the East, in consequence of an alteration in the balance of trade causing an outflow of bullion in the usual well-known way ? — Yes, that was his view. 2597. And did not the report of the Silver Com- mittee supplement this, by pointing out that under such circumstances silver would go to the East, what- ever might be the balance of trade ? — Yes ; the Select Committee pointed out that, even if there should be no excess of exports over the amount needed to pay for the imports and the Government payments in England, it did not follow that the import of silver would absolutely cease, since' the demand for silver might displace some of the other articles imported. 2598. But this operation, whether it took place in the one way or the other, would be temporary only ; silver would go at once, and then, the new level being reached, trade would go on as before. That was the o 24358. C.B. 15 Feb. 1887. view of Mr. Bagehot and the Silver Committee ? — jjf^^ Yes ; and, as it appears to me, the level is so quickly H. Waterfield, reached that the increase of exports due to a fall in exchange does not perceptibly affect the transactions of the year in which the fall occurs. 2599. {Mr. Barbour.) Is the level reached in prac- tice by a rise in silver prices, or a fall in gold prices ? — By a fall in gold prices. 2600. And Mr. Bagehot did not contemplate a fall in gold prices ? — No ; I think that was the point he overlooked. 2601. {Sir T. Farrer.) And did not what Mr. Bagehot predicted actually happen ? Did not silver go to the East in 1877-8 ? — Silver did go to the East in an exceptionally large amount in those two years. 2602. Indian prices are very difficult to follow, are, they not ? They rise very slowly. India is so large a country that it is very difficult to form any general conclusion as to a rise of prices in India ? — It is very difficult, owing to the very large extent of the country, and the extent to which the particular districts are affected by the seasons. 2603. Then Mr. Bagehot gave no countenance to the doctrine that a permanent alteration in the real value of Indian goods, or of English goods, or of the trade between the two countries, could be the conse- quence of an alteration in the relative values of gold and silver ? — No, he stated distinctly that the effect on trade would be temporary ; and that the rise of prices in India, which he anticipated, would not do more than withdraw the exceptional encouragement which the fall in exchange had given. 2604. Mr. Bagehot did not apprehend what has since happened, namely, continued falls in the ex- change unaccompanied by any specially large imports of silver into India ; by any rise of Indian prices ; or by any special increase of exports from or diminution of imports into India? — No, he thought that the disturbance to the trade would be corrected by a rise of prices in India, not by a fall of prices in Europe. 2605. The facts that I have stated in that last question are, according to your evidence, the present real facts of the case, are they not ? — Yes, I think so. 2606. {Mr. Birch!) Prices have not gone up in India? — No, prices of exported goods have slightly fallen ; but speaking generally, they have been nearly stationary, as far as we can judge, but, as I said just now, it is very difficult to decide on the movement of prices in India. 2607. {Mr. Barbour.) Do you think prices have fallen permanently in India, or that the recent fall is due to the seasons ? — I think it is probably due to the unusually large number of good seasons. 2608. {Sir T. Farrer.) Do not these circumstances point to a cause or causes entirely different from that which Mr. Bageliot and the committee of 1876 were con- templating, namely, a superabundance of silver only ; and do they not rather ppint to an increase in the purchasing power of gold? — Yes, I think so. Mr. Bagehot saw that gold might, perhaps, have risen in price, but he thought this was to be attributed merely tb the cycle of prices, and would soon pass away, and that it must not be mistaken for appreciation due to diminished production, or, I presume he would have added had it occurred to him, to increased demand. 2609. If this were the case, that is, if the relation of silver to commodities remained the same, whilst the relation of gold both to silver and to commodities were altered, there would no longer be an induce- ment to export silver to India upon the fall of ex- change ? — No. 2610. In that case the exporting English merchant would receive for a certain quantity of goods, say, 10 rupees, which he would change into 15s., where before the fall in exchange he would have received \l. for the same goods. But the 15«. will be worth as much as the 1/. was before ? — Yes, in commo- dities. 2611. And the exporting Indian merchant would receive only 15«. for his goods where he received 1/. S 128 KOYAL COMMISSION ON (*OLD AND SII.VER : ■Mr. U, Waterjield, C.B. 15 Feb. 1887. before, but his 15s. will buy 10 rupees just as the 11. did before ?— Quite so. ' 2612. Assuming this to have been the case, it would account for a fall in exchange unaccompanied by the consequences to trade foretold in 1876 ? — Yes, the consequences to trade. 2613. Now, then, we will go to the causes of the increased purchasing power of gold. The supposed in- crease might arise, might it not, either from a scarcity of gold, or from the production at reduced cost of the commodities against which gold is exchanged? — Yes; assuming the cost of production to be reduced in the case of all the commodities in respect of .which the purchasing power of gold had been in- creased. 2614. That is to say, Supposing the purchasing power of gold to have been increased generally ? — Quite so, that is my mealiiiig. 2615. But the purchasing power of gold against a particular commodity may be increased by the pro- duction at a diminished cost of that particular com- modity ? — Yes, by quite another series of factors. 2616. Suppose, for instance, that gold has become scarcer, whilst all other commodities, silver included, remain constant, then, putting aside the question of fixed charges, the only change will be that a smaller quantity of gold is given and received by the mer- chants, the number of rupees and the quantity of goods remaining the same as before. In this case the only change will be a change in nominal gold prices, and except to this extent trade will not be affected ? — Quite so. 2617. But the increase in the purchasing power of gold may be due to another cause or other causes, namely, to the production or delivery at reduced cost of the commodities against which gold is measured. Suppose, for example, that the only commodity we are concerned with is wheat. Then, if the cost of the carriage of wheat from India to England is reduced, other things remaining the same, the gold price of Indian wheat in England will fall, and the silver price of wheat in India will remain constant ? — Yes. 2618. If in addition the cost of carriage and ship- ment in India is reduced, silver remaining constant, the silver price of wheat at the ports in India will fall, and the gold price of wheat in England will fall still more than in the case previously supposed? — Yes. 2619. Whilst, if at the same time silver becomes more abundant in proportion to the demand, wheat and silver will fall together as against gold, silver prices in India will remain tlie same, and the fall in the gold price of wheat, though really due to reduction in the cost of conveyance of the wheat, may appear or partly appear in the exchange as a reduction in the gold value of silver ? — Yes ; I think that your reasoning is correct in theory. 2620. This, of course, is a hypothetical case, and the other cases of the superabundance of silver and of the scarcity of gold are hypothetical cases, and probably no one of them comprises the whole of the actual case. But do they not illustrate the truth that the essential factors, the verts causis, in the reduction of real prices or values are, as you have stated, reductions in the cost of production, or rather, in this case, of transport, and not in the relative values of silver and gold ? — Bj real prices or values of the exported commodities, I understand you to mean the amount of commodities received in exchange, as dis- tinguished from the measure of the commodities expressed in money ; and in this sense I agree with your opinion, from a trading point of view, since any rise in the value of gold may be discounted as equally affecting commodities given and received. But the object with which I have been desired to give evidence before the Commission is to represent the position of the people of India acting through the Government, and in their case that which they receive in exchange for their surplus commodities is the use of English capital and English agency, for which interest on debt, pensions. &c. have to be paid.. And to ascertain the real price paid for these, it is essential to include as a factor . the rise in the value of gold which may have been caused by the additional demand thrown upon it in recent years having exceeded the supply. 2621. Quite so, but then I would ask you a further question or two. If the rise in the pur- chasing power of gold has arisen from a scarcity of gold, which did not exist when the English, capital was advanced, then it is true, no doubt, that the increased purchasing power of gold has thrown a burden, in the shape of interest, on India greater than that which it undertook when the capital of her debt was advanced ? — Yes. 2622. But, supposing that the increased purchasing power of gold is due, not to a scarcity of gold, but to a reduction in the cost of production of commodities, then India, if she produces these commodities with a smaller amount of effort or labour than before, will, to that extent, be relieved from any additional charge incurred by her in paying the interest on her gold debt at its increased value, is that not so ? — ^Yes, if she is producing the commodities with less labour, she will get some return for the increase in the price of gold which she has to pay. 2623. She will have a larger amount of commodi- ties to pay ; but she will have for the same labour a larger amount of commodities out of which to pay them ? — Assuming your hypothesis. 2624. If, for instance, wheat was the only commodity produced in India, and if by means of the railways which have been made with borrowed capital the cost of the delivery of wheat were reduced as much as gold has risen in value, India would incur no additional burden finding as much wheat as would be necessary to pay the increased interest on her gold debt ? — If I follow your question, it is not only the cost of delivery of wheat, but the cost of cultivation that must be reduced correspondingly. 2625. I put them together ? — Supposing the cost of cultivation and delivery were reduced, that would be so. 2626. Wheat is only one of many things wJiich India sends us in order to pay the interest ' on her debt ?— Yes. 2627. But they are mostly agricultural produce, are they not ? — A very large portion. 2628. And, therefore, largely dependent on the rail- ways which have been made with borrowed money ? —Yes. 2629. They are also, are they not, largely depen- dent on special causes, such as good or bad harvests ? — Yes, very largely. 2630. Consequently, before determining that the increased value of the gold debt is an increased burden on India, would it not be necessary, under the above circumstances, to see in the case of each article how much of that increased value is due to gold itself, and how much to the increased abundance of the articles themselves in which India pays her debt ? — I do not think it would be possible to do so. 2631. It therefore needs a good deal of examination, before we can conclude that an increase in the value of the interest which India has to pay on her gold debt is a real increase of the burden on the people of India ? — It requires careful examination, undoubtedly. 2632. And when it is considered that the debt was in a large measure incurred for the purpose, and with the result, of increasing those facilities of production and transport which have helped to raise the value of gold, our doubts concerning the increase of the burden, or the injustice of that increase, are strengthened ? — The extent of the increase of the burden ; I do not wish to say anything about the injustice of it. 2633. At any rate, so far as the real burden of the debt is concerned as distinguished from the incon- venience to the Government ? — Exactly. 2634. I want to ask you this further question with regard to the real burden of the debt. How does the position of India as a gold debtor differ from that of other gold debtors, Australia, for instance? These MINUTES OF BVIDKNCE. 129 colonies have a gold debt varying from 150,000,000/; to 200,000,000/., yearly increasing. If gold rises in value, the interest on their debt continues to increase m value, does it not ?— Yonr inquiry is with reference to the Government ? 2635. I am not speaking of the inconvenience to the Government, I am speaking of the burden upon the people of India ?— The essential difference in that case seems to me to be that, in the case which you have taken of Australia, it is a gold-producing country, md therefore, if a rise occurs in the value of ' gold in Europe, there is a corresponding improvement caused by that in the value of her commodities that she exports. 2636. Therefore Australia would be iu the same position as India when she has more wheat to pay her debt with ?— No, the same quantity of gold which Australia produces riaes in value relatively to all prices in Australia which are gold prices. 2637. Do not let us take Australia. Let us take a colony which does not produce gold, say Canada, which has a large gold debt in this country. In what respect is the increase of the gold a greater burden upon India than it is upon Canada ? — As a country I do not know that it is differently affected by it. The commodities will have to be valued in either case. 2638. (Mr. Cohen.) Would it not be a greater burden to India than to Canada, if since the time that the loan is raised for India there had been a fall in silver, because the money remitted to India would be at that time in a currency which had not become de- preciated, but which subsequently became depreciated ; therefore, if at the time the loan was raised the rupee was at 1*. lOd., and it has fallen to Is. 6d. meantime, there would be that increase of burden on the inhabi- tants of India which the inhabitants of Canada had not been subjected to, because they had not been sub- jected to the intermediary depression in the currency. Is that not the case ? — I understood Sir Thomas Farrer's point to be that of the value of the com- modities. 2639. {Sir T. Farrer.) Assume this, that the whole alteration in value between gold and silver is due, not to the fall in silver, but to an increase in the purchasing power of gold, then in that case I want to know in what respect is India, putting aside the inconvenience to the Government and looking only to the burden on the country, worse off than Canada ? — I cannot admit in this context the distinction which your question seems to imply between the Govern- ment and the inhabitants of a country ; in India, for instance, the inhabitants have to pay taxes sufficient to meet the charge for the remittance of the annual sterUng sum which the Government on their behalf have contracted to pay. But, taking your view, I agree that on the same amount of debt the purely economical burden would be as much enhanced in Canada as in India, because both countries would have to give a larger amount of commodities in order to pay their gold debts. Though the purely economi- cal effect, however, may be the same, the actual effect on the community is widely different, since in the case of Canada the additional burden caused by the increasing weight of the gold debt falls directly on and is distributed over the producers and manufac- turers of articles of export without the intervention of the Government ; while in India it falls primarily on the Government, who are then compelled to distribute it over the people by continual additions to the taxes, which, as I have already said, in India is considered a political evil of the gravest character. 2640. {Mr. Chamberlain.) If the phenomenon with which we have to deal is solely the appreciation of gold, then every payment, every contract to pay gold, becomes increasingly burdensome to the payer, and in equal proportion whether the country is a silver-using or a gold-using country ? — Yes, I understood that was Sir Thomas Farrer's question. 2641. {Mr. Cohen.) I asked whether the burden is not increased by the appreciation of gold as compared with silver, whether it does not fall with increasing force upon the Indian who has nothing but silver to ^''' „ ., pay in. That is really the point ?— I think on Sir ^- Waterfield, Thomas Farrer's hypothesis it is not so, for I under- ' stood him to put the question to me that, if the quantity \ 5 peb. 1887. of the commodities which the country exports, is in ■ both cases increased in proportion with the apprecia- tion of gold, the payer in India is not worse off than the payer in Canada, and I think that is so. 2642. {Sir T. Farrer.) The only difference between Canada and India is this, that in Canada the com- modities which Canada has to pay as interest are paid for gold directly; In India silver comes in as an intermediary ? — Yes. 2643. But both pay in commodities, and with respect to Canada as well as India gold has appreciated, and consequently a larger quantity of commodities are needed, both in the one and the other, to pay the interest on the gold debt ? — Yes, I think so. I think that agrees with what I have said before, that in my opinion the measure in which we make the payment is economically of small importance. 2644. Then, to turn to the evidence that you have given us ; may we take it that the appendix you have put in gives in Table I. (old and fixed contracts) those of the annual sterling payments on each of which the Indian Government has to bear the whole burden of the fall, without any compensation in the shape of the reduced prices of what it buys ?-^That is the intention as far as I was able to make the calcula- tion. 2645. And that Table II. (new or current contracts) gives those of the annual sterling payments on which the Indian Government gains in reduction of price what it loses in exchange ? — Not exactly that. It includes this, but I have put into Table II: payments which may be said to be at the option of the Govern- ment. I will take the line relating to stores for India. The Government of India has it in its power to buy more or less stores, and therefore, although it has made no contract, I include that charge because it may be said that it is open to it to reduce the charge for exchange by buying less stores. Again, I have put into this table the remittance transactions, which are payments that fluctuate with the rate of exchange, and therefore there can be said to be no further loss on that account in consequence of a fall. 2646. But on the whole it is Table I. which gives us the burden of which the Indian Government com- plain ? —Yes. 2647. Andl think the largest amountwas 26,217,811 of rupees in 1885-86, from which has to be deducted 722,474 gain on current contracts, making 25,495,337 as the whole loss in the last year. Is not that so ? — Yes, but the last year is a very exceptional one, as I pointed out in the last paragraph of my memorandum. 2648. It is the fifth line from the bottom of Table I. that gives us the figures of the actual loss which has been incurred by the fall since the time at which the table commences. It is the fifth line at the bottom that gives it for all years ? — That is so. That is the total excess caused by the fall in exchange. 2649. {Mr. Barbour.) Do you mean the excess of remittance, or the actual loss to the Government of India ? — That is the actual loss to the Government of India caused by the fall in exchange, as distinguished from that which is caused by an increase of their gold payments. 2650. {Sir T. Fai-rer.) T was going to ask you if you could put in a table giving year by year, from 1874-75, the net excess of rupees caused by the fall in exchange over what would have been required if the rate of 1874-75 had continued, and also a column converting this excess into sterling at the rate of the year, and also a column showing what the Budget estimate of the charge on this amount had been. That will show ids what the fluctuations had been, and it will show us how far the finance minister of India was able to estimate the loss ? — Yes, I have prepared the two tables as you desired ; but I must point out that, in converting the excess payment of rupees under exchange into sterling, I think the Com- S 2 130 ROYAL COMMISSION ON GOLD AND SILVER ; „ prr^/' jj ij mission must take care not to be misled, for the burden C.B. ' oil the Government of India is the number of rupees that it has to pay, not what that would have fetched 15 Feb. 1887. in gold. (See Appendix VIIL G. & H.) 2651. That is according to one hypothesis or the other ; but giving it in sterling conveys a clearer meaning to the minds of Englishmen ? — Possibly ; but I think it would be a misleading one, that is my point. 2652. With regard to this loss by exchange, is it not possible to insure against this charge either by a high estimate or by retaining a balance or otherwise ? Why is it more difficult to deal with, than any other extraordinary expenditure, such as war or famine ? — It is not more difficult to deal with this loss than with a loss by war or famine, if the loss by war or famine were one that it was impossible for the Government of India to foresee or prevent, if the charge were quite beyond its own control, and if it were liable to recur year after year after the financial arrangements had been made ; but, in order to provide for such a loss as this, it would be necessary for the Budget every year to show a surplus of two or three millions, and I presume that no Government could go on showing that surplus year after year, and then, if a fall did not occur, refusing to reduce taxation for fear such a fall might occur in another year. 2653. But it would never need to show a surplus of two or three millions, because there has never been a fall in exchange in one year causing loss to that extent ? — In the first in the two that I mentioned, in the year 1885-56, there was a deficiency of 740,000 tens of rupees through a fall in exchange, apart altogether from any increase of expenditure. The next year the Government of India provided for a further fall from Is. '7d. to Is. 66?., which is approxi- mately 10 or 1 1 millions of rupees, and immediately afterwards,- before August, the rate had fallen to Is. 4Jd., which would have involved, had that fall remaiaed, a further charge of something like 1,750,000 tens of rupees. 2654. I quite understand that there is a great in- convenience about it, but I want to know whether, as compared with the inconvenience of other sudden and unforeseen calls, it is not somewhat exaggerated in the statement of the Government of India .-' — My point is that it is continually liable to recur, but is quite uncertain. 2655. Can you give the additional expenditure in each year since 1874-5 by the following causes, most of which must have been unforeseen : famine, Afghan War, military preparations on the North-west Frontier, and the Burmah annexation ? — I will put in such a paper. (See Appendix VIII. K.) 2656. I should like to ask you some questions con- cerning what you have told us about the revenue and expenditure of India. You have given an account of what we may call the elastic as distinguished from the fixed revenue, and it is with the elastic revenue only that I propose to deal at present. First of all there is excise. That is fixed upon drugs and spirits, is it not ? — Yes. 2657. Well there has been in that, I think, looking to the financial statements, a steady growth from 2| millions in 1875-76 to 4 millions in 1885-86?— Yes. 2658. And that is not to be attributed to the increase of intemperance, bat to improvement in the condition of the people and to better administration ? — And to the fact that the rates have been nearly doubled. 2659. In what year? — Great attention has been paid to the administration, and the rates have been continually increased, not by fresh legislation, but by orders given from time to time with the view of bringing up the excise duty to correspond with the import duty. I asked the Revenue Secretary yesterday if he could tell me to what extent taxation had increased, and he said that he thought that, within the last 10 years or so, the rates had boen nearly doubled. 2660. The financial statement shows a very gradual and steady increase throughout the decade ? — It has been gradual and throughout India, not confined to one district or province. 2661. Then I want to ask you with regard to the license tax and provincial cesses, which I think are called the famine insurance taxes ? — Yes, part of the provincial rates, and also the license tax was so called, but not the present assessed taxes. The present assessed taxes are not for famine insurance. The income tax that was put on 12 months ago is not in any way directly connected with that charge. 2662. The license tax- has been altered within the last year, has it ? — Yes. 2663. It was a tax originally put on for the pur- pose of famine insurance ? — It was so. 2664. It was a tax on persons engaged in profes- sions, commerce, or trade ? — Yes. 2665. And it was at the time it was put on proposed to extend it to the professional and official classes ? — Yes, which has now been done. It has been made a general income tax for all India. 2666. Is it now applied to famine insurance ? — No, not directly ; but it is applied to increase the revenues of India generally, and out of this revenue the Go- vernment of India puts by a million and a half for famine insurance. 2667. It is a general tax, and not ear-marked for any particular purpose? — Yes, it is a general tax. 2668. Sir John Strachey says : — " Of all the taxes " that are levied in India, there will be none more " just or necessary than this, when, as I trust, may " soon happen, similar taxation has been extended " to the official and professional classes." That has been done ? — Yes, that has now been done. 2669. The richer classes have been very loud in their complaints at different times, have they not, and have prevailed on the Government to repeal the income tax, while good financiers have always wished to put on a tax of this kind ? — I am not prepared to say that the tax has been repealed in consequence of the outcry of the richer classes. 2670. {Mr. Courtney.) To which income tax are you referring ? — The income tax that expired in 1874, when Lord Nprthbrook declined to renew it. 2671. The income tax repealed by Sir Charles Trevelyan did not go so low? — Yes, the minimum income taxed then was 500 rupees a year, as it is at present. 2672. (Mr. Fremantle.) When was the present income tax put on the richer classes ? — About 12 months ago. 2673. (Sir T. Farrer.) I should like to read to you a passage from Sir John Strachey's book on the sub- ject: — "The income tax as it existed in 1870-71 " yielded, at the rate of 3^ per cent, on in- " comes exceeding 500 rupees, a little more than " 2,000,000^., and with the better administration which " could be secured, it would certainly, at that rate, now " yield very much more. A large sum could, however, " without difficulty, or the slightest political danger, " be raised, in case of necessity, by the simple plan of " increasing the existing licence tax and cesses. By " doubling their present rate, which would still not " bring them up to the rate at which the income tax. " was on more than one occasion levied, and extending " their incidence to the official and professional classes " in the manner that has been proposed, we should ob- " tain at least 2,500,000/., or 1,500,000/. more than the " revenue now derived from these sources." Do you agree with that ? — No, I cannot agree in that, nor do I think that Sir John Strachey would now maintain that opinion. Certainly, the Government at present hold that to increase the income tax, unless it were inevitable, would be a very grave mistake ; and it is almost an essential part of the income tax, as applied to India, that it should, if possible, remain at the same rate and assessment for some time. It is the con- tinual reopening of the assessments, and altering the .nmount which the natives have to pay, which leads to the great objection on their part to such a tax. MINUTES OP BYIDENOB. 131 2674. What is obtained from it now?— About 1,399,000^., after deducting the cost of collection. 2675. From the income tax as distinguished from the cesses ? — Yes. 2676. And that is now part of the general revenue, and not ear-marked for the purpose of famine in- surance ? — Yes. 2677. {Mr. Barbour.) Do you think that the present provincial rates could be safely or justly doubled for general purposes ? — No, certainly not. 2678. {Sir T. Farrer.) But the difficulty of raising it would not be that it is ear-marked for a particular purpose, but the diificulty generally of raising taxa- tion of that kind ? — The provincial rates include a great deal of money which is of the nature of our local rates, and which can only be applied to local purposes. The provincial rates which are available for the general revenue form a very small portion of the amount received under that head. 2679. But the 1,399,000/. was from the income tax ? — That was from the income tax, but I should like to qualify that figure. 1,399,000/. is the net budget estimate, but it included the receipts from the railway companies, which the Secretary of State decided could not be taxed, except as regards surplus profits, and therefore the amount will be smaller than that. 2680. Then I should like to ask you with regard to stamps on legal and commercial documents. There has been a steady increase in them from 2,800,000/. in 1876 to 3,600,000 in 1886 ?— Yes. 2681. Those, I suppose, are a very fair legitimate tax ? — On that point opinions diifer very much. There has been a great outcry in the Indian papers and in the Indian Legislative Council on different occasions as to the propriety of the G-overnment making income out of the administration of justice. 2682. {Mr. Barbour.') Are you aware that the Chief Justice of the High Court of Calcutta objected to the high taxation levied in the form of court fees and shown in the accounts under the head of stamps ? — He did. He wrote a very strong minute. 2683. {Sir T. Farrer.') I see in the statistical abstract a steady increase from forests, from 700,000/. in 1876 to 1,000,000 in 1885, but I suppose that is gross, not net ? — The net increase is from 277,000/. in 1875-76 to 411,000/. in 1886-87, an increase of only 134,000 in 11 years. 2684. Then in registration I see there is a steady increase in the income from 200,000/. in 1876 to 300,000/. in 1885. That is a tax, is it not, on all documents affecting the title to property ?— -On all documents which are registered. It is not imposed for the purpose of taxation. The net receipt was 51,000/. in 1875-76 and 119,000/. in 1886-87. 2686. {Mr. Barbour^ In many cases the regis- tration is compulsory, is it not ? — It is compulsory in many cases. Speaking generally, all documents affect- ing immovable property worth more than 100 rupees (except wills"), and certain documents affecting personal property, must be registered. In other cases regis- tration is voluntary. 2686. {Sir T. Farrer.) With regard to that Sir John Strachey says it might be raised by 500,000/. or jnore : These are his words : " This is one of the best " suggestions yet made for adding to the revenue ; " there is complete evidence to show that it could be " collected without dissatisfaction, and that no impor- " tant objection of principle to it exists" ?— I cannot say that there would be no objection m pnnciple, and certainly it would be long before it would produce so much as 500,000/., or auything like it, net. 2687. {Mr. Barbour.) These documents which are registered, besides the registration fee, pay a pretty heavy stamp duty, do they not?— Yes, I believe so, and that no doubt forms an objection to the increase. 2688 {Sir T. Farrer.) Then salt is the next. Upon that the duties were equalised and reduced in 1882, were they not ? — ^Yes. 2689. And something like 1,000,000/. was taken ofi, was it not ? — It was more than 1,400,000/. which was taken off at that time. 2690. Notwithstanding that, it has continued to increase up to the last year, I think ? — It is continually increasing, slowly but gradually. 2691. And I see that with regard to this Sir John Strachey says : " If these anticipations should bo " fulfilled, the G-overnment will have in its hands a " financial engine of immense power ; for it will be " able, for the purpose of meeting any serious " emergency, to obtain temporarily, by a small increase " of duty, a large increase of revenue, and this almost " without the people being conscious that any addition " has been made to their burdens " ? — Yes, the salt revenue on its reduced scale is an engine of very great power for the resources of the Government of India^ in a case of emergency ; but the duty could not be increased without causing, more than in almost any other case, a feeling of hardship throughout the mass of the people in India, and I have no doubt that any increase of the duty would somewhat check the consumption. 2692. It would touch the very poor ? — It would touch the very poor. I find that the revenue in 1885-86 was almost exactly the same as in 1876-77, the con- sumption having increased from about 26 million to 31 million maunds. 2693. Has there been any steady fall in regard to opium ? — There has been a much smaller income for the last year • or two, but that is in a considerable degree due to the increase of charge owing to the mode in which the opium revenue is realised. The Indian Government pay for the cultivation and manu- facture, and fix beforehand the amount of opium which they will sell by auction. They announce each summer the amount which they will sell in the follow- ing calendar year, month by month. 2694. Are their expenses in proportion to the ex- tent of the crop, not of the sale ? — Yes. 2695. Consequently, if there is a very large crop and very heavy expenses, that will reduce the net revenue from opium for the year? — ■Quite so. 2696. So that the revenue falls with a very good crop ? — Yes, for the year. 2697. But then there is a stock in hand for subse- quent years ? — There is a stock in hand. 2698. {Mr. Barbour.) These remarks apply to the Bengal opium, not to the Malwa ? — Yes, the Bengal opium ; but the prices this year are remarkably low, from no reason connected with the Indian crop. There has been a recent treaty made with China, which enables the Chinese G-overnment to receive about three and a half times as much duty at the port as they did before, instead of a large part of the duties being levied by the local authorities piecemeal as the opium was carried up the country ; and no doubt the mer- chants feel that they will have really to pay miich more than they did before, and they therefore give a less price in purchasing the opium. 2699. Has that treaty arrangement come into force yet, practically ? — It came into force on the Ist of this month, but was not in operation when the last sales were effected of which we have heard. The "addi- tional article " to the Chefoo Convention of 1876, that is, the article under which the new arrangement is provided for, was signed on the 18th of July 1885. 2700. So that if it had not come into force then, and is coming into force hereafter, you may probably expect a further fall in price ? — Yes, possibly. 2701. {Sir T. Farrer.) Can you give the price per chest of Bengal opium in each year since the present arrangement was made; the arrangement, I mean, under which a fixed quiintity is sold each year ? — The following table shows the prices of Bengal opium per chest since the practice was begun of announcing beforehand the amount of opium to be sold in each month of the ensuing year : — 15 Beb. i^2 BOYAL COlfiaSfe^O'N ON dftiiD 'A^D SILVER : Mr. H. Waterfield, C.B. XS Feb. 1887. Calendar Tears. Number of Cliests sold. Highest price. Lowest price. Average price. 1880 56,«0 Es. 1,466 Rs. 1,212 Es. 1,326 1881 o6,«0 1,443 1,230 1,861 1882 56,400 . -1,341 1,112 1,240 1883 65,150 1,339 1,168 1,240 1884 47,660 1,45!? 1,181 1,287 1886 49,992 1,349 1,186 1,255 1886 64,000 1,237 1,050 1,158 2702. {Mr. Courtney,) Does the substitution of the one tax for the many taxes make a greater tax on the whole or the same ? — I do not think it is possible to tell that exactly, because no one knows what was paid. The Chinese Government agree that, if they take this full tax, they will exempt the chest of opium from fur- ther duty as it goes up country. 2703. There was a good deal of discussion as to the amount which should be paid as compensation for the Likin duties ? — Yes. 2704. Was it intended that it should be a jusL equivalent ? — It was intended to be a fair equivalent, I believe, for the rights of the Chinese Government. 2705. If it is a fair equivalent, there would be no permanent effect on the price of opium sold ? — The amount now payable is probably in excess of the amount supposed to have been paid formerly, but the levy of the full duty at the port would prevent a great deal of the smuggling of the opium up-country without paying the dues. 2706. There are compensations against that ? — Yes, no doubt. 2707. But the market is at present agitated by un- certainty as to what the eifect will be? — I think possibly that may be one reason for the reduced price. 2708. But the substituted duty was intended to be an exact equivalent ? — Yes, for the rights of the Government ; but it was expected that they would ensure the receipt of a sum which previously was uncertain. 2709. And therefore it was intended that it should have no permanent effect ? — I presume that that was the intention, 2710. {Sir T. Farrer.") And subject to any change that may have- occurred since the arrangement was made under which the Government sell a fixed quantity in the year, the income from opium has been tolerably steady, has it not ? — The net income has fallen in the last six years from 8,451,000^. to 6,577,000/. 2711. Is that in consequence of the extra expenses incurred by greater crop ? — About one-third of the reduction since 1880-81 in the net receipts is due to additional charge ; but the expenses included in the Budget of 1886-87 were not so heavy as in either of the two previous years. 2712. {Mr. Birch.) But is it not a fact that the production of opium is enormously increasing in China itself? — I believe it is. In 1880 the sales in Calcutta were rather larger than at present ; 56,400 against 54,000 chests. 2713. {Mr. Barbour.) You do not expect the opium revenue to increase, do you ? — No. 2714. You are rather afraid of its falling off? — Yes, I am afraid that that may be the effect of the increased production in China. 2715. {Mr. Courtney.) That 8,451,000/. with which you started was a considerable increase on previous years ? — It had risen rather rapidly in the previous three years. 2716. {Sir T. Farrer.) The Customs were largely reduced in 1880-81 by something about I| millions ? —Yes; about 1,150,000Z. 2717. Turning to the expenditure, I see you put the increase of military expenditure in India over that of 1876-77 at about 1^ millions. I observe that in Sir A. Colvin's financial statement it is stated that 2,827,000/. is the increase due to the army during the cutrentyear, and that 463,200^.'is the increased politi- cal expenditure caused by the complications of 1885-86, and that, but for Burmah and the North-west Frontier, the surplus would have been 400,000/. He puts the increase for this year arising from military expenditure at a considerably larger sum than the increase you have given upon the military expenditure of 1876-77 ? — Sir A. Colvin's statement is open to a little misconstruc- tion in that matter, unless you examine the figures very closely. The figures which you are quoting, from paragraph 20 of his statement, refer to the exceptional increase in 1885-86, not to the permanent increase shown in the current year. 2718. I see in a letter from the Indian Grovernment of February 1886, which was laid before Parliament, that they put the permanent excess of the expenses of the North-west Frontier at over 2,000,000/. ? — In speaking of the permanent mihtary increase, Sir A. Colvin's figures are an addition to the expenditure in India of 1,127,000/. in 1886-87 (paragraph 37 of his statement), and 657,000/., which is deferred to a later date (pnragraph 36) ; so that 1,784,000/. represents the permanent increase of military expenditure in India, which is made up to about 2,000,000/. if the additional charges for expenditure in England are included. 2719. Will you hand in this table of the revenue and expenditure? — I will do so. It might answer a good many of the questions. (/S'ee Appendix VIII. L. M.) 2720. The Burmese expenditure will, I suppose, be very much larger than was estimated ? — Yes. 2721. If you get into any difBculties with China, it would be as bad a thing as the North-west Frontier ? — I think the extra expenditure for Burmah is likely to be 1,100,000/. this year. 2722. To return to the debt. What were the prin- ciples which governed borrowing in gold or silver ? ■ The principle of the Covernment of India was to borrow in silver, in the currency of the country, whenever they could ; but in a time of great diffi- culty in India, owing, for instance, to a war or famine, when money had to be raised promptlj', it was impossible to raise it in silver. In that case they borrowed in gold, but they always endeavoured to keep down the gold debt as much as possible, so as to retain as a reserve the power of borrowing in sterling. 2723. There are objections, are there not, to bor- rowing by the Government in India through the Government in London ? — Yes, on account of the addition to the gold payments; and also, if the Government were to borrow in London on every occa- sion, for public works and such purposes which are not absolutely matters of necessity, they would be using up their reserve, and their credit in London would then become worse. 2724. But is not the effect on their credit very much the same when they borrowed silver in India ? Did not the money really go from London ? — No doubt the money went from, London, but the price of the sterling debt is maintained at a much higher rate if the stock is not increased too rapidly. 2725. They both of them fall upon the Indian Government, and both of them must to that extent impair the credit of the Indian Government ? — Yes, but, as was pointed out the other day, the stock avail- able for trustee investments stands much higher than the rupee debt, though in either case it is the credit of the Government of India. 2726. But the credit of the Government of India would not be more diminished by borrowing in Lon- don than by borrowing in Calcutta ? — Not the credit of the Government of India, perhaps, but the value of the sterling securities would. 2727. Can you give any figures or memorandum showing how the credit of the Indian Government in England and in India has progressed during the last 10 years or upwards ? — I hand in a table for the pur- pose (see Appendix VIII. N.) 2728. {Mr. Barbour.) Yousaid just now that, when the Government borrowed in India, the money went MINUTES OF KVIDENGE. 18^ from this country ; did the whole of the money go?— No, only a portion. 2729. (Mr. Courtnet/.) About what proportion?— It has never beea possible to say exactly, because it IS subscribed through the banks, and the ratio cannot be accurately told; but the Government of India about three years ago, in 1884, when evidence was given before the Select Committee on Indian Eail- ways, held that perhaps 1 milUon tens of rupees might be annually subscribed in India from local capital. But, if the G-overnment raised a public works loan of 2^ or 3^ million tens of rupees, the extra 1^ or 2^ millions would come from England. 2730. (Mr. Birch.) Two thirds from England ?— It depends on the amount of the loan. What they held was that only about 1 million could be raised from local subscriptions. 2731. (Mr. Courtney.) Has the rate of interest in the London mai'ket been habitually below that in Calcutta ? — Yes, assuming the same relation between the gold and the silver. 2732. No doubt ; but, whatever that relation may be at the moment, you can borrow more cheaply in London than you can in Calcutta ? — Yes. 2733. Just as the Government of New South Wales can borrow more cheaply in London than in Sydney ? — Yes. 2734. The Government of New South Wales habitually borrows in London ? — Yes. 2735. So that a portion pf the debt may go back to Sydney ; but it makes the bulk of its debt in London ? Yes. ' 2736. And thinks that economical, because it can borrow more cheaply ? — Yes. 2737. And, if there is the fact that trustees can invest in the debt created here, that is an additional inducement to borrow here ? — Yes. 2738. Now, why has there not always been- the same inducement, leaving out of qjuestion the relation between silver and gold, to the Government of India to borrow in London ? — I think the objection has always been the uncertainty what the rate of in- terest that it would have to pay in -future years would be. There is no doubt that the rate of interest it pays at the moment, if it then terminated its arrangement, would be cheaper in London than in Calcutta ; but, if it borrows at 4 per cent, in Calcutta and at 3|- per cent, in London, it may happen that the number of rupees which it will have to send home in a few years afterwards will be 4^ per cent, on the amount that was received. 2739. I said, putting out of question the fluctua- tion between the gold and silver, leaving that" out of account ? — Then, 1 think, a further reason is the im- portance of encouraging local capitahsts as much as possible. The natives of India will not subscribe to a loan raised in London, as a rule. 2740. But is it economically desirable for the Government of India to borrow more dearly in Cal- cutta, because it thereby enlists native capitalists ? — I think that there is a political advantage of great moment in the natives of the country being holders of their own debt, and not feeling that it is a foreign debt on which they must pay their interest. 2741.. But a considerable portion is actually sub- scribed in London, comes from London, even whfen it is nominally raised in Calcutta ? — Yes, a considerable proportion comes out from London. 2742. And the differences between the ruling rates in London and Calcutta were such that that must always be the case ?— I should think so. 2743. (Mr. Cohen.) Is it not the fact that no loans can be raised in London for India without consent of Parliament, although we can raise loans for Crown colonies and other self-governing colonies ?— We can- not raise loans in London without the consent of Parliament. 2744. But you can raise money in India without coming to Parliament ?— Yes. Parliament has never limited the powers of the Government of India' to raise debt in India. 2745. (Sir T. Farrer.) The reduction of the debt ■^^'•• of which you spoke has arisen from carrying over ^' Waterfield, what was formerly the general debt to the account of " productive works. You say debt has not been paid 15 jfeb. 1887. off? — For purposes of account, the debt has been " divided into two portions ; one is the debt raised for public works, and the other is the debt raised for other purposes. It seldom,, probably never, can hap- pen that the amount of debt raised in any one year for public works will exactly agree with the amount spent for public works, and the practice is to transfer every year from the ordinary debt to the public works debt the sum corresponding to the capital expenditure on public works during the year. 2746. And in that way the ordinary debt has been largely reduced, and the debt for public works is in- creased ? — Yes ; if the Government lays out 3 millions in public works, and provides 2J millions of that sum from loan (which is added to the ordinary debt), and the other 500,000/. from revenue, say, from the famine insurance grant, and then transfers 3 millions from the ordinary to the public works portion of the debt, there, is really a reduction of the ordinary debt by half a million. Hence, the reduction of ordinary debt is due to the fact that a good deal of money has been spent from revenue on the construction of public works, and a corresponding sum transferred from the ordinary to the public works portion of the debt. 2747. That is, you expend revenue on capital account ? — Yes. 2748. And you treat that as reduction of debt ? — Quite so. 2749. (M?: Barbour.) These public works do not always return the full rate of interest on the capital expended ? — No. Up to 1884 the Government made a point of not borrowing money for public works, that is to say, not allowing public works to be constructed out of borrowed money, unless there was a reasonable probability that the return would exceed the rate of interest, but they have always in recent years allowed revenue to be sjpent,' when the Government could afford it, on works which were calculated to be of utility, and especially to provide an assurance against famine, whether they would pay fully the interest charge or not. 2750. (Sir T. Fdrrer.) But on the' whole they are beginning to pay very well, are they not ?— They have very much improved in late years. The railways in particular have largely improved. 2751. And are improving still, subject to the unpro- ductive railways ? — Yes, quite so ; but the extra charge for unproductive railways has so much increased in the last year or two, owing to the military railways, that the net charge in the Budget for 1886-87 exceeds 1,700,000 tens of rupees. 2752. Is this statement of Sir John Strachey cor- rect, or is it modified by what has since happened. He says (page 102) : — " India has now obtained works " to the value of 142,000,000/., which produce a gross " income of 16,500,000/., and , (excluding interest " charges on capital) a net income of 7,000,000/., and " consequently yield a return of 4| per cent, on the " capital outlay, which pays all interest except a pre- " sent net residual yearly charge 'on the State of " 195,000/., or less than 3 per rent.," besides being a benefit to the country, which Sir John Strachey puts roughly at 40,000,000/. a year ? — I think that probably in that calculation Sir John Strachey was speaking solely of those, which had been' constructed as produc- tive works, and that he omitted the unproductive works which are, now debited to the railway account. You will see, by referring to the top of page 100, that this is the case. 2753. He says (page 45) that "the general result " is that the .average rate of gross interest charge on " the whole Indian debt has fallen from 4 • 6 in 1869-70 « to 3-8 in 1880-81, or about f per cent.," and "fur- " ther reductions may be anticipated " ?^ — In that calGulation no account was taken of the fall in exchange. He treate4 the sterling expenditure as only 134 KOTAIi COMMISSION ON GOLD AND SILVER: Mr. H. Waterfield, C.B. 15 Feb. 1887. so many tens of rupees, as was the practice at that time, the Exchange charge being entered separately. 2754. I do not think he does, because I ihink he speaks of those yearly contracts as improvident con- tracts in which an agreement was made to pay the debtors in England in gold ? — Yes, but that is in another part of the book. The figures which are now shown as the net charge on the railway revenue account are in 1878-79, in tens of rupees, 2,076,000; in 1879-80, 1,571,000 ; in 1880-81, 1,044,000 ; in 1881-82, 286,000; in 1882-83, 1,306,000; 1883-84, 305,000; 1884-85, 1,051,000; 1885-86, 782,000; and in the Budget for 1886-87, 1,722,000. 2755. I would ask you what are the famine and insurance expenses. I cannot understand exactly what those are. 1,500,000Z. were set aside to pay famine and insurance expenses ; then how is that l,500,000i. applied ? — In the first place it is applied to the relief of famine during the year. 2756. But that accounts for a very small part of it ; now how is the rest o iit spent ? — The next object to which it was devoted under the arrangement that was made in 1881-82, when it began to be entered in the account in this way, was that half of it, 750,000A, might be spent on the construction of works calculated to protect the country against famine. 2757. That is to say, upon useful productive works ? — ^No, it was not allowed to be spent on a work merely because it would be useful, and would pay 4 per cent. It was only to be spent on works that went through districts where famine was likely to occur, and where the effect of the railway would be either to throw grain in time of famine into the country, or, in the case of a canal, to irrigate the country and so protect it against famine. 2758. Still, on the whole, these would be railways for the general benefit of the country ? — For the general benefit of the country, but not necessarily of a directly remunerative character. 2759. Still they are useful productive works ? — T suppose every railway in India must be useful in some way. 2760. Then it would seem, would it not, that the taxes originally imposed for the purposes of famine insurance are now become general taxes, and that the purposes to which they are applied are reaUy useful general purposes ? — The Government of Jndia, in principle, still would hold itself bound to spend 1,500,000/., either in the manner that I have been describing, in actual famine relief, or in the constj-uc- tion of works, or in the reduction of debt; but in carrying into effect the policy of continually raising debt for the construction of railways, it would have been absurd to have with one hand paid off debt and with the other borrowed, and therefore the balance is taken as part of the loan for the year. 2761. {Mr. Barbour.) I think that special provision of 1,500,000/. will disappear in the coming year? — It will practically be entirely taken to meet the charge for railways being constructed. 2762. Because the Government of India in its present position cannot afford, as it were, to pay that insurance premium any longer ? — Yes. 2763. {Sir T. Farrer.) In fact the tax has become a general tax, and the proceeds are treated as general revenue ? — No, I am not prepared to admit that that is the case. The Government of India have agreed with the Secretary of State that they will do so this year as an exceptional arrangement, rather than impose fresh taxation, till they see what their financial posi- tion is, but they do not hold themselves entitled to take it as general revenue in the same manner that they take any other part of their annual income. 2764. I should like to read to you a sentence from a letter from the Government of India, dated the 26th January 1886. It is one of the letters in which they press some alteration of the currency, or at any rate some large measure, upon the Treasury for the pur- pose of meeting the difla.culties arising, in their opinion, from the loss by exchange : " The position " of India in relation to taxation and the sources " of the public revenues is very peculit'.v, not merely " from the habits of the people, and their strong " aversion to change, which is more specially ex- " hibited to new forms of taxation, but likewise " from the character of the Government, which is in " the hands of foreigners, who hold all the principal " administrative offices, and form so large a part of " the army. The impatience of new taxation which " would have to be borne wholly as a consequence of " the foreign rule imposed on the country, and virtually " to meet additions to charges arising outside of the " country, would constitute a political danger, the '< real magnitude of which it is to be feared is not at " all appreciated by persons who have no knowledge' " of, or concern in, the Government of India, but " which those responsible for that Government have " long regarded as of the most serious order." You are no doubt aware of that statement ? And now I will ask you to compare with it the following state- ment from Sir John Strachey'a book. Sir John Strachey says (page 356) : " But although new forms of " taxation may be difficult to devise, it would be a " great error to suppose that the limits of possible " taxation have been nearly reached in India. The " country is, beyond a doubt, one of the most lightly " taxed in the world, and there is not only no founda- " tion for the assertion that taxation has of late years " been increasing, but, on the contrary, it has posi- " tively been reduced." Then he says, at page 374 : " The general conclusions which seem to be established " are these: first, that the existing revenue is so " prosperous, and its main sources so certainly in- " creasing in productiveness, that there is no reason " to suppose that recourse to new and untried methods " of taxation will become necessary; secondly, that " there would be little difficulty, in case of necessity, " in almost immediately increasing the revenue " yielded by existing and other taxes of a little " objectionable nature, to the extent of at least " 2,000,000/; a year; and thirdly, that if a much " larger sum than any which could be provided by " such means, or by the growth of existing revenues, " should be required in consequence of some great " financial catastrophe, the income of the State " could certainly be increased by several millions a " year without injury to the country ; but that before " any measures were taken in such a view the whole " question of taxation in Bengal should be re-con- " sidered, with the object of placing on that province " that fair share of the public burdens which it now " fails to bear." I would ask you whether you agree with these statements ? — I think I may say at once that the position has completely changed since that book was written. At that time there was, excluding charges for war and frontier railways, which Sir John Strachey put aside as not recurring, an estimated surplus exceeding 5 millions. The position last year was that there was a deficit of 2,891,000/., and that the Government has been able only to provide a surplus this year of 182,000/., which was immediately swept away by the fall in exchange. The circum- stances of the country seem to me to have entirely changed, both as regards the expected increase of revenue, and as regards the actual increase of ex- penditure, even if the charges connected with the Afghan War be set aside as exceptional. 2765. Do you mean that circumstances have oc- curred which have thrown additional and unexpected expenses upon the Government, or that the productive powers of the country, the foundation of all this taxa- tion, have become less ? — The net receipt from one important source of revenue, the opium, has greatly diminished. The revenue under the steadily pro- ductive heads of stamps and excise appears to have nearly attained its maximum, and the expenditure under the head of exchange has been enormously in- creased since Sir John Strachey's book was written. I will prepare a memorandum on the subject. {See Appendix VIII. 0.) 2766. He speaks very strongly about the exchange. There is in his book a chapter upon it ? — Yes, there MINUTES OF EVIDENCE. 135 falling / ^ "Ifi*^'"^ ^^ contemplated the exchange S%A 4id in four or five years from that timl evidlnl;! ?.f'''^^°'^ *''^ S^'^^^*! purport of your lZfT,1^Tr.^^° '"^"'^''^ ^'^•l expenditure, it is this, that in the 10 years which you take there has been an increase of expenditure of 3,000,000^. and of revenue of 6,000,000/. That is to sky, there has oeen an increased surplus of 3,000,000/. ?— An in- crease of 6,000,000/. in net revenue, and an increase or 6^ milhons m net expenditure. 2768 And during those 10 years there has been, nrst and last, a very heavy loss by exchange, though not so heavy at first as it is at present ?— Yes. _ 2769. There is, if you include 1874, which comes immediately before the time you have referred to an extra expenditure of 15,000,000/. on famine, I thmk ? — In the ten years from 1877-8 to 1886-7 the payments for famine relief and insurance were iiist about 15,000,000/. ; if you go back to 1874-5 vou must add 5,000,000/. more. 2770. There has also during that time been an expenditure of about 18,000,000/. on the Afghan war ?— About 17,500,000/. net, of which, however, the British Government paid 6,000,000/. 2771. India has been provided with railway and other productive works, at a cost of 142,000,000/. ?— That is the amount spent from the time when railways and canals were first constructed by the Government m India to the date of the publication of Sir John Strachey's book. The capital outlay may now be taken at above 190,000,000/. 2772. And during the last 10 years there has been a reduction of taxation by 2J millions, balanced by an imposition of taxation to the extent of about 2,000,000/. ?— Yes, approximately. 2773. And India has got, in addition, a great number of railways which pay their expenses and add enormously to the wealth and productive power of the country ? — They can hardly be said to pay their ex- penses directly, as they are estimated to be now cost- ing about If millions a year, but they unquestion- ably have enormously increased the productive power of the country. 2774. Do not you think that is a very good record for any country, and one that reflects great credit on its financial administration ? — Yes, I do. 2775. I think you did not make a point of the discouragement of private investments in Indian com- mercial undertakings ? Can you give any notion of the amount of capital invested in such undertakings as cotton mills, jute mills, &c. in India during the last 10 years or upwards? And whether it is English or Indian capital .' — I am afraid that I cannot give at all a complete answer to that question. From the sta- tistical tables prepared in India I have extracted statements, which I hand in, giving the number of mills, looms, spindles, and hands employed in the cotton and jute manufacturing industries, as far as they are known, from 1876-7 to 1884-5 ; and also a statement of the Joint Stock Companies registered and working in British India in March 1885. The paid-up capital of 696 such companies was about 20,636,000 tens of rupees, but I am unable to say how far this was English or Indian capital. (See Appen- dix VIII P. & Q.) 2776. (Mr. Fremantle.) Have you formed any opinion as to the expediency of introducing a gold standard into India ? — Yes, I think it would not be at all desirable. 2777. Was not gold the standard of value in India till 1835 ? — Yes, it was not till 1835 that gold ceased to be legal tender in India. Silver has always been standard there, but gold was also legal tender till 1835. 2778. {Mr. Fremantle.) What led to the abolition ofthe gold standard?— I believe that it was mainly the very great inconvenience of the numerous coins which were passing current in various districts in India, and the great importance of having one uniform coin. It was, therefore, decided to have one standard rupee, called the Company's rupee, and that was the coin to be current throughout the whole of British India. o 24358. 2779. So that it was more an objection to the „ w t A Id existing state of things than an absolute preference ' c.B. for the single silver standard? — The Court of Direc- _! '. tors considered that Lord Liverpool's recently pub- 15 Feb. 1887. lished letter had established the principle that the standard coin should be of one metal only, and they had no doubt that in India that metal must be silver. It seems, however, to have been the very great incon- venience of the numerous coins, and the want of a standard coin, that was the primary cause of the change. 2780. How would you state your objections to the gold standard, provided the coinage arrangements were good ? — The whole of the settlements of the land revenue are in silver, and the contract is that the landholder shall pay a certain number of silver rupees of a fixed standard. tChe meaning of introducing a gold standard would be that he would have to pay a certain number of fractions of a sovereign, and that would imply a fluctuating quantity of rupees, which would lead to very great inconvenience, besides pos- sibly being very unjust to the payer, if gold should continue to rise in value. 2781. But might not the existing rupees be treated as a token coinage, and be received in payment up to a certain fixed amount ? — In that case the rupee would cease to represent a fixed quantity of silver ; the whole of the hoarded capital of India would be depreciated, if the rupees were made a token currency instead of a standard currency. 2782. Would not the adoption of a gold standard on the other hand bring out the hoards of gold very largely, and would not that be a good thing for the country ? — I doubt if it would have any effect of that kind. Treasure will always be hoarded, unless the people completely change their habits, and, by pre- ference, gold as being the more valuable metal. I think that the people will even now bring gold to the market whenever they suppose that it pays them to do so ; and I do not think the fact of its being a standard coin would bring out gold any more, whereas the immense mass of small payments which have to be paid render gold coins of very little practical use in the country. 2783. But at present gold is in practical use in India for hoarding and for ornament ? — There is a very little coinage, but it is a mere nothing. 2784. You appear to be appreheiisive that the sterling prices of produce and of silver may be ex- pected to fall until a point is reached at which silver cannot be brought to market with advantage, when the grower of produce must consent to a reduction of price, or trade will be checked. Have you formed any opinion as to when that point would be reached ? — No, I cannot pretend to do that. 2785. But I presume you v/^oulu agree that the effect of a considerable further fall in the sterling price of silver would lead to the closing of poorer mines, so that the fall would be to a certain extent arrested ? — At a certain point, but the statistics ofthe production show that it may go to a very low point beford it would be very greatly affected, I think. 2786. (Sir John Lubbock.) You stated that in your opinion the fall in exchange has been a great injury, both to the Government of India and to the people of India ? — Yes, to the whole Indian com- munity. I take the Government and the people as one for that purpose. It is with reference to the foreign payments. 2787. And when you speak of loss by exchange you mean a loss owing to change in the relative value of gold and silver. You have stated that the net ex- penditure of India in England has risen since 1876-77 by 3,593,000/., of V7hich you attribute 1,081,000/. to increase of expenditure, and 2,512,000/. to so-called exchange ? — The increase of sterling expenditure is 1,081,000/., and the number of tens of rupees payable in respect of sterling expenditure is increased by 3,593,000, so that the increase under exchange is 2,512,000. 2788. And you stated that until recently silver T 136 EOYAL COMMISSION ON GOLD AND SILVER : Mr. H. Waterfield, C.B. 15 I"eb. 1887. prices in India had not materially altered ? — As far as I can see, that is so. 2789. Tour argument, then, as far as 1 understand you, is that this 2,512,O0uZ., due to so-called exchange, is a real loss to India? — A real payment by India additional to the payments she had to make before. 2790. How far do you consider that this loss is due to the fact of the currency in India being in silver ? — I consider that the whole of the increase arises from the taxes being received in silver, while a large part of the payments must be made in gold. The Govern- ment have only received a certain amount of silver, and they have had to pay a larger amount of silver than before. Whereas they would before have paid a certain number of rupees to defray their sterling; expenditure, they now, without any consequent in crease of their revenue, have to make a larger pay- ment, therefore the charge is really increased by the mere fact that the number of rupees required to defray that charge has increased. 2791. You mean, that although they received the same number of rupees they really received a smaller value ? — A smaller gold value. They receive the rupees which represent in India, so far as I can see, about the same value. 2792. Therefore your contention is that the silver has remained at the same value, but the gold has appreciated ? — That, I think, is the case. 2793. And supposing the currency had been in gold, and the taxes collected in gold, would not the taxes have been really higher, for though the revenue remained nominally the same as before, still the actual value would have been greater ? — The revenue, so far as the Government was concernedj would have remained the same, but as far as the community was concerned the efEect would have been different ; if the taxes had been payable in gold the payment would have borne more heavily on the taxnayers. 2794. The total expenditure of India is 44,000,000 tens of rupees, of which 14,000,000 are gold payments ? — Tes, approximately. 2795. Therefore they are paying an increased amount as regards 14,000,000,speaking roughly ? — Yes. 2796. The total debt of India is 162,000,000, speaking in round figures, of which 68,000,000 is in England and is due in gold, and 94,000,000 is in silver ? — The sterling debt of India on the 31st March lB85 was 69,000,000, and the rupee debt 93,000,000. That would give a total of 162,000,000. 2797. And, of course, if the whole of the Indian debt had been in gold, the loss would have been far heavier than it is at present ?— Certainly. 2798. You regard it as an advantage, do you not, that the standard of value should be stable in any country. That is your contention ? — Yes, as far as it is practicable. 2799. And I suppose you will admit that, if India had a gold currency, prices in India would have fallen as prices in England have fallen? — I think so. 2800. You have stated that prices actually have not fallen ? — ] cannot see that they have, till lately. 2801. You have said that the Indian Government could not be expected to have put forward a budget year after year, shovf^ing a surplus of 2,000,000/., if that 2,000,000/. were not actually required for famine, but in that case the 2,000,000/. would have gone in the reduction of debt, would it not ? — They would have used any realized surplus in that way, but they would have been exposed to continual demands for reduction of taxes from one side or another. 2802. You would not consider a reduction of 2,000,000/. of debt to be an unreasonable amount under the conditions of India, would you ? — What would actually have happened, in that case, would have been that they would have spent 3 millions or 3| millions on public works, and only borrowed 1 or 1^ milUons, so that the other 2,000,000/. would practically have paid oif debt. I should have been very glad to have seen such a policy, but it is more probable that taxes would have been remitted, or expenditure in other ways would have been increased. 2803. (Mr. Barbour.) A witness stated to the Commission that in the 10 years ending 1885 the Government of India had borrowed 59,000,000/., and had spent on railways, irrigation, harbours, roads, and other public works, 116,000,000/. He quoted from the statistical abstract, and he said that a country that spent roughly 6,000,000 tens of rupees every year in this way over and above what it borrowed could not be said to be in an unsatisfactory position. Have you any remarks to make with reference to these positions? — I have examined the statistical abstract and the accounts, but I am unable to find such figures. In the 10 years from 1875-76 to 1884-85, the expend^ ture out of revenue on the construction of railways and irrigation works, including those charged to the famine insurance grant, was 8,768,000 tens of rupees, or an annual average of 877,000, not 6,000,000. Possibly the witness included the expenditure on the construction and repair of barracks, civil buildings of all kinds, and ordinary roads. This amounted to an average of 4,729,000 a year, over an area of 868,000 square miles, and had to be met as one of the neces- sities of government in India ; but, whUe it doubtless is satisfactory that the Government should thus be able to discharge its duty, and while it may be a cause of regret that such expenditure frequently has to be temporarily curtailed when there is a special emer- gency, it cannot be viewed as a luxury which can only be indulged in if the Government is in a flourishing condition. 2804. It was one of the ordinary charges of administration ? — Yes. 2805. A witness pointed to the fact that between 1872-73 and 1881-82 the salt revenue had increased by 1,208,000, and said that that showed remarkable elasticity in the revenues of India. During that time were there any changes of system, or is the whole of this sum due to natural growth of revenue?— The salt revenue did increase from 6,167,000 in 1872-3 to 7,376,000 in 1881-2, that is by, 1,209,000. Of this amount an increase of 805,000 occurred in the two years from 1877-78 to 1879-80, when measures were taken for the equalisation of the duties by redu- cing those in Northern India by about 16 or 17 per cent, and raising them in Southern India by 38 per cent. In 1882 a general reduction of 20 per cent, or more was eff'ected. But the administration of the department had also been greatly improved, so that probably there was much less illicit consumption than formerly, and the quantity paying duty rose from 23 to 27 million maunds between 1872-73 and 1 881-82. This included 938,000 maunds consumed by the native states with whom arrangements were made about 1876, the receipts from which and from the Portuguese Government under treaty amounted to 363,000. 2806. So that there has not been a very great growth of revenue ? — It leaves very little for general growth. 2807. You gave figures just now showing that in 1870 the proportion of the whole English trade which was trade with India was 8-3 per cent, and in 1884 it was 9'7 ?— Yes. 2808. During those years, I think, the export duty on wheat was remitted in India ? — That was in 1873. 2809. And during those years the import duties were entirely remitted ?— The general import duties were remitted in 1882. 2810. And that would naturally cause a consider- able growth of trade ? — Undoubtedly. 2811. And the opening of the Suez Canal would no doubt have a tendency to specially increase the trade of England with countries lymg east of the Suez Canal ? — Yes. 2812. The trade of Europe at any rate ? The trade of Europe. Witness afterwards, withdrew. Adjourned till Friday. MINUTES OF EVIDENCE. 137 Twelfth Day, Friday, 18th February 1887. PRESENT : The Right Hon. A. J. BALFOUR, M.P., the Chaieman, presiding. Mk. D. M. Babbouk, C.S.I. Mk. J. W. Birch. Me. L. L. Cohen, M.P. Me. L. Couetnbt, M.P. Sir T. H. Faerbr, Bart. Me. C. W. Peemantle, C.B. Mr. W. H. Houldsworth, M.P. SiE John Lubbock, Bart., M.P. Mr, Geo. H. Murray, Secretary. Mr. Paul F. Tidman was called and examined. 2813. {The Chairman!) You are a member, are you not, of the firm of Mactaggart & Co., East India merchants ? — Yes. 2814. And are well acquainted with all the facts concerning our trade with the East ? — With the far Eastern portion of it. 2815. Are you of opinion that that trade has suffered by the disturbance which has occurred during the last 10 years in the relative values of gold and silver ? — So far as English traders are con- cerned. 2816. Could you explain in some detail to the Commission exactly how the injury to the English traders arises ? — I will take the two branches of trade, the one earned on by English merchants to the East in manufactured goods, and the other in the importa- tion of produce from the Bast. 2817-8. Let us take jSrst the case of the English merchant exporting to the East; do you think he suffers from the alteration in the exchange ? — My case is, that he is in an entire state of uncertainty as to what he will receive for the proceeds of the goods that he ships at the present moment. He may make a calculation based upon the data before him at the time, and he may then find that, not as the result of any trade loss or contingency whatever, but from some fluctuation in the market for silver, what in the best of judgment would have been a profit has been turned into a loss. 2819. Some of the witnesses that we have examined have told us that that particular source of loss is obviated by arrangement with the banks, and by tele- graphic transfers by which the merchant exporting to the East and from the East is saved from all loss ? Yes. I think, however, it must be evident to the Commission that there is a risk incurred if the article which a man must take in exchange for his goods, falls in value between the time of the commence- ment of his operation and the close. That risk must ,be borne by somebody, and if I put it on to a bank I simply shift the risk, and the person who takes that risk makes me pay for it. But, as a matter of fact, you will find that, whereas it has been asserted that Eastern banks are always willing to take this risk there are times out of number when they dechne to do so, and when the purchase of goods is simply stopped because the merchant cannot make his arrange- ment for the exchange. , 2820. I suppose those are occasions when the fluctuations are of so violent a character that the bank will not take the risk .'—It would be generally on occasions of that sort. There might be other reasons, but that would be one reason. 2821. But, even at ordinary times, you are of opinion that the bank practically charges an insurance rate in addition to their ordinary business rate, and that that insurance rate is pro tanto a weight upon commerce ? — I distinctly think so. There may be cases when the bank can reduce that risk to aminimum. 2822. But still they have to charge something for it ? — The risk is always there. 2823. {Mr. Houldsworth) The risk is on the balance that the banks have, because, although the banks lose in one direction, they gain in another, and therefore the total amount of risk is: the balance. It might be a balance of profit. I quite follow you that there is a charge for the risk, but, after all, it is only on the balance of the bills both ways ?^ — ^From the banker's point of view they might hedge both ways by a double operation. 2824. {The Chairman.) But there are certain cases which the banks cannot cover, in your opinion ? — Distinctly ; and they decline to sell forward in exchange. I have referred to the Manchester accounts of last year, and I found that that was so. On a number of occasions the market in Manchester for the East came to a deadlock, upoii the ground, stated pub- licly, that the uncertainty of the exchange prevented merchants executing orders. That is in 32 weeks out of 50 last year. 2825. And on those days the whole commerce between the two countries was checked, owing solely to the uncertainty of the exchange? — ^Most distinctly-; that is borne out by the public records of Manchester. You will find it in the prices current of any of the leading firms in Manchester. Orders in the market which might have been exesuted were impracticable, owing to the impossibility of fixing exchange. 2826. We are not to understand you as holding that for 32 weeks out of 30 Manchester and Singa- pore and the East had no commercial relations with each other whatever ? — Not at all. 2827. What we are to understand you as meaning is, that there was a distinct inconvenience and check to the exporting merchant, because he could not induce the banks to take the risk of a fall by exchange, owing to the uncertain relations existing between gold and silver ? — That is the explanation of it ; that if there were orders in the market that day for 500,000/., those orders were not and could not be executed, owing to the uncertain position of the exchange . 2828. They had to stand over to a period when the exchange became more stable ? — Distinctly. 2829. {Mr. Courtney) If there are orders ? — There are always orders every week, and large orders. The trade is regular. It might be more one week T 2 Mr. P. F. Tidman 18 Feb. 1887. 138 ROYAL COMMISSION ON GOLD AND SILVER: 18 Feb. 1887. Mr. than another, but the orders were there and are there. P. F. Tidman. You would hardly find a week in Manchester in the year in which there were no orders, and orders to a large amount. 2830. {Mr. Houldsworth.) Might I ask whether the same effect was produced on imports, whether there was a check there also or whether they were not stimulated by the same cause ? — The causes would not be coincident at all. 2831. {The Chairman.) As I understand, the par- ticular evil which you are now explaining to the Com- mission is an evil which arises, not from the fall of silver, but from the uncertainty of the relations be- tween silver and gold ? — That is so entirely. 2832. And therefore that would affect imports and exports equally ? — Yes, but the imported produce being sold in London upon the day on which the order was impracticable in Manchester would have been subject to entirely difierent conditions. It would have been drawn for months previously, and its cost would have been fixed months previously. 2833. {Sir T.Farrer.) I should like to ask whether this uncertainty arises from an actual fall or rise in the exchange at the time, or from some speculative uncer- tainty about what it may be. Is it at the time when there is a great fall in exchange that this uncertainty and difficulty arises ? — If you trace the feeling with regard to silver for the first six months of last year, you find that the uncertainty about its value became inten- sified as the year went on, so much so that in the last quarter of the year there was a kind of feeling ap- proaching to what we had some years ago, a feeling of panic such as we had when the suspension of the Bland Bill was spoken about, and if you notice the chart which is before the Commission the fall in price was very severe during those three months. Naturally at that time there was a very great uncertainty as to the future, and a complete distrust in the future of silver. Now I say that in the month of July the whole feeling turned, whether it was the appointment of this Com- mission, which I believe has had a great deal to do with it, or the large business done in wheat in India which created a great demand for exchanges or both, I do not know, but the reverse effect was produced, confidence was re-established to a great extent, and the price of silver rose. 2834. Then during that first six months, and es- pecially towards the end of it, the business was very much extended, and exports would very naturally fall too, would they not? — They did so. 2835. And they would increase towards the end of the year ? — Yes. 2836. Then now I will ask you to look at that paper which shows the export of cotton piece goods month by month through the year, and I ask you whether you find in those figures any evidence of that ? — I know that towards the end of the year the Manchester figures increased ; but to show this fairly you would require to see the next three months, when goods are ordered. They might take four months to make before they are exported. 2837. It is not at the time this suspension of business takes place, but two or three months after- wards that you see the effect ? — Clearly. 2838. Now I would ask you to look at this return again for the three months after the months in which you say there was that great depression ; do you see any such effect ? — You must look at the whole ex- ports. You have given me the exports of India only, and I think I am quite right in saying that the exports of cotton goods from Lancashire towards the close of last year showed a decided advance, and made up for a very dull state of business during the early part of the year. 2839. Do these returns show it .' — Not as you put them here. 2840. They are very much the same all through the year. I think the largest amount of export was in value 1,700,000^. in March; the next largest in August, about 1,700,000/. again ; and the smallest in December, when there was about 1,300.000A ? — This is only to India, which is one great market, but not the world's market for Lancashire. 2841. {The Chairman.) But, at all events, as I understand your view, the uncertainty of the ex- change does disturb the Manchester market on certain days when that uncertainty prevails ? — Yes ; but I do not wish that that should be taken merely as my opinion. I appeal to the printed records of the Man- chester market. 2842. You have not traced the results of that dis- turbance in detail through the Manchester records and compared it with the monthly return of exports and imports ? — I have not. 2843. What you tell us is the injurious effect of the disturbance on the Manchester Exchange ? — Yes. 2844. And you hold that such a disturbance cannot exist without causing considerable inconvenience to commerce ? — I do. 2845. {Mr. Cohen.) How long would that dis- turbance last which, you say, involved a cessation of business ; a panic might only last six hours ? — Friday is the principal Manchester market day. If the market we are speaking of is that of the 23rd April, you find the price of silver A'7\d. In a fortnight after that day it has fallen \d. Well that, of course, would render impracticable the limits that had been prac- ticable two market days previously. Now, between the 7th of May and the next market day, the 14th, there was a further fall of exchange of nearly \d., therefore those limits would not only be impracticable on that day, but utterly out of the question, and hope- less ; therefore business would be so far stopped unless those limits had been raised. The same limits re- maining would be more impracticable a fortnight after than they were before. 2846. I want to get the particular fact that you have just stated substantiated. I do not think that you intend to convey by your answers that all business was stopped ; it is simply that within certain limits transactions were impracticable ? — I hope I have not made any such representation as that. 2847. What I want to know is whether the business was stopped in Manchester altogether for any period of time, or whether such stoppage did not only occur twice in the year, each time for 24 hours in conse- quence of the extreme variations and the fluctuation of silver ? — I should say that business was never stopped, because there was purchasing for gold-using markets as well as for silver. There is always business. There is purchasing for the Australian markets as well as the Indian markets, for Australia is not affected by the variations and fluctuation of silver. I am not expressing my own opinion, but stating a matter upon which the Commission may satisfy themselves by the printed statements in Man- chester. On those 32 occasions, the report states, business was either checked or stopped by the exchange difl3culty. It is not my opinion, it is the opinion of the business community of Manchester. 2848. {Mr. Barbour.) Do I understand you to say that these orders were afterwards executed, that there was merely an interruption for the time, but no diminution in the total amount of orders ? — Some might have been executed and some withdrawn, in consequence of the limits of the day. If T give an order it is to be executed within a certain time : if it cannot be executed within that time, and the limits are impracticable, the order falls altogether. 2849. {Sir T. Farrer.) Could you give us the dates of those 32 occasions ? — They can all be put in before you ; I have not them in my head. 2850-1. {Mr. Birch.) Supposing the market were held on the Tuesday, and nothing could be done in consequence of the fluctuations of exchange, the operations might be done on the Wednesday out of the market, just as well as in the market on the market day. It is only a momentary check on account of telegraphic information received that the exchange has suddenly dropped \d., and everybody is frightened for the moment, but the following day the merchant goes into the market and executes the orders he had MINUTES OF EVIDENCE. 139 ready the previous day. The prices current would only show you what happened on the market day ?— 1 ^,P®^®°^ ill Manchester has an order to buy upon the Tuesday at a limit, and that limit is impracticable on account of the exchange between silver and gold on that day, it does not become practicable on Wed- nesday unless there is a change in the exchange, and if, as I point out to you, and as this chart shows, the course of silver at that time was steadily downward, what was impracticable on Wednesday became more impracticable on the following Friday, and it is only when you get a sudden jump, as you do here from the Uth of May to the 21st., that these orders, if they were left in hand for three weeks, may become practicable, and probably did become practicable. 2852. {Mr. Barbour.) Do you speak from personal experience in the course of the trade ? — I am not per- sonally interested in Manchester at all. I give my orders to buy through an agent in Manchester. 2853. {The Chairman.) Now perhaps you will go through the particular example which you mentioned as representing a possible transaction ? — In the case I am supposing the buyer buys for shipment to Singa- pore 100 bales of grey yarn, and it costs him 1,500Z. It reaches Singapore in the usual time, and is sold at the market price of the day, at the exchange of the day, which leaves him a loss. Now that is a trade loss, which has been incurred by that operation at the time I am stating. 2854. That trade loss arises from the fact that the relative value of gold and silver has altered between the lOlh April and the 11th June ? — No, there was scarcely any fall in silver between those dates ; this is a loss arising out of the conditions of the market on the othei- side ; it may have arisen from a variety of causes. 2855. But would a merchant, knowing that he would undergo such a loss, engage in the transaction at all ? — In many cases, yes, because a merchant is obliged to keep up a large and assorted stock. He is very much in the position of a shopkeeper. If he has a large establishment, and desires to keep his place in the market, he must keep it supplied with every class of goods. If he does not, his buyer for that particular article leaves him and goes elsewhere. An old-fashioned merchant, who looks to his own business and manages it, is not altogether governed by the question whether he loses that 140/., but whether he should lose that and make it up on some- thing else. He must keep a stock. 2856. Then the merchant you are speaking of is not a mere intermediary between the producer on the one side and the consumer on the other ? — I am not speaking of an agent. 2857. But the old-fashioned merchant, one witness informed us, is now almost extinct ? — I should have thought not. It appears to me that the tendency of trade is rather to revert to that specimen. I mean to say, that many years ago there was a very large con- signed business. Manufacturers were ready to con- sign their goods. Well, they found out, I think, wisely, that that is not their business; that their business is to sell to the merchant, taking their profit and loss on this side, and the merchant takes his chance of profit or loss on the other. 2858. Then we assume the merchant has engaged in this transaction, and quite apart from exchange it has produced a loss to him of 140Z. .?— That is so. 2859. Now we have reached the 30th June. On that day the exchange was 3s. 4^d., and we have shown so far a net trade loss of 140/. 15*. Will you go on with your account of this transaction ?— Then the varn is sold at a varying credit from a month to two months. It is commonly called cash, but there is no such real thing as a cash sale, it is practically a month or two, and if you will notice the chart you will see that the actual course of exchange was that on the 30th July it was 3*. 3^d. and it fell to 3s. 2d. 2860. By what date ?— The following fortnight it had faUen to 3s. 2d. and continued so for a month. The money coming in was remitted, of course, at the lower rate. 2861. That was about the 13th i^.ugust ?— That would be so. 2862. And that produced a loss of ?--76/. 15*. from the diiference between silver and gold, the difference of exchange. 2863. Now will you give us another example and go through that in the same way ? — The next is an example of exports from the same market in which the merchant buys 100 tons of pepper, which is one of the main commodities of Singa])ore, to ship to London at the market price, 23 dollars p. pL, which is 6,037/. 10s., the exchange being then, on the 6th August, 3s. lf«?. the dollar. That gives 6,037/. 10s. This, in his opinion, being a dear purchase, he takes a view of the market and thinks to buy better by wait- ing. He waits until the 19th November, which is the time when the pepper comes generally freely to market, and he buys on the 19th November. He is so far right about his price, as the currency price has fallen from 23 to 21 " 50 dollars, and presumably, therefore, he was a wise man to wait, because had the exchange remained as it was at the time he bought, he would have received for 5,550/. instead of 6,037/. 10s., the same quantity of pepper. But then silver takes another course, and instead of going down it suddenly goes up during the latter part of this year, and by the time he has bought his pepper and wants to ship it, he finds tjie exchange instead of 3s. 1^by tele- graph is i s. 5^d. biit no bank would secuie that for June next at Is. 5|6?., which is a difference of two per cent., so that it may not be really a security at all, but that shows the appreciation that both sides will have of the risk. ' 150 ROYAL COMMISSION ON GOLD AND SILVER Mr. H. H. Gibbs. 25 Feb. 1887. 3055. {Chairman.) Do I understand that last statement of yours to mean that the bank charges two per cent, as insurance ? — In effect, the bank charges two per cent, as insurance. 3056. Against the possible loss by exchange between this and June ? — Yes. 3057. (Mr. Birch.) But in any other country in the world, if you go to a banker to fix an operation two months hence, you may have to suffer in exchange ? — Oh, certainly. 3058. Therefore, it is not a silver country, but any country in the world ? — I quite agree. I have spoken here not from any knowledge of the silver-using country, you see, but of a country where there is a paper currency, though based on silver, and I said that much more would one have to suffer in exchange when the changes, which from causes abso- lutely irrespective of commerce, were taking place, were making silver fall Id. or l^d., or rise again Id. and l^d. any week. Of course, I am speaking altogether here about the risk in Chili, where the ex- change is counted in paper dollars, based upon silver, and, therefore, sympathising with silver, but with other circumstances affecting them which do not in the same way or not in the same degree affect silver, or may not. 3059. (Chairman.) I understand that every bank charges for a transaction which is to e?;tend over, say, four months ? — Yes. 3060. What we should like to know is the diffei'ence in the charge of the bank according as that transaction which goes over four months is with a silver or a gold using country. That would put what we want to know exactly in figures ? — I should say that the case was this: that in a gold-using country, from Australia to England, for example, and vice versa, a very small degree of mercantile intelligence will enable the merchant on the one side and the banker on the other to estimate what has been the export and import of the country, and what, seeing (say) the amount of wool that is being brought down, the amount of gold being brought down, and the amount of goods that are coming in, will be the t;ourse of exchange in the next four months, but if it is a silver-using country, and you have, in addition to that, the possibility of the United States repealing the Bland Bill, and silver going down all at once to an unknown level ; the risk is greater, the insurance for the risk must necessarily be greater, and, there- fore, the burden on trade is greater. 3061. I quite understand the nature of the argu- ment. What we want to get at is the degree of injury to trade. Let us suppose that you have two trans- actions, one with Singapore, which is a silver-using country, and one with Java, which is a country other- wise exactly like Singapore, but a gold-using country. You may go to the bank, and ask them to help you in both transactions ; will they ask you more for Singapore than for Java, and, if so, how much more ? The reason I chose Java is that one of the witnesses we have had before us explained that Java, which is bi-metallic, has a fixity of exchiinge with gold-using countries, which Singapore has not? — I imagine that the gain to Java was that it had the same currency, the same money as Holland, and, therefore, it would be regu- lated really by the exchange between England and Holland, after the arrival of the specie here, but I really know nothing personally about Java. The case seems to be this : It is a mistake to call Java a gold- using country. Its money is the Dutch silver guilder, the standard is bi-metallic, but of what is called the "limping" sort, that is to say, the mint is not at present open for the coinage of silver. In like manner, the money of Pondicherry is the French franc, with the limping bi-metallic standard. In Singapore the standard is silver, the money the Mexi- can dollar. In India the standard is silver, the money the rupee. If I have business with all these places, and my correspondents make me remittances in specie, for my rupees I shall get Is. 5|rf. instead of the Is. lOid., which I should have received in former years ; for my dollars 3s. 4d. instead of 4s. Sd. ; but from Java I shall receive guilders worth Is. 8d., as they were before 1873, and from Pondicherry francs worth 9^d., as they were before 1873, the full value at the ratio of IS^- to 1. If silver should go down 5d. more in the ounce, it would have no direct effect on the remittances from Java and Pondicherry, while those from India and Singapore would be enormously depreciated. Thus, however much Java commerce may suffer from other causes, it has suffered no abnormal loss in exchange, and is free from ajjpre- hension of fluctuations in the future which cannot be even approximately calculated. How much more a bank will charge for securing your forward exchange with Singapore than with such a country depends upon the circumstances of the moment and the courage of the banker. 3062. (Mr. Barbour.) The question may be put in this way. In dealing with a country that has got the same standard, say, two gold countries dealing with each other, is it generally customary to buy and sell forward ? — It is not customary in Australia. It could be done of course ; but the banks would think the application strange. The fluctuations in exchange there, except under temporary and very peculiar circumstances, are very small. 3063. (Mr. Houldsworth.) I understood you to use the word risk very much in your argument as synonymous with loss. Now, is it not a fact that if you have a risk which results in a loss, the reverse transaction will result in a gain, or might ? — If they were synchronous transactions. 3064. So that risk is not synonymous with loss ? I may have been misunderstood. What I' mean to say is, that it is burden rather than loss. 3065. But it is not a burden if it results in a gain ? — No ; but it is a burden to the merchant, who has to pay the bank. The bank may gain but may lose. 3066. All commercial transactions are risks, and the whole basis of commercial transactions is the balance of profit or loss ? — Certainly. 3067. And exchange is only another element, and is not all loss. Therefore, an exchange bank or an exporter, or an importer, if he had losses on the one side over exchange, would have gains on the other, and it might turn out at the end of the year that the balance was on the one side or the other ? — Yes, I think it might. I think risk is cost, rather than loss. That is true, but for all that I must insist that the more uncertainty that you have in exchange the heavier the cost, and the less you are able to com- pensate yourself. 3068. Then you would mean to say, that if cotton was always at one special price, it would be better for trade than it is ? — No, I do not. I think it would be a bad thing for dealers in cotton. It would destroy speculation. I think you would carry my argument ad ahsurdum there. 1 will quote something here from what I wrote long ago. " Suppose a manu- " facturer to send two consignments of goods— one to " Australia and another to Calcutta, telling his " correspondents that 30s. per piece is a covering " price. The Australian has no difficulty at all ; he " knows the cost of transmission, and will not buy a " bill for remittance on less favourable terms for the " manufacturer than he could get by sending specie. " His only calculation is as to the possible variation " of the exchange between the date of his sale and " the date of his recovering and remitting the pro- " ceeds ; and a knowledge of the exports and imports '' will give him a reasonable clue to the probabilities " of rise or fall in the exchange. The Calcutta " merchant can also estimate this ; but there is " another element on which he cannot calculate " in the least when he makes his sale. What " will be the price of silver when he comes to buy his " bill ? Silver is to his English friend a mere com- " modity, and his remittance to him is in its essence " a shipment of that commodity, and on the fluctua- " tions of its price he cannot calculate at all. But, " ' what then ? ' it may be answered ; ' These are MINUTES OF EVIDENCE. 151 " ' only the natural rists of trade, Is our currency " ' to be revolutionised because a manufacturer has " ' made a loss ? ' I answer that this is an extra " risk, which should and could be avoided ; but the " particular loss to the shipper is not the measure of " the evil; for the risk forces him to suspend or " curtail his shipments to the country, whereby both " he and his correspondent in Calcutta suffer; he " curtails his manufacture accordingly, whereby large " classes in England suffer, and trade is injured all " round." 3069. ( Chairman^ I now come to a point on which we have had a great many theories advanced by various witnesses, namely, the extent to which trade is disturbed by an unnatural stimulus to production being given to silver-using countries corresponding with what, I suppose, we must regard as unnatural depression in gold-using countries. Could you explain to the Commission your view of how that result tiikes place ? — I am willing to agree that the import trade into England has not been unnaturally stimu- lated by the fall in exchange ; but if it is denied that it is stimulated, I must say that such stimulus is the most natural thing in the world, and certainly exists. I do not know if the Commission has had before it any -witness, himself engaged in production in a country having a depreciated currency ; but I assert that no figures, however marshalled, and no theory, however specious, can controvert facts which are seen and known every day by all those engaged in production in such a country. It has been said that Mr. Bagehot never countenanced such a notion. Mr. Bagehot was a man of great ability, and his opinions are always interesting, even on subjects of which he had no personal knowledge ; but I may assure the Commis- sion that my partners, who are manufacturers and merchants in Chili, where the currency is depreciated, as well as every one of their neighbours who have practical knowledge of the subject, would look on this question with the same astonishment as if it had been asked whether Mr. Bagehot countenanced the notion that the three angles of a triangle were equal to two right angles, or that any two sides of a triangle were greater than the third. I shall be exceedingly surprised if any intelligent person, with the like experience, will dispute the general statement that a depreciated coinage decreases the initial cost, and stimulates the production of commodities intended for export. So much has it done so, that I may safely say, that if the exchange should rise from its present point of 26d. to the dollar to somewhere between 36^. and 40«?., not another quarter of wheat would be grown in Chile for export ; many copper mines, which subsist on the low exchange, would be closed, and many nitrate establishments would be in the same case. 3070. Do I understand, then, that the mode in which this stimulus acts is by the diminution of the initial cost of manufacture in the country where the currency is depreciated ? — Precisely. 3071. Will you explain how that depreciation in the initial cost of manufacture has taken place ? — The wages and all necessaries of life remain nearly as they were, that is to say, that the dollar being now worth 2s. Id., we pay the same (in meat or in money) as we did when it was 3s. 4d. to 3s. Qd. Conse- quently, the initial cost of a quintal of nitrate is still but a little over two dollars, and is drawn for at, say, 4*. 2d. instead of 6s. 8d., so that there will be 2s. 6d. less to deduct from the gross proceeds, whatever they may be. If the rise in the value of gold were exactly in accordance with the fall iu the exchange, and if it exactly synchronised with that fall, this gain of 2s. 6d. would simply serve as a protection to the producer in the country of depreciated currency, or, I should rather say, a bonus, giving him a compensa- tion for the fall in price in the gold country, which protection other producers would not have. But as a matter of fact, they are not synchronous. The depre- ciation of the currency may be the work of an hour ; but the rise in the value of gold depends upon an o 24358. increased demand for it as money, or a diminished Mr. production, both of which need a long time before ^- ^- Gibbs. their effects are felt throughout the mass existing in ...-p, , . „ the world. 1 have not indeed been in Chili myself, [ ' but I have the irrefragable evidence of my profit and loss account, and I find it a very satisfactory witness. 3072. Your theory, as I understand it, is that if the fall in the exchange was exactly synchronous and equivalent to the fall in gold prices, then there would be no stimulus given to the production in the silver- using country beyond what you have described as protection. Will you tell us how there is protection conferred upon the producer in silver-using countries ? — That would be rather a matter of figures. That again 1 would rather set out afterwards. It would be easy to give a concrete transaction. [See Appendix X. (2)]. 3073. Does the protection you speak of mean that the producer in the silver-using countries gets a bigger profit than the producer in gold-using countries ? — He gets the same profit as he did before. That is what I take it to be. He would then get the same profit that he did when the dollar was 4s. 6c?. or 4.«., or whatever it might be. The profit that he then got, and the profit that he now gets, would be the same ; whereas, the fall in the gold price of silver not being synchronous with the fall in the gold price of commodities here, the fact is that he comes in, not indeed for the higher gold price, but for a less diminished price in gold. One might say that this was the case. The value of nitrate of soda is now 10.S., and it was 12sj 6d. before. To cancel the 2s. 6c?. gain mentioned in the last question but one it ought to I)e lower ; and in the course of time it would be lower and the 2s. 6d. gain would vanish. Things would accommodate themselves ultimately, but they have taken seven years to do it in, and they have not quite done it yet. 3074. (Mr. Birch.) That mean.s to say that the whole of the fall in the price proceeds from the appre- ciation of gold ? — Yes, of course other things being equal. 3075. ( Chairman!) Your view is, that the producer in the gold-using country is at a disadvantage, because he gets less price for his commodities as gold appreciates, but has to pay wages, if not exactly on the old level, at all events more on the old level than the price of gold would justify ; in other words, because wages do not immediately follow the fall of the prices of the commodities which he produces .-' — No, I think I would put it the other way, that the man in the silver- using country paying now 4s. 2d. for the cost of manu- facture of his nitrate instead of 6s. 8af. is at an advan- tage over the man who pays indeed, perhaps, the same wage in a gold-using country, or no great difierence, but pays a substance that has appreciated pari passu with the range of prices in the country to which the import is made, or to which the export is directed. 3076. Do you think the advantage given to the producer in the silver-using country, as compared with that in the gold-using country, is due to what I may call the mechanism of exchange, or is it due to the fact, which you have pointed out to the Com- mission before, that wages do not follow so quickly as other commodities the alteration of the value of the standard ? — It has nothing to do with the mechanism of exchange, so far as I understand what you mean by that. It is due to the fact that the wages and the neces- saries of life do not follow so rapidly as other things, the fall or rise in the exchange, i.e. the fall or rise of the value of that which is paid for them ; but in a gold- using country it must be that though they keep whei-e they were, they must, of necessity, inasmuch as they are paid in gold, bear a relation to the gold prices at home. 3077. Then, in your view, the advantage to the producer in silver-using countries is simply that he pays less wages ? — Less gold wages. 3078. Not less real wages, or, at all events, not more real wages ? — Less gold wages. I mean that the deduction from the gross price of the commodity 152 KOYAL COMMISSION ON GOLD AND SILVER: Ml. H. H. Gibbs. 35 Feb. 18S7. in the country to which it is exported has to be less, because he has only to draw for a certain mimber of pence instead of a greater number of pence, paying the same Wages in the coin of the country, or in the food and clothing which he buys with the coin of the country, than he did before. 3079. While the manufacturer in the gold-using country is practically paying more wages, though nominally he may perhaps be only paying the same, so it resolves itself into a question of wages, not really a question of exchange ? — That is a question of wages, not a question of exchange, though it is represented by exchange. ' 3080. Let us consider the case of a silver-using country which is isolated, and not trading with a gold-using country at all. There, if the currency depreciates, the manufacturers are stimulated ? — Yes. 3081. And, similarly, taking the case of a gold- using country not trading with a silver-using country, there, if the currency appreciates, manufacturers are depressed ? — Yes. 3082. And it does not really add to our knowledge of this phenomenon to bring in the question of trade between a silver-using country and a gold-using country. The phenomenon , itself is wholly inde- pendent of the fact that the two countries have different metals for currency, it is, in fact, a question of wages, and' not a question of exchange ? — No, it is a (question of wages, and not a question of what you call the mechanism of exchange, namely, the way in which the thing is drawn for by bill or otherwise. That is so ; but it is a 'question of wages affected by the varied and varying, value of the measures of value in the two countries. Such a thing would not happen, of course, if in Chili gold was the cuiTency or notes based upon gold, except so far as notes based upon gold may be over issued. 3083. Then, it is due to the fact, as I said before, that wages feel the effect of appreciation or depre- ciation of price more slowly than other commodities ? — You must say wages, and the cost of the necessaries ofHfe. 3084. What evidence have you for the fact that wages and necessaries feel more slowly a change in the value of a currency than ■ other commodities ? — The fact is; that it is so in Chili. Also, I understand that it is the same in other countries. I am told that it is the same in this country. The converse of it is true in this country, because, admitting the appre- ciation of gold, wages have not fallen in proportion. 3085. (Mt: Courtney.') But I think there are some more points to be regarded in that problem. Just consider the case of Australia, at the time of the gold discoveries there, when gold became at once greatly depreciated. What was primarily affected there?— An enormous rise of wages. I quite admit that, but that is an exception to the rule, which was obvious because the necessity of the case made it so. There was a very small number of wage earners in proportion to those who were willing to be served, in proportion to the demand for service. The conse- quence was that a man said to himself : " I can go to " the diggings and get so much a day. If you want me " to black your boots, you must pay the same." That is not the same as a regular trade going on. The whole thing was varied by that strange and unwonted phenomenon, the discovery of the gold. 3086. Does not that involve a modification of your theory ?— I hardly think it does ; because, I think, in all other similar cases of which I speak, the same would happen, and in all other similar cases to that of which you speak, the exception to the rule, if I may use such a word, would occur. 3087. But does it not amount to this, that where the depreciation of the standard is due to a greater production of the metal pf whiph the standard is com- posed in the country itself, there wages and neces- saries are the first things to feel it. Supposing, in England, for example, silver or gold were depreciated through a production in England itself, you would find in England itself that wages and necessaries, would be the first to feel it ? — It seems to me that there is a great deal in that way of putting it. Your wage-earner would be off to dig his wages out of the ground, unless you could induce him to stay by giving him higher wages out of your pocket. 3088. Your theory only holds where the depreci- ation arises from changes in the production of the metal elsewhere than in . the country, which are felt in another country through trade ?^I think I will put it in another way, which, perhaps, would rather confirm what you say. The wage paid in Australia was the very thing that was the produce of Australia, and the very thing that was disturbed in it. The man said : " By going to the diggings I can get wage, that is I " can get the gold." That is not at all the case with the man in Chili ; for example, supposing there had been a great over-issue of notes, which, I suppose, has been the case, owing to the war in 1 879 ; the man who is earning wages could not by his work produce so many notes a week, while the man who went to the diggings could procure himself gold. I think there is a very great difference. 3089. I think you would find it desirable to re-state your theory, though with that modification ? — I should still say mine is the general theory, and Mr. Courtney's an extraordinary exception. In the case you suggest the general theory is varied because the material substance of which the wages are com- posed is the very same substance which the labour of the wage earner produces. 3090. {Mr. Birch.) Do I understand you to say that the increase of the currency would not affect wages ? — Certainly it would in time. 3091. In Chili it has affected them, surely ? — That is the very point. It has hardly affected them the least in the world. The effect has been trifiing. 3092. ( Chairman.') You have now explained to us broadly your view of the mode in which trade in the silver-using countries is stimulated, and also you have explained to us one of the causes why trade in a gold-using country like the United Kingdom is de- pressed, that cause being the fact that wages, though nominally the same, have in reality risen. Are there any other evils which, in your opinion, arise from the appreciation of gold in a gold-using country ? — I think, generally, that a period of appreciation of the measure of value, that is to say, a period of falling prices, is unfavourable to trade, whUe a period of higher and somewhat increasing prices is favourable to trade. One reason, perhaps it is a sentimental reason, is that the man who finds that prices are increasing is more disposed, more inclined, to enter into business than the man who finds that- his last transaction was destroyed by a falling price, and the present transaction seems likely to be des- " troyed in the same way. 3093. In other words, it promotes enterprise ? — It promotes enterprise. If it is too great, as I have seen plentifully in the history of the trade of this country, it promotes rash speculation, but otherwise it promotes enterprise, and I should add that it is evident to me why a low range of prices is less favourable to trade than a higher range of prices, and that is, that the margin of profit is greater on a high range of prices than on a low range. 3094). But you do not mean to assert, do you, that profits are greater with a plentiful currency than with a scarce currency ? — I do not say that of necessity, but I say that profits are greater where you have an improving trade and higher prices. 3095. It is the actual change from a lower to a higher level which produces it ? — Certainly ; and there may be a change from a higher to a lower level without any.such affection of the measure of value. 3096. {Mr. Houldsworth.) Do you mean that there is a possibility, pf a greater profit at a higher range of prices th£|,n a lower ? . I thought you meant the possibility of a larger margin at a higher rate of price than a lower ? — "Xes, I think it is. I have such an impressipn on my mind. MIKUTES OF EVIDENCE. 153 3097. {Chairman.) But. you do not mean us to uhderstand that if gold, we will say, fell a half in value, the actual profits of production, after it had fallen and become fixed at the lower point, would be greater ?~No, I do not mean that: What I mean is, that the variation is bad, and the variation in a down- ward sense is worse for trade than the variation in an upward sense. When you have once got down to the point, and all previous contracts are completed, the thing is pretty much what it was. 3098. Then you have now enumerated two causes why the appreciation of gold has injured the internal trade of England, one depending on the rate of wages, the other depending on the spirit of enterpris(i, or the reverse, which a fall in the value of the currency produces. Are there any other, causes which you would like to call our attention to ? — I do not think the matter is quite exhausted. I see increased com- petition with home industry in certain industries which have been fostered in silver-using countries, and I see much uncertainty in entering into contracts, in these countries, from which one has a prospect of future profits. I must also take into account all investments of money in foreign countries. 3099. But have you anything that you would like to lay before us beyond the general view that it is an injury to manufacturers to find the actual burden of their debts increasing while the nominal amount of them remains the same ? — Certainly. Suppose a man has borrowed money to build his mills, for example, he has to pay the same interest continually ; but this interest is an appreciating interest, and his profits do not appreciate at all, but quite the reverse. 3100. But you have no special facts to lay before us in support of that general proposition ? — No, I do not think I have. 3101. Have you any facts to which you would like to call our attention with regard to the effect produced by the variations in the relative values of the two standards upon the investment of capital in silver- using countries ? — Certainly ; there is a great deal to be said upon that point. 3102. Is there any other consideration which you would like to lay before the Commission with regard to this part, of your examination, which deals merely with the existing evils ? — The apprehension of great changes in the future value of investments of capital in. silver-using countries, such changes, I mean, as would be produced by a further fall of silver. 3103. To put it shortly, the reason why, in your opinion, the investment of capital in silver-using coun- tries has diminished is the extreme uncertainty the investor feels as regards the return for his investment? — The interest and principal. 3104. {Mr. Cohen) Do you consider the low prices Qjirrent in countries using the gold standard an advan- tage or an evil ? — I consider low prices, and especially falling prices, an evil in their effect on trade. For the consumer, of course, they are good, if and when the low prices reach him. They are a good to him in themselves, but maybe an evil to him on balance, inas- much as the injury to trade tends to hurt him as well as other people, and he may not have the where- withal to pay even for the diminished cost of the commodities. 3105. Are they worse than an additional fluctuation and oscillation from one range of prices to another ? Disturbing all the relations of trade, and preventing the merchant from calculating, because he has another element to take in besides that of his own goods, what the range of movement will be ? — Yes, I thmk so. 3106. You spoke also just now of the protection which a trader could obtain by buying bills forward; was there not a time during the past year when silver went down to 42. whereas I cannot ' hire it to cover myself from any Provand,M.P. Indian bank under 10 or 12, and I have known it 20. 3311. {The Chairman.) I quite understand that. All we wanted to know was whether you had any information to give us as to whether the Indian mer- chant suffered at all. It is obvious that he suffers much less owing to the fact that the bank can cover every transaction, but what we wanted to know was, whether there was not a margin uncovered in the trade which caused a loss to the merchant. Perhaps you have no specific information to give us ? — I would be speaking too much at second-hand if I did so. There is one thing which I want still to mention about the exchange. I have said the banks will take the risk of exchange on terms which cost the merchant about 12 per cent, per annum, but unless the merchandise has been sold even these onerous terms leave him still open to the eflfect of a rise in exchange, that is a corresponding decline in the sale price of goods, which invariably takes place promptly in every part of the East, though a full in exchange is never met to the full extent by a rise in the sale price, nor even partially, until a dearth of supply compels the dealers to raise their offers. 3312. But why is the price of goods more sensitive to a rise in exchange than to a fall in exchange ? — Because if a merchant is trading, say, in Shanghai, and the exchange were to rise Id., and he can sell grey shirtings of a certain quality at T 1 ■ 50, this T l'50is on account of the rise in exchange" imme- diately worth l^rf. more to him ; and if he was willing to sell at T 1 • 50, the old rate, he will be a more willing seller still at, say, l^d. higher. But competi- tion will prevent him continuing to ask T 1'50. He at once offers the buyer the goods at, say, T l'48i. The Chinaman who buys has nothing to do with the sterling exchange, and if he were a buyer at T 1 ■ 50 he will certainly be so at anything under that price. That is how a rise in exchange operates so quickly in causing a decline in the market price of goods. On the other hand, if exchange fell, then the Chinaman would not raise his price to meet it until there is a dearth of goods in the place, and then he raises it, not because exchange went down, but because goods have become scarce, and he cannot get them unless he pays more money. The last severe decline in exchange took place between March and August last year, and there was no corresponding advance in the market price of imported goods to meet the fall in exchange. {See Appendix XL) 3313. {Mr. Birch.) But supposing exchange has remained the same, and the cost price has gone down 2d., the effect would be the same ? — Exactly the same effect follows in the foreign market, not perhaps so promptly but ultimately to the same extent. If the price goes up in Manchester the Chinaman will not give a corresponding advance until there is a scarcity of goods. 3314. Or the exchange comes down ? — Or until something happens on account of which he is com- pelled to give a higher price. 3315. {The Chairman.) But the price of grey shirtings in Shanghai must always depend on the supply and demand ? — Yes, but a demand for forward delivery can be supplied at any moment. If I were living there I could offer a man goods cheaper on account of a rise in exchange or a decline in the Manchester cost price. The goods might have to be shipped from Manchester. A large amount of the import business in India is done "forward." It is only a very small per-centage of the India business in Manchester goods that is not already settled before the goods are bought and shipped. 3316. {Mr. Houldsworth.) But if the demand does not warrant that you will have a slight trade later on ? —Yes. 3317. {The Chairman.) Is there anything else you would like to lay before us in regard to the evils of uncertainty ? — On account of the severe fluctuations in exchange the export merchant must have sold his 164 EOYAL COMMISSION ON GOLD AND SILVER: Mr. A. D. Provand,M.P. 28 Feb. 1887. goods and also settled his exchange to be free from what may be hazardous speculatiqn. Even then his risks do not end. With each transaction he has three contracts open, one with the manufacturer, one with the bank, and one with the buyer in a foreign coun- try ; and if the first fail to deliver at the time specified (and this may arise in many ways beyond his control), the merchant is liable for an exchange claim to the bank, and probably also to the buyer, neither of which claims could have arisen before the relative values of silver and gold became so much disturbed. A great number of exchange claims are 'open at the present moment. I know one seller of goods in Manchester who has three exchange claims just now for between 4001. and 500/. 3318. Due to the fact that the exchange has altered or to delay by the failure of the manufacturer to fulfil his part of the bargain?— Yes, to both ; and in two out of the three cases the failure of the manufacturer was from breakdown of machinery. He could not help that. Delays may arise from many causes beyond his control. I know I am liable to the buyer in China for, the goods, and to the bank if I have sold them a draft forward, but I cannot compel delivery from a manufacturer in Manchester. The custom is, if I like to wait I will get them after, say, a strike is over with- out any extra price, or I may cancel them if I please, but I cannot do anything more than that. I have never yet said anything about liability to any bank here. If I were to sell bills to be drawn against goods to a bank here, and be unable to get delivery of them on account of a strike, I do not know that the bank would allow a strike clause to relieve me from liability, ' because they in turn would have " covered " the busi- ness, and would lose their profit on the bills if I did not deliver them. 3319. They will charge you for the delay, and besides that for the fall of price during the delay ? — Their claim would be that which they had lost, which their claim would show. These things have all risen up and hampered and harassed our trade with China and Japan, in consequence of the fluctuations in silver, and since the fall in silver. 3320. Have you any facts to bring before us which would indicate that the fluctuations of exchange had injuriously affected the Lancashire manufacturer ? — I can give you one case in connexion with the yarn trade. At one time all the cotton yarn sold in China and Japan was exported from the United Kingdom, but now almost the whole of the coarse counts, 16/24's, consumed in those countries are shipped from Bombay. The export from the United Kingdom is now nearly confined to 28's/32's and finer counts, which, to the present time, are not manufac- tured in Bombay. The first 50 bales of cotton yarn were shipped from Bombay to Hong Kong in 1866, but the growth of the trade was not very rapid, and it had only increased to about 3,000 bales per annum in 1874. At this time the great fall in silver commenced, and other conditions then came into play which benefited the Bombay mills and damaged those in the United Kingdom. And these conditions have since then operated in the following way. The capital of the Bombay mills is in rupees. The wages are paid and the cotton and everything used in the mills is also paid for in silver, except a small part of the stores and the coals ; these, being imported, are bought on a gold basis, i.e., as silver falls or rises in value compared to gold these articles cost the Bombay mills so much more or less ; but, except for these, all the outlay of the Bombay mills is in silver. China and Japan, like India, have a silver currency, and the freight and insurance on goods from India to China and Japan is paid in silver. All goods are sold in China and Japan for silver, and the following table shows the rate of exchange fi'om 1873 to 1886 for bank drafts drawn in Shanghai on Bombay, by which the proceeds of yarn shipments would be returned to Bombay, Demand Rates of Exchange in Shanghai on Bombay per 100 Taels. Tear. 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 Rupees. 306^ 306 306i 315 307| 309 305| 307^ 307f 307 308 307 306 309 It will be observed the rates of exchange during these 14 years were very light. The high average of 1876 was caused by a monetary panic in Shanghai, and this for the time being favoured the sellers of yarn imported from India. I have already explained that the entire outlay of the Bombay spinner is in silver (except for coals and a few stores) ; that he sells his yarn and receives the proceeds also in silver ; and that, therefore, no varia- tion of the relative values of gold and silver affect him, except on coals and a few stores. The advan- tages to him are, therefore, that the trade is free from any speculative element (except the market price), as he knows what the sale of his yarn in taels (or dollars, as the case may be) in China or Japan will give him in rupees in Bombay^ Much of the yarn is sold in China and Japan for delivery at forward dates, and he can make such bargains without fear of exchange fluctuations, as he can reckon on his out-turn in rupees within a fractional per-centage. Under these favouring conditions the export of cotton yarn to China and Japan has increased as follows : — 1874 - 1875 - 1876 1877 - 1878 - 1879 - 1880 - 1881 1882 1883 1884 - 1885 - 1886 ■ Bales. 3,000 9,000 17,000 28,000 47,000 50,000 67,000 69,000 91,000 112,000 141,000 173,000 220,000 It has gone from 9,000 in 1875 to 220,000 bales in these 12 years. During the 14 years under review the position of the Lancashire spinner has been as follows : So far as he spins from cotton not of Indian origin his business from the start is on a gold basis in every respect ; but if he spin India cotton, and most of the common counts, say 16/24's, exported to China and Japan are spun from India cotton, he begins his operations by buying cotton on a silver basis, i.e., if silver fall relative to gold he will get more cotton for each sovereign, but having bought his cotton this is at once put on a gold basis by being drawn for from India on London in sterling, and afterwards the business is entirely on a gold basis, the freight and insurance to China and Japan being paid in sterling. The spinner himself may not be the actual buyer of the cotton in Bombay, but it is bought and paid for by the actual importer in the way I have described. The moment it Is shipped from Bombay it is put on a sterling basis. The yarn is sold in China for silver (in taels or dollars) and the proceeds returned in a draft drawn in sterling on London. The following table shows the average rate of exchange for 14 years : — MINUTES OF EVIDBKrOE. ic; s. t^. 5 9 5 8| 5 7 5 4; 5 5y 5 2- 5 0: 5 1- 5 1 5 H 5 oi 4 H 4 1 4 6 Demand Eates of Exchange in Shanghai on London per Tael. 1873 - 1874 - 1875 - 1876 - 1877 - 1878 1879 - 1880 - 1881 - 1882 - 1883 - 1884 - 1885 - 1886 - The foregoing table shows an almost uninterrupted decline in the exchange during the 14 years, until, in 1886, there was a fall of 21| per cent, on the rate in 1874, and this decline has, during all this time, ad- versely affected the Lancashire spinner in three ways : (a.) As exchange fell in the East the price in China for English yarn could not be raised to meet the fall, as the fall did not affect the Bombay spinner, and he, therefore, accepted the same price : (6.) The exporter of Lancashire yarn could not sell for forward delivery, as he was unable to estimate how much the sale price would pro- duce to him in sterling : (e.) His inability to estimate the sterling out-turn of his shipments caused him. Instead of awaiting the receipt of his pj-oceeds from the East, to sell drafts to the banks in London against his shipments ; but though this re- lieved him of the risk of a fall in exchange,' he did so on the terms of paying the Eastern banks what was to him an excessive price fi)r the use of their money, and was, in this way, still handicapped against the Bombay spinner. Then I have a table showing the number of bales of yarn exported from the United Kingdom to China and Japan. Bales. 1875 - - - - 75,445 1876 - - - - 74,843 1877 - - - 84,400 1878 - - - 89,670 1879 - - - - 95,656 1880 ... - 109,877 1881 - - - 116,555 1882 - - - 84,579 1883 . - - - 83,819 1884 - - - - 95,341 1885 - - - - 80,639 1886 - - - - 64,553 In 1875 the export was 75,000 bales. It rose to 116,000 in 1881, and fell in 1886 to 64,000, so that last'year is the lowest of any of the 12 years. It will be observed the trade was a growing one down to 1881, even though exchange had fallen a great deal in the meantime ; but this growth was chiefly in 28/32 and other yarns, which Bombay cannot spin ; but from 1882 to 1886 the trade has been a decUmng one, and last year marks the smallest shipments over the'l2 years shown in the table. 3321. Has the decUne since 1882 been in yarns ^hich Bombay cannot spin ?-Yes, the yarns which Bombay- cannot spin have declined also I will explain how that is. Bombay spms up to 24 s easily, but they also spin 26's, and the natives can get a 26 Bombay cheaper than an Enghsh 28, so they come down a count or two, and so get a yarn which I suppose suits their purpose. ,■ , • 3322 They have produced something which is taken in lieu of it ?— Yes, they have made somethmg which is taken in lieu of it. The trade has not only 28 Feb. 1887. declined, but for years past has been unprofitable, and Mr. A. D. a great many of the shipments which have been made Provand,M.P. over the past seven years have been in the hope that the superior quality, and the known marks of the • Lancashire yarn would recover their position. Another reason for continuing the shipments was that certain mills in Lancashire could make nothing else, but within the last few years I am informed that nearly 20 mills have either stopped altogether, or have had their machinery altered in order to spin other counts. The loss to Lancashire on this account has been very great. 3323. you anticipate the decline which has been going on since 1881 will continue? — Yes, the export is now nearly stopped from Lancashii'e of 16/24's. I have not myself sent a bale for six or seven years, 3324. I suppose you would admit that that is largely due to the fact that Bombay had natural advantages in spinning the coarser yarns over Lancashire, but in addition to that you find, as I understand it, the chief cause arises from this 10 to 12 per cent, which the Eastern banks charge for assisting the merchant to carry on his business ? — Yes, it is the uncertainty of the exchange whicli is the chief difficulty. The Bombay spinner and the Chinaman are on the same level in this respect, as they have both a silver cur- rency. 3325. It appears that there are two entirely distinct reasons why the Indian merchant benefits as compared with the English merchant ?— Till 1874 the Indian mills might be said to have created the trade they had by the natural advantages they possessed in being where the cotton was grown. They could make 16/24's, but their whole export trade to China and Japan at that time, from 1866 to 1874, had only amounted to 3,000 bales ; but from 1875 to 1886 those 3,000 bales, now that silver troubles have come in, have become 220,000 bales. 3326. Yes, I quite apprecia,te the magnitude of the fact ; what I was rather anxious to get at is your view of the causes? — I think it is not possible to distinguish between the differences in exchange and the uncertainty of it in that way. 3327. As exchange fell in the East the price in China for English yarn could not be raised to meet the fall, as the fall did not affect the Bombay spinner, and he, therefore, accepted the same price. Now let us suppose that the exchange, instead of falling, had risen in China, then, I presume, the Bombay merchant would not have been benefited ? — No. 3328. So you see there is a distinction between the uncertainty whether the exchange rises or falls, and that other cause which is due to the fall in the exchange .'' — Well, if a fall or a rise took place during the currency of the transaction, of course those con- nected with the transaction, either in Lancashire or Bombay, would be affected, but if silver were to be steady at the present price for 10 years I could not say what would happen. I cannot say more exactly than by giving statistics how much of the Bombay export of yarns to China and Japan is to be ascribed to natural advantages, and how much to the fall in silver and subsequent exchange fluctuations. 3329. I do not wish to press you unduly on the point, but let us suppose that exchange had been very uncertain during these 10 years, so that nobody could foresee in the course of six months what the exchange would be, then I understand the Eastern exchange banks would not charge 10 or 12 per cent, for their money ? — Yes, they would. 3330. And the merchant would not suffer ? — He would suffer. 3331. But if the uncertainty had been on the whole due to a tendency to a rise in the exchange, though the Bombay merchant suffered a loss of 10 per cent, the English manufacturer would have gained ? — A rise in exchange would favour us. If I expected a rise in exchange now I might ship heavily, and I would sell the goods forward as quickly as I could, and not settle my exchange, so that I would get all 166 ROYAL COMMISSION ON GOLD AND SILVEK : Mr. A. D. Frova7id, M.P. 28 Feb. 1887. the advantage I possibly could if the rise came about as I hoped. 3332. Of course if the prices of everything, includ- ing labour, in England fell exactly as the exchange fell, there would be no loss to the manufacturer, if he could alter at the same 1i,ime the interest on per- manent debt and wages of his workmen? — Every transaction would then be on the same level. 3333. But it would be the same thing to the English merchant ? — To the English manufacturer. Yes, if he gets everything at so much less to meet the lessened price, it would be precisely the same. 3334. Then you think the cause of his loss is, that the wages and interest on permanent debt have not altered as prices have fallen ? — They have not altered ; Lancashire workers earn as much in every part of Lancashire as they ever did at any time, and in some parts they earn more than they ever did before, even where the manufacturers are not doing so well. 3335. You have no other general observations to make to us ? — There is another trade in coarse cotton cloth, which Manchester formerly did with China, and all I have said with reference to yarn applies to it. I have extracted a small table to show how the Bombay people have increased their exports of such cloths to China. (See answer to Question 3453.) 3336. (Mr. Birch.) I think you said that the Indian banks make no profits or little profits, whereas the China and Japan banks do good business ? — It is the same banks that do the business with all these countries. 3337. I mean the portion that is done in China and Japan is advantageous. I understood you to say that relatively they do a much better business with China and Japan than they do with India .'' — It is a more speculative business. The profits may be more or less. Separate accounts are not published by the banks, so I am unable to say whether their India or their China business is most profitable. 3338. That is to say, the business which is favour- able to them is, to a certain degree, speculative, and might result in a loss in the merchant's annual profits ? — ^No, I expressly guarded myself against giving any opinion as to what profits the banks made out of this business. What I have said deals solely with what trying to guard against exchange fiuctuations cost the merchant trading with China, and is not to be under- stood as describing the profits made by the bants on those very transactions as these vary in different banks according to the judgment and consequent action of the managers. 3339. The inference was that the whole banking business is a speculation in the exchange ? — In China it is ; and that is why the banks make such wide rates. 3340. Does it appear to you that the financing system of the banks has its disadvantages, inasmuch as they have to a' certain extent over stimulated trade ? — I do not think so. I have often heard the bad trade of the East ascribed to the banking facili- ties ; but I do not take that view of it at all. I have heard persons inveighing against banks for advancing. In my opinion, if a bank is doing businef?s with the East, and any person comes to them with proper security, it is not their business to inquire into whether his investment will pay him a profit or not, it is enough for the manager if he sees in the proposed business a profit for the bank with security. 3341. You have no experience, I suppose, of dealing with countries where there is a forced paper cur- rency, such as Russia, Chili, or Peru ? — No, none. 3342. Because there, you see, the variations are much greater in exchange than they are even with Japan and China. A forced paper currency has very much greater fluctuations than we have seen between the silver and gold ? — Yes ; but my impression is fiom what I have heard that the business is not con- diicted with those countries on anything like such close terms as it is with India. Another thing is that the export business of Chili has been over a long period, I should say, except with short intervals of prosperity, a very unfortunate business for exporters from this country. I speak generally ; I have no special knowledge of it. 3343. The increased competition on the part of the Bombay manufacturers would appear to be rather a natural result of manufactories starting where the raw material is on the spot ? — That was the original reason of the Bombay mills being started. 3344. And then when they had once started they would go on naturally producing ? — They ' did, but they had very bad times. Their good times have come since 1875. 3345. But they have increased largely since 1875, have they not ? — Yes, they are building mills in Bombay now. This fall in silver has been to a certain extent a bonus to them. 3346. (Mr. Chamberlain.') You say that at the present time you have to pay about 10 to 12 per cent, for the use of the money of the Eastern banks ? — Yes. 3347. And with the exception of the Hong Kong and Shanghai Bant none of these banks, as far as you are aware, make much profit ? — No, they do not. 3348. And even the Hong Kong and Shanghai Bank has had serious losses lately ? — Yes, quite lately. That was by advancing against sugar in Manilla. I should say from the indiscretion of the manager on the spot, but on the whole it has been a very suc- cessful bank. 3349. But does not the fact that these banks make small profits, although they charge large interest, show that there is a good deal of risk in their transactions ? —Yes. 3350. And is not the very heavy charge for interest due to the existence of this risk i" — It is. 3351. Quite as much as to the question of exchange or fall in silver ? — It is the exchange which is the risk, and if there had been no fall in silver there would have been no question of exchange. The risk is greatest in buying bills on China. For India they do not charge high rates. The bank 4)usiness with India is competed for so closely, transactions are so easily covered, and, besides this, the Indian Council by their large sales of bills so control the exchanges that they cannot get squeeze rates, but with China they run greater risks. Every bill they buy in London on China is, so to speak, a speculation, and they make a high rate for it. In the China and Japan trades the banks practically make the rates. 3352. Yes, and they must lose money with many of their customers, or else their profits would be in proportion to the rate of interest which they charge ? — At the first glance that would appear to be so, but some explanation is here necessary. Every decline in silver since 1873 has caused the banks severe loss. Their capital is in sterling and also their chief de- posits. These were sent to the East when exchange was high and stand in the banks' books at nearly 2s. per rupee. But since the decline in silver they have written down this value, which has cost them several hundred thousand pounds, and much of their profits have gone in doing this. If during the 14 years the rate of exchange had been steady then the profits made by the banks in buying bills on China, on the terms shown above, would have been very large, but the tendency has been during all that time to lower rates until the. average rate of 1886 was 21 1 per cent, below the average rate of 1873. In buying a draft in London on the East the banks were, in fact, buying so much silver, and, as in the case of China, they did not collect that silver until from 3^ to 4^ months after they had paid for it in sterling. They held this silver for at least part of that time until they got " cover," and in estimating the profits they earned allowance must be made for the fact that they were holding an article which over a period had a lessening value. The Hong Kong and Shanghai Bank's capital is in silver, because it is a local bank out there, and its profits have been chiefly derived from local business. MINUTES OF EVIDENCE, 167 3353. Then, is not this the case, that if these banks made no bad debts, they would either make large profits or be able to charge less than 10 or 12 per cent, for the money ? — I do not think they would take the exchange risks to China for less than 10 or 12 pur cent., but of course they would have more profits than they have if they did not make any bad debts. 3354. Then as a result of these heavy charges for the use of money, you say that the Lancashire trade has suffered ? — Our trade with China has suffered. 3355. I am speaking entirely of China and Japan ? — It makes it a speculative gambling business in fact. 33oG. And as a result of that, no yarns from 16's to 2i'6 are sent to China and Japan ? — None at all. 3357. And the remaining trade in 28's and 32's is seriously straitened ? — Seriously crippled. 3358. And all that trade has gone to Bombay ? — All that trade has gone to Bombay. 3359. So that every bale of cotton sold less from Lancashire means a bale of cotton more sold from Bombay.' — It means more than that. Our trade has not only become less, it went up to 116,000 bales a year, and it would have gone on expanding. 3360. But whatever you have lost, whether of the old trade, or of trade which you might have got, has gone to Bombay ? — A large part of what Bombay spins now would have been spun in Lancashire. 3361. Tliis enormous advantage to Bombay is the result of the fall in silver ? — I believe so. 3362. And that fall of silver is due either to an over supply of silver or to a short supply of gold ? — Yes. 3363. That is to say, it is due to a natural cause ? — Yes ; but I must mention that that natural cause was prevented operating down to 1873. 3364. Now I ask you, do you think it fair that the legislature here should interpose an artificial obstacle to the advantage which is now gained by one part of the empire at the expense of the other, owing to natural c:iuses? — I must answer your question as applying lo the whole world. 1 believe it would be infinitely better to-day if silver and gold were tied together again as they were before 1873. 3365. This Commission have to consider whether legislation should take place in order to restore the old relations between silver and gold. The legisla- ture which would have to give effect to our recom- mendations is a legislature in which India is not represented. I ask you whether you think it would be fair that we should propose legislation which would injure India, although it benefits Lancashire, when the object of the legislation, according to your own admission, is to interpose an artificial obstacle in order to do away with a natural advantage ? — The advan- tao-es of returning to a fixed standard would be infinitely gi^ater than the disadvantages. If I pass a certain law it may be a hardship in a particular ease, but a benefit in 50 other cases, and I am asked about the particular case, not about the 50 other ones. 3366. (Mr. Courtney.) Supposing you admit that owing to the operation of a natural law one portion of the United Kingdom, which is a manufacturing portion, gets a' great benefit, at the expense of another portion, which is a corn-producing portion, would it be fair for the legislature of the United Kingdom to interfere to prevent that one portion from obtaining the advantage, because it involves some disadvantage to the other ?— Well, I can only answer, that I believe it would be infinitely better that silver and gold were ao-ain tied together. _ . 3367. (Sir T. Farrer.) You have given us evidence of one particular evil, an evil to Lancashire, which is also at the same time a benefit to Bombay ; now sup- pose the question rested alone upon the evidence which you had given us to-day, would you think it right that we should make the general alteration that Mr, Cham- berlain has suggested. 3368. Do you think that the evils that you have told us of to-day are sufficient to justify a complete alteration in our currency laws ? — These and other o 24368. evils might be sufiicient to justify us. I am not ^^r. A. D. ^ aware anyone has suggested making any change in Prn vand,M .P. our own currency laws, ,,g peb 1887 3369. {Mr. Cohen.) You spoke of the Eastern " '_ banks charging J 2 or 13 per cent. ? — Yes. 3370. Surely if that rate were incommensurate with the business which is subjected to that rate it would cure itself by other banks starting as we find in every other business. Are we not entitled to assume that the rate, onerous as it is, is not beyond what tiie nature of the business calls for ? — I quite agree with you, I do not think it is. 3371. Can you state to the Commission how long it is since an Indian bank was established ? — There has been no India or China bank started for many years. 3372. That would rather indicate that the banks were not doing extravagantly well notwithstanding these high rates of interest? — Eastern banking has not been a profitable business compared with Colonial banking for a Ling time past, on account of the decline in and fluctuations of silver. 3373. If notwithstanding these high rates of interest the business has not been so profitaWe as to induce new banks to start, do you attribute that to the cir- cumstance of the difference of currency creating diffi- culties which can only be met by these onerous charges ? —I do. 3374. And there is no other remedy for these onerous charges but a change in the system of cur- rency rather than a multiplication of banks. Is that so ? — Yes. 3375. I suppose we may take it as a fact that if a merchant exports goods and imports against them the question does not enter as a factor into the case at all ? — 'Oh, yes, it would. 3376. It would if no money passed at all ? — He would have to collect the silver for his goods in China in order to buy tea with it, and he might not then be able to buy tea or anything else with the money. 3377. There would be no export of money at all, how would exchange enter into it ? — The view that exchange could not enter into the question would sometimes be true if the merchant could on the day he sells his imports buy exports with the money, but in Chinx this would at any time be difficult and for most of the year impossible. He would usually have to wait weeks and might have to wait months before he got his cash, and he could not buy tea or silk " forward," he could only do so when it came into the market and could be seen and sampled. Assuma he sells his goods on the 1st of January ; he after- wards delivers them, and gets his money some time in February ; he may then want to buy tea with that money, but the tea season does not begin for three months afterwards, and if even it were during the season it meantime may have risen or fallen affected by the rate of exchange in sterling. Because as exchange rises they pay a lower price for tea, and as exchange falls they can afford to pay a higher price, and this is true of all exports from China and India likewise, because it is to the laid down cost in sterling on this side that the exporter of eastern produce looks. 3378. You were pressed by Mr. Chamberlain, and one or two other members of the Commission, as to whether it would be fair for the Government of Great Britain to interfere for the disadvantage of Bombay as against other parts of the country, assuming that you have established an advantage to Bombay, but is it not necessary in answering such a question as that to consider the elements of that advantage before you can give an answer as to whether it would be fair to interfere with them ? — Yes. On this subject some apparently simple questions would require an essay to answer them. 3379. I understood you to say that natural causes were the factor in producing that advantage ? — That is to say, the over- supply of silver. 3380. But let us take, for example, the land settle- ment of India, which was fixed in advance when the 168 EOYAL OOMMISSIOX ON GOLD AND SILVER : Mr. A. D. Provand, M.P. 28 Feb. 1887. rate was a liigli one and lias not been altered. That would be an element which you would not call a natural state of things. That is an unnatural state of things, is it not ? — ^When you allude to rent, that was the rent of agricultural land in India. It would not affect a mill to any extent at all, the ground rent would be so very small. 338 ! . Does not that affect the rate of wages through- out the country, the rent which the Government exact for their land ? — It may have some effect upon it. I have never heard such a thing stated. 3382. You consider the advantage which the Bom- bay manufactnrer now possesses exclusively due to natural causes ?— I consider the advantage which the Bombay spinner now possesses is, to a large extent, due to the fall in the value of silver relatively to gold. 3383. Then is the fall of silver a natural or a fictitious cause ? — It is to some extent a natural cause, but there are now always several temporary reasons affecting the value of the metal itself. At present there is- apparently not more than enough silver, as the continental people are buying, which maintains the - price, yet nobody will buy exchange forward as they are frightened. Do you call that a natural or an artificial cause ? Until 1873 silver was kept steady by the operation of law, but one cannot say that the removing of a law is a natural cause. That law in the first place interfered with some natural cause. 3384. Supposing that the fall in silver was owing to the action of continental Governments, would not that be a case which, in your opinion, might be met by legislative action on the part of our Government ? — I do not think that any legislative action that we could take against them would have much efEect on the value of sUver except in conjunction with other Governments. 3385. (Mr. Courtney.) Supposing I were in Mel- bourne and went into a bank there with 1,0U0Z. and asked for a telegraph transfer on London ; I should have to pay something to the bank for giving me that facility, should I not? — You might or you might not; it would depend on the rate of exchange between the two places for the time being. If they did not want to remit having idle money in I;ondon they might even pay jou something for giving it, but if they wanted to remit money they would charge you some- thing for giving it to you. 3386. But what regulates the rate of exchange under normal circumstances? — The payments which the one place has to make to the other. 3387. The cost of transferring specie is the regulating cause of the rate of exchange ? — Yes. 3388. In the element of the cost of transferring specie does the time occur which would be occupied in transferring it from the one place to the other ? — Yes. 3389. Then the interest for the time occupied by transferring is an element in the rate of exchange ? — It is. 3390. In the instance which you have given us, you suppose goods realised at Shanghai and a tele- graphic transfer obtained on London replacing the original money, do you not ? — Yes. 3391 . And you make out that 12 per cent, is charged against the 105 days that would be occupied in the time between the original advance and the date of the telegraphic transfer ? — Yes. 3392. Should you not, according to what you have already admitted, have taken into account as part of the rate of exchange of that telegraphic transfer the time which it would have taken to send money home ? — I have not done so, because I have taken the tele- graphic transfer rate. 3393. You have admitted that the telegraphic transfer rate involves, as a regulating cause of that rate, the time it takes to send money from the one place to the other ? — I have not admitted it because a telegraphic transfer takes no time. I could work it out with absolute accuracy, and show that the mer- chant who drew on Shanghai, assuming the rate had not changed between the drawing date in London and repaying date in Shanghai, would have paid the bank 4/. 9s. I^d, for the 105 days' use of their money. 3394. Supposing, in order to avoid the question of silver, I take the case of a gold-using country, Mel- bourne, If I go into a bank in Melbourne with gold money, and ask for a telegraphic transfer in London in gold, there is a certain rate of exchange charged, a certain price charged, and under normal circumstances the governing cause of that charge is the time which will be occupied in sending money from Melbourne to London ? — No, there would not be, because you pay your money into the Melbourne office to-day, and the office of the same bank pays out the money to-day in London, and the money begins to earn interest in one place when it ceases to earn it in the other. 3395. {The Chairman.) You admit this, that the actual quotation of exchange between London and Melbourne need not necessarily be at par. If it differs from par, it differs because of the competition for billf either in London or Melbourne, that the rate of variation from par cannot exceed the cost of trans- porting the precious metals from Melbourne to LondDn ? — Yes ; that is quite right. 3396. But, as matter of fact, you would also go on to to say, would you not, that the bank cannot charge interest on a telegraphic transfer for the whole time that would elapse, supposing money had to pass from Melbourne to London ; the bank cannot charge interest for that period ? — With telegraphic transfers the price will largely depend on the competition between banks created by their respective positions ; and you may eliminate some things which would affect the rate for di'afts drawn at a certain usance. The bank in Melbourne which has idle money in London will be delighted to sell you a telegraphic transfer without charge, they might be even willing to pay you a larger sum in London than you handed them in Melbourne. 3397. {Mi: Courtney^ And in that case the person who wants to send home money is saved the cost of sending it, and is saved the interest during the time it is being sent ? — Yes. 3398. Do you deny that the interest is an element which he takes into consideration in the bargain ? — The man who is buying telegraphic transfers does, not go into these calculations at all ; if he were buying a demand bill he would, because he would then pay no more to a Melbourne bank for a draft for, say, 100/. in London than that amount in gold plus freight and insurance to London, with a trifle additional for the convenience' of the bill. 3399. And a man buying anything does not go into all the causes that regulate the cost of that article that he buys. If you look at the matter as an economist all elements of cost combine together in bringing about a particular price. The question I wished an opinion upon was, whether in the payment made for a tele- graphic transfer, an element in consideration, is not the time that would be occupied in sending home the money, if the money had to be sent home ? — I do not calculate that at all. I would not know if the banker had to send the money home. 3400. But you will observe, if my opinion which I have indicated is true, instead of taking in 105 days you ought to take in 170 days, and your 12 per cent, that you say the bank makes is reduced to seven or eight? — Why should I take 170 days? From the day I receive the bank's money in London against a 60 day bill on Shanghai, uhtil that money has been remitted by a telegraphic transfer, and is again with the bank in London, only 105 days have elapsed. 3401. I should say you ought to take into account not only the time occupied in the bill drawn out, but some consideration for the time that would have been occupied in sending the money home. Supposing instead of the man going in and getting a telegraphic transfer he asks for a bill at the usual date ? — Four months on demand. 3402-3. Would he pay the same for the one as the other ? — No, he would not. MINUTES OF EVIDENCE. 169 3404. Was that four months originally fixed as about the time that it would take to send home some- thing that would realise the money? — Originally it may have been so. The diiference in Shanghai would be about 1 rf. a tael between the telegraphic transfer and the four months' rate, say, about 2 per cent. I should like to say there are few things so puzzling as Eastern exchanges to those who are unfamiliar with them. For example, if the bank rate in London were to rise to 7 per cent, the telegraphic rate would fall in Shanghai, although the fuur months' bank rate might not change at all, and if tho bank rate in London fell to 2 per cent, the telegraphic rate in Shanghai would advance, although in the meantime there was no change in the four months' rate. Telegraphic transfers are affected by circumstances which may not, or only partially, influence the dates for drafts drawn at demand, or at some months afterwards. 3405. {Mr. Barbour.) The exchange banks in the East, I fancy, frequently have their capital in gold, have they not ? — Yes. 3406. The capital of the company is in gold. Many of the exchange banks have been started on a gold basis ? — The Eastern banks, with their head offices in London, originally raised their capital in this country in gold. 3407. And they have had a portion of that capital in the East? — Yes, the most of it, and also the most of their deposits, which are also in gold. 3408. And I suppose they have been losing on that portion of their capital in silver in the East ? — Oh, yes, very largely. 3409. {Sir T. Farrer.') Is there any export of yarns from Lancashire to Java ? — Yes. 3410. Do you know how that is going on ? — I do not think it has been a very profitable trade with Java for some time, but still there is a good deal of it done. 3411. Is it going on better or worse than the trade wi'h China and Japan ? — ^It is a much smaller trade. It is not one twentieth part the size of the China trade. With that country there are no disadvantages of exshange at all. The trade is only affected by market demaml. 3412. I want to know, for that reason, whether it has suffered less than the trade with China and Japan ? — The trade with Java has suffered from a special cause, the decline in the value of sugars, the same as the trade with Manilla. 3413. Is there any competition from Bombay to Java ? — ^None that I know of. I do not think there is any yarn sent from Bombay to Java, none to speak of, because the Java yarn which they buy is all 40's. 3414. They buy the higher counts?— Yes. 3415. Then the yarns that are sent to China and Japan, are they all made out of cotton that comes from India ? — No, the 16's/24's that used to be shipped from Lancashire to China and Japan were, I might say, all made out of India grown cotton, but the 28's and 32's that we sent there were chiefly made out of American cottou, but still some were made out of India cotton; when you rise above 28's/32's there is no Indian cotton used at all. 3416. And those which go from Lancashire to China and Japan now are chiefly made with American cotton, are they? — The yarn that goes from Lan- cashire to China and Japan is chiefly made with American cotton, very little Indian cotton. 3417. So that in the case of the yarn that goes from Bombay to China and Japan, the Bombay manufacturer has the benefit of the material on the spot ? — He has that benefit. 3418. Whereas if the Lancashire manufacturer were able to compete with him in that he would be obliged to overcome the difficulty of sending the yarn from India to Lancashire, and from Lancashire back to China ? — Yes. 3419. Do you know what proportion of the ultimate price of the article is represented by the cost of transport of cotton from India to England and back to China?— The transportation charges from India to Lancashire on the cotton to make a bale of yarn (weighing 400 lbs. net), and like charges on the bale when manufactured, from Lancashire to Shanghai, may be taken as nearly 30s. A bale of English yarn costing, say, 13^. on arrival at Shanghai, will include cotton costing about 8/. and 5/., made up of manu- facturing and transportation charges. 3420. {Sir T. Farrer.) There has been, as you say, a very great development of these mills in India lately, and I gather from some of the reports that they have been having a bad time in India these last two years ? — I am not aware. 3421. You will find in one of the reports recently published that very few of the mills have been dividing more than 1 and 1^ per cent, dividend ? — I did not hear about the \^ per cent., but I have heard complaints and statements made of the extra- vagant way in which the mills have been worked. There is a firm in Manchester connected with Bom- bay mills, and two days ago a gentleman connected with them was in my office in Manchester, and he told me of one mill that had paid 10 per cent, since 1879. I do not speak of that as being general, but he told me that he was interested in some mills that had paid 10 per cent, since 1879. 3422. You do not assert that that is general ? — ^No, I cannot speak with any degree of authority what- ever with reference to anything ■ relating to the financial position of the Bombay mills or what dividends they pay. 3423. Have you formed any opinion as to whether this difference in exchange arises from what people ordinarily call, whether correctly or not, appreciation of gold, or from depreciation of silver? — Well it would be more accurate to say that gold has appre- ciated, because, although it is true that silver has fallen relatively to gold, it has not fallen relatively to everything else. 3424. And gold has risen relatively to everything else ? — All the world over, to everything else. 3425. Then supposing a man sends cotton from Lancashire to the East, and that when he gets back his price he receives a smaller quantity of gold than it was worth at the time that he sent it, but that gold is worth more, is it not ? — That depends upon what he is going to do with it. 3426. But you told me just now that gold had risen against everything ? — Well, that gold is worth more, but what he has to apply that gold to may be the same ; he may have to pay wages and rent and various other things with it which have not meanwhUe changed in amouijt. 3427. He may have to apply it to things in Eng- land which have not depreciated in comparison with gold, but taking things generally and the value of gold generally, the gold which he receives though smaller in quantity, is worth more than the same quantity of gold would have been at the time when he sent his cotton out ? — Yes, it would be so far as he was not tied by what I might call fixed charges. 3428. Then if he goes on paying wages and wages have not fallen he will not have wherewithal to pay his workmen to the same extent as he would have if gold had remained at its former value ? — Yes. You were asking about the appreciation of gold just now. It is sometimes said that it is not on account of the appreciation of gold that the prices of articles in general have fallen, but on account of the increased production of articles. I was going to mention cotton. It is 35 per cent, cheaper than it was some years ago, and meantime the quantity produced has not increased except tQ.a small extent. 3429. {Mr. Fremantle.) How would you summarise the effects of the present state of things as i-egards the price of silver and the Eastern trade upon the Man- chester trade ? — I should say that Lancashire had suffered enormously through it. 3430. But have all classes suffered, or any classes specially ? — Special classes have suffered most. I think all classes have been more or less affected. Z 2 Mr. A. D. Provand,M.P. 28 Feb. 1887 170 KOYAL COMMISSION OS GOLD AND SILVEK : Mr. A. JJ. Provand,M.P. 28 Feb. 1887. 3431. ILive there been many failures in Lanaa- sliire ? — A great many. 3432. Have those been of merchants or of spinners? Well, chiefly of manufacturers. I was going to nientio.T that you must distinguish between manufac- turers and spinners. The number of failures of manufacturers in recent years in Lancashire has been very great, and many estimates have appeared in the newspapers in Lancashire, and I have had estimates given to me by friends Avhich point to this fact, that the capital of the cotton manufacturing business in Manchester has not paid 5 per cent, for 12 years past, but I am incapable of pronouncing any opinion on that myself. I am not a manufacturer. I have no interest whatever in these mills or in any mill, or in any manufacturing bi:siness whatever in Lancashire. There is one indication of this in the market price in Manchester of the shares in the co-operative mills. In Oldham there are TOO mills, the shares of which are dealt with in the market, and I think that very few of these shares are at a premium, and in such cases the premium is very small. They are iilmost all at a discount, and the discounts in some cases are enormous. If you like I could get a public renort from Oldham showing the paid up values and present market price of the shares and send it to you. You would see in the list every mill, its capital, the number of the spindles, who made the machinery, the market price of the shares, and everything. 3133. {Mr. Houldsioorth.) Would that sustain your argument at all with reference to India, because those you are speaking of spin 32's? — But they have been aft'ected. I have already pointed out how they have been affected. 3434. You said 20's were affected ; would yciu say as far as 32 r' — I think the China people are using 26's Bombay, and they are using less 28's/32's on that account. 3435. {Mr. Fremantle.) Do you know many in- stances in which Manchester spinning houses have setup factories in India ? — No ; I understand Messrs. Greaves and Son have started Bombay mills. 3436. But that emigration, so to speak, of the cotton spinning business, has not largely taken place.? — I cannot give you the statistics of the mills in Bombay. They are easily ascertained, but I have not got them with me. I do not know of any firm in Lancashire that have mills in Bombay except that one. 3437. The number of mtlk in Bombay has largely increased in late years ? — Yes, and I understand there are nine mills building in Bombay at the present moment. 3438. When did the establishment of cotton spinning mills in Bombay begin ?— I cannot say. 3431). Would it be within the last 20 years ? — Oh, no, there were a few before that. 3440. Therefore, you would not attribute it entirely to alterations in the price of silver lately ? — Oh, no, byno means, because the first shipment of yarn from India to Hong Kong was sent in 18G6. 3441. The first stimulus to the business of spinning cotton ju India was given, I presume, by the American War ? — Well, great stimulus may have been given at that time. , 3442. {Mr. Houldsworth.) You said that the trade in Lancashire in 16's, especially to 24's with China had become nearly extinct ? — Well, there is not much done in these counts now, althouom the commerce of the world ? — No, but I suppose their commerce would for a time come to an end. I do not look at it quite as bringing the controversy to that crucial point. 3561. I chose an extreme case, because it is much easier to argue in theory on extreme cases ? — That Aa 2 178 ROYAL COMMISSION ON GOLD AND SILVER : is so. But it is only a theoretical argument, not pre- tending, I think, to have a practical application. 3562. {Mr. Courtney.) Would it solve the whole difficulty and get rid of the whole trouble of Lanca- shire, India, and other people if we established a bi- metallic law in Jersey ?— That is an extreme way of putting it ; that is exactly the same as the Chairman's way of putting it. 3563. {Mr. Cohen.) Suppose you established a bi-metallic law in Jersey or in Switzerland, that being a bi-metallic country, you would send silver there in order to get gold away from it, but as soon as the resources ceased to afford any gold, then you would no longer send silver there for that purpose ? ' No, I do not think that in theory that is the case at all. I do not myself see what the exis- tence of gold in the bi-metallic country has to do with the matter. The gold is transferred here in England. Now if there were no gold at all, (I will leave for the moment the extreme case of Berne, or of Jersey, and I will take France,) the existence of gold in Prance I have always contended does not affect practically the question, because I sell my bill here in England, and the gold that belongs to somebody else is passed to me for that bill, and the silver that is sent to France which entitles me to that, gold is only so much additional export from England, and import into France, and it alters to that extent the balance of exports and imports of the two countries. 3564. Independently of what you have spoken of the natural movement of trade between the two countries, there is under a bi-metallic system an exceptional movement caused by a desire to buy or sell one of the two metals. That operation will con- tinue as long as any of the metal in demand remains in the country ; but that ceases when there is no gold to be got in the bi-metallic country. When they send silver to get gold that is a distinct operation from the ordinary movement of the metals, which is governed by the state of trade between the two countries ? — That is so. If the agents were to send for gold that would be the effect ultimately, as they would have to pay for that gold a vast deal more than it was worth in commodites, because when you came half way through the gold, you would find that the agio, you might call it, but the premium reaUy, the price which at that time in that exceptional case they would take would be enormous. For the amount of gold that they bought they would have to pay double its value. That seems to me to be travelling into another country. 3565. If we had a bi-metallic currency all over the world the temptation to send silver to the one place to exchange it for gold to the other would not exist ? — No, not if they were all bi-metallic. 3566. {The Chairman.) When a bi-metallic country is denuded absolutely of one of the metals, and is there- fore in practice mono-metallic, what advantage is it to the rest of the world that it is theoretically and legally bi-metallic ? — My answer is that it is not mono-metallic sc) long as it will coin ad libitum either metal, and so long as one may pay one's debts in either. You ask it at that moment to coin silver ; it coins a piece of silver into francs. You are the owner of those francs, and you draw for the amount, and you must be dependent, so far as I see, upon the exchange between the two countries, as I was endeavouring to say just now. I am quite willing to be shown that it is not so, but I have frequently asserted that, and nobody has ever yet taken one single step to show me that it was not so. 3567. {Mr. Birch.) You were referring to ex- changes. As long as there was gold freely current in France it was as you say ; you could sell your bill on France at a gold exchange, but immediately the country became denuded of gold you could not have sold your bill at the same exchange if the balance of tradewas against France ? — I have said nothing about " a gold exchange," or " the same exchange." I have repeatedly said that the exchange and consequently the price of my silver must, and did in fact, vary with the balance of trade. Can you point to any day in that 70 years on which it was impossible to sell a bill on Paris ? 3568. For example, the exchange in 1845 went up to about 2\ per cent, against that country ? — I repeat that I have said nothing about a gold exchange, a per- petual gold exchange would of course denote a perpetual price of about QOd. an ounce, the exchange was at 25'85 in April in that year ; but I could have sold my bill all the same, and the amount of gold I should have received for my silver would have corresponded to that exchange. Accordingly the price of silver here was in that year and month and year as low as 58|rf. In March 1854 the exchange was 24-97^, and the price of silver Ql^d. Prom 1872 onwards the price of silver ceased to bear any relation to the Paris exchanges. 3569. And was not that because there was a scarcity of gold at that time ? — You mean the rise of the ex- change was caused by there being no gold. I do not think that is a correct statement of the cause. The failure of French exports to equal the imports was the true cause. Whether those exports are produce of the year's growth, or gold which is stored produce, matters not ; the stored produce, being the supplement of the other's deficiency is exported last and is therefore the apparent though not the real regulator of the ex- change. The presence of gold in France protects the drawer of bills, and prevents the taker from exacting too high an exchange, but limited by that, the balance of indebtedness, the supply and demand of bills, is the regulator. 3570. {Mr. Barbour.) I understand you to say that so long as the exchange does not vary there cannot be a variation in the relative value of gold and silver ? — As long as the exchange does not vary from the normal rate, I do not see myself how there could be any variation. I do not see how there could be a permanent variation in the price of silver. I could suppose that there can be a rise in the price of silver notwithstanding, because though the sending your silver to Paris ties you down to the receipt of a certain number of francs ; yet, if there is a great demand for India in England you do not send your silver to Paris but where it would be best paid for, therefore there might be a demand for silver irrespective of the bi- metallic country. The bi-metallic country comes in as a regulator to prevent the fall in the price, but I could easily conceive that there might be a demand for India, a demand for this or that purpose, which would send it up, as it did send it up in March 1859 when the price went to 62f , which was rather more than proportionate to the Paris exchange, which was 25.12^. All the silver was exhausted in England. One sent to Paris to get silver, and, as I said before, collected 5 franc pieces, melted them, and sent them out. 3571. {Sir John Lubbock.) It can be a regulator as long as a country has got both metals, but take the gradual exhaustion of gold. As long as Switzerland could supply any gold no doubt she has a certain effect in regulating the price, and the ratio of the two metals, but when she was entirely denuded of gold and had no more gold to pay, I do not then see that having nominally a bi-metallic law she would regulate in any way the price ? — It is extremely difficult for me when everybody else, quite as competent as I am to form an opinion, disagrees with me. I cannot help suspecting that there must be some flaw in my argu- ment. I do not see it yet, nor has anybody attempted to show me how the absence of gold can prevent your sending siher to Paris and drawing on it, and selling your draft at the exchange of the day. 3572. {The Chairman.) I would ask you to consider the extreme case. If you can satisfy your mind that the Canton of Berne could regulate the relative prices of metal for the whole commercial world your theory is without a flaw. I think it is rather a paradoxical position to take up ? — Yes ; of course my answer would be that for all practical purposes, it is wholly paradoxical ; only belonging to the island of Laputa, I mean to extreme theory, which has no real practical MINUTES OF EVIDENCE. 179 beai'ing on the case of a great commercial country, stiU less upon a jiumber of countries agreeing together. 3573. {Sir John Lubbock.) But does it matter how large or how small the country is supposing that it is denuded of gold ? — Provided there is trade with that country. It is not the supply of gold in that country. So long as there are bills to be drawn upon the country in question, whether Berne or Jersey, or whatever it might be, there would be a price for silver so long as Berne or Jersey will coin your bar of silver into the money of the country (supposing it had a different money), but so long as there is a trade there must be an exchange ; so long as there is an exchange you must be able to get English money for your bill. If it is not so, I wonder no one explains what will prevent it. 3574. {Mr. Barbour.) Assuming that the produc- tion of silver is increasing as compared with gold, and that in consequence silver is being poured into a bi- metallic country, should you admit that there would be a tendency for the gold to leave it ? — Certainly. 3575. And supposing that process goes on until at last you arrive at the point at which all the gold leaves, and there is nothing left but silver, and silver is being produced still, will that silver im- mediately after the gold has gone out still fetch the same value in the bi-metallic country ? — It will still fetch the value shown by the exchange. 3576. Will it not then turn the exchange against the bi-metallic country ? — Certainly ; just as the ship- ment thither of any other commodities would do ; if other commodities have not been at the same time sent hither by France. It is all a question of balance of indebtedness. If silver flows in, and by your hypothesis we may take it as probable that it would pour in, without the shipment of a sufficient quantity of goods to balance it, the exchange will turn against France, there I am with you so far. 3577. If a bi-metallic country' will accept all the silver that comes without the exchange being turned against it, it will maintain the ratio, but if there is not a sufficient export from that country then the exchange turns against it ? — Certainly. 3578. And the ratio between gold and silver is destroyed ? — Not the ratio, the ratio remains the same but the price in the gold-using country alters. 3579. The market price alters .' — The market price in the mono-metallic country. That is always what I have said, the market price in the mono-metallic country oscillates round the point fixed by the ratio, in the bi-metallic country, that is to say, if the ex- change is in favour of this country then you would get a higher price than the ratio. If in the extreme case .suggested by you all the produce of the American mines, and of every other mine in the world, pours in one year upon France the exchange in all probability vriU turn against France. You must take it that it turns against France, the exchange (as the expres- sion of the balance of indebtedness) being the one thing that regulates' the gold price of silver here. That is what I have all along said, but I say it depends on the exchange and not in the least upon the presence of gold in the country (except so far as gold, like anything else, is an exportable commodity and enters into the balance of indebtedness), but upon the exchajUge. 3580. {Mr. Courtney.) I would put it in this way. Supposing Jersey is a bi-metallic country. Every other country in the world is simply a gold country, mono-metallic or gold. Silver comes to be produced with much greater facility, and Jersey being a place which has both gold and silver in use, the silver is taken there and gold either directly or through com- modities is got in exchange for it ? — Yes. 3581. That can be carried on as long as there is any gold left in Jersey ? — Yes. 3582. Suppose you have reached the limit when the gold in Jersey is absolutely exhausted ? Theoretically the relation between the gold and silver might still be the same in Jersey, the law might be the same ? — Yes. 3583. But inasmuch as there is no gold there, prac- tically the relation would have vanished altogether ? Mr. No. ^- H. Gibbs. 3584. But even when one commodity has ceased to ' exist ? — Certainly not, because the one point that you ^^' ' do not carry in your mind is this, that I have a right to send my bar of silver to Jersey, and they must coin it into pieces of money which bear that ratio to gold. That is what they must do. 3585. Yes, but if there is no gold there for it to bear the ratio to? — To gold; not to a particular piece of gold. 3586. Carry it a step further. Silver is still being J)roduced in great quantities ; you cannot get gold for it in Jersey at the rate of 1 5^ to 1 ? — Or any rate at all, there is none. 3587. But people want to get rid of it elsewhere ? — They send it to Jersey. 3588. They may send it to other places, Jersey cannot get gorged with silver ? — Yes, your theory is that it is. You do go on sending it to Jersey because you can get it coined into shillings, or whatever may be supposed to be the money of the country. It is perfectly right so long as you have trade with Jersej', but when you have exhausted tl.e trade, when you can get nothing from Jersey, consequently when you have no more goods to draw from Jersey, you send them no commodities. 3589. {The Chairman.) Why do you assume this absolute cessation of commerce with Jersey, because Jersey is bi-metallic? — Because you have brought the exchanges with Jersey to such a point by importing into Jersey more than she can pay for. After you have done that you have no trade with Jersey. 3590. Surely what woijJd immediately happen would be that the silver would go out of Jersey ? — Whither ? 3591. Follow this reasoning. Silver comes in to Jersey more and more, each piece of silver therefore can buy less of Jersey commodities in Jersey, silver falls in relation to Jersey commodities, and of course it will leave Jersey and go to where it has not fallen in relation to commodities ? — But the hypothesis is that all other countries are mono-metallic on gold. Silver is of no value to them. 3592. {Mr. Courtney.) But it has value as a com- modity ? — It has, but what value ? It would go pro- bably into the arts. 3593. {Mr. Chamberlain.) Is not the result of all this examination that the attempt to preserve this arbitrary relation between the two metals will in the event of an over production of one of them result disastrously for the country that does it ? — I am not sure about the disaster. You have ^hcwn that Jersey has sold all it had at increasing prices, and has had its production greatly stimulated. The result may not be healthy, hut it is only because you have taken Jersey. You have not taken equals with equals, still less have you taken superiors with inferiors. I mean to say we are now only arguing on imaginary cases, which have no practical value. They demon- strate nothing, though they exemplify the working. 3594. You would admit that it might be the case if it were done by a single country, the amount of whose transactions bear a small proportion to that of the general transactions of the world. Your argu- ment is, if it were done by all or a sufficient number, then no such difficulty would arise ? — That is exactly what I say. The point we come to is this, that a time has come when there is not an ounce of gold in Jersey, when silver still continues to pour in. Then I say, if there is still any trade in Jersey, if any man wants to remit a bill, has anjrthing to pay to the people in Jersey, then he will buy my bill on St. Heliers. 3595. {Sir T. Farrer.) For how much? — For the exchange of the day whatever it is. I do not in the least say what exchange, but I say a point may come when the exchange will go extremely high. It may come that it might be 37 francs Jersey money to the \l. sterling, which will be the equivalent to the present price of silver or thereabouts. Of course that would happen if there is nobody who is willing to buy a bill upon Jersey whereVith to pay for commodities which 180 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. H. Gibbs. 4 Mar. 1887. he has had from Jersey. Then this would be the price that he would pay me, the exchange of the day. I only say, as a matter of theory, that it is the exchange that will regulate the price of silver where there is a country willing to coin silver into its own money ; or the" price of gold, if there is a bi-metallic country that is willing to coin gold into its own money. 3596. {Mr. Birch.) But Jersey would hardly serve to illustrate the case ; you require a large centre. We will take France. She would coin your silver, and if you sent it there you would have the stock exchange besides commodities for investment; but you might not be able to get gold. If gold was wanted in other parts of the world, the gold might have been drawn out of France, and there would only remain the silver currency? — That would be quite true. It does not answer my point, that whatever the exchange between this country and the other country at that exchange I could get gold for my silver. 3597. {Sir T. Farrer.) Is not that lowering the ratio between gold and silver ?— It is lowering the price of silver in other countries, which is a different thing. 3598. {Mr. Birch.) But you could not get gold if there was no gold in the country ? — If I send under any circumstances a piece of silver to Paris to be coined into francs and you yourself have to remit a bill on Paris to pay a debt, why do not you take my bill ? If you do take my bill you pay me in gold for it at the rate' of exchange of the day. 3599. I pay you here in gold and hitherto you have been able to get gold in Paris. Between 1851 and 1866 the Mint of Paris coined 224,000,000 of gold, and it only coined 13,000,000 of silver, and that shows that gold went there when gold was the cheaper of the two, and silver did not go there ? — But that is not the point; I have 1,000 francs to my credit in Paris ; I oflfer a bill for 1,000 francs on the London Exchange, and I want to know why you should not take that bill if you have to pay 1,000 francs to Paris ? You answer me that you pay me here in gold, and that hitherto you have been able to get gold in Paris. I do not see what that has to do with it. My point is that, as you say, you pay me here in gold, whether there is gold in Paris or no. 3600-1. {Mr. Courtney.) Supposing we start with what we call the conditions of equilibrium, gold and silver existing in Jersey ; you can buy Chaumontel pears there at 2s. a dozen, silver fetches here 5*. an Ounce. Those are the two conditions with which we will start. We go on the process which I have already explained by which silver is poured into Jersey until the gold is gradually exhausted. — Silver continues to be poured in, the price of pears goes up from 2s. a dozen until it reaches As. a dozen. Simultaneously the price of silver here falls from 5s. an ounce to 2s. Qd. an ounce ? — Do you mean that as a consequence ? 3602. Would not they go on simultaneously ? — No, not of necessity. It would quite depend upon what the trade with Jersey was. If Chaumontel pears were 4s. a dozen the probability is that very much fewer Chaumontel pears would be bought. 3603. There was an equilibrium between the prices of pears and gold, 2s. a dozen for pears and 5s. an ounce for silver ; that was the equilibrium. If you theoretically disturb the price of one you send a demand for the other article, and they oscillate simultaneously, or one after the other, so as to keep under natural conditions of trade the same relative price 1- — I think that may possibly be if you take the whole traffic of Jersey, which is only another way of stating that the exchange upon Jersey would fall. 3604. That is the point I wished to arrive at. What we should arrive at ultimately would be that prices would be doublei their nominal amount in Jersey ? — That is very likely. 3605. And the exchange between silver and gold would have fallen one half? — Yes, it is probable that it would, but not in Jersey. 3606. Well then I should say is not what you call the maintenance of the ratio between, silver and gold a mere phrase ? — No, the ratio is not destroyed, so long as you can get your bar of silver coined into the money of the country, whatever it is. 3607. {7'he Chairman.) I do not think we can use- fully pm-sue this any further. The question to which we want an answer is this : What is the distinction between Jersey absolutely denuded of gold, but freely coining silver, and India which does not use gold, but freely coins silver ? We admit that India coining silver does not keep the (Exchange straight between gold and silver, and what we want to know is why Jersey doing the same thing does keep the exchange straight ? In other words what is the distinction between a silver-using country and a country that would freely coin gold if oifered it, but which is practically never offered it.'' — I think that in such an imaginary case as you suggest there is no practical distinction. We may leave Jersey out of the question. It was obviously an unreal example, as unreal as it would be on the opposite supposition of a gold-using Jersey stand- ing in the face of a group of bi-metallic States, and depriving them of 600,000,000/. or 700,000,000/. of gold. But Jersey has served our turn as an illustration of the way in which a small bi-metallic community might be deprived of its gold (or silver), might have exported all its produce, and might have nothing left where;with to meet a flood of silver (or gold) poured into it. I will rather take France as an instance. France denuded of gold is for the mordent in the position of a silver-using, silver-coining country. She would indeed coin gold, but by your hypothesis none is offered her. What, then, is the distinction between her and India, also a silver-using, silver coining country, coin- ing no gold ? France coins her silver at a certain ratio to gold, 25 grammes silver corresponding to gr. 1 '6129 gold, and consequently to a definite proportion of the sovereign. There is, therefore, a definite par of ex- change between French silver and English gold. India coins her silver into pieces bearing no legal relation at all to gold, and there is therefore no par of exchange between Indian silver and English gold. But so long as there is a par between French silver and English gold, Indian silver and French silver being the same, the same par must necessarily exist for both. Therefore while France is bi-metaUic the price of silver here will be at least that which corresponds to the Paris exchange, whatever may be the balance of indebtedness between England and India. But if the bi-metallic law no longer exists in France to hold the balance, the price of silver vn.ll be governed by the balance of indebtedness between England and India or other silver using countries. France indeed besides being, in theory, denuded of all her gold, may, in theory, be inundated with silver, until there be no takers of bills on France. It might be indifferent then whether the holder of silver sent the metal to India or to France. It would probably be wanted by neither, but being money there, it would be a forced import into either country ; and neither French bi-metallism nor anything else would keep up its price in gold-using countries beyond what the exchange between those countries, and France and India respectively would show. But this whole discussion about the total absence of one metal from a bi-metallic country is unreal, and quite remote from the practical question before us. There is no reality in the suggestion that France would be denuded of all her gold ; still -less that a group of countries would be so denuded ; none in the fear that she could be deluged with silver, still less in the notion that her productive power could be simul- taneously destroyed and leave her no exports to set MINUTES OF EVIDENCE. 181 against her imports, a notion which leaves wholly out of the account the progressive rise of prices in France, the stimulus to production there, and the rise of prices in the gold-using countries. The practical question is, whether as things now are, when there is no real expectation o£ the pro- duction of hundreds of millions sterling of silver, and when it is certain that the bi-metallic law being re-established in France, silver would be again money or potential money everywhere, it would or would not be advisable to do everything in our power to bring about such a consummation ? I thinii it would. 3608. {Sir T. Farrer.) I should like to ask in addition to that, under such circumstances what is the meaning of the phrase " the ratio is main- tained," what is the signification of that ? — By this question, and by some words in former ques- tions, I perceive that there is an impression that if in a bi-metallic country there is a premium on gold or silver, so that, for example, 15 • 7 ounces of silver should be paid for an ounce of gold at one time ; and 1 ounce 3 grains of gold for 15^ ounces of silver at another ; the ratio of 15^ to 1 established by law has been somehow disturbed. This is certainly not the case, for one could at either time get either metal coined at that ratio (and no year passed without both metals being so coined in France), one could pay one's debts in either metal, and if one had borrowed 1 ,000 Napoleons in gold, one could discharge that debt in silver. This mistake would not be made if people would get into their minds what were the real provisions of the French law, and not evolve out of their own imagination a provision which does not exist in it. I must repeat that one of the three essential points of that law is, that the debtor has the liberty of paying in which metal he will ; and not that the creditor has the right of demanding which he will. Were this latter the case, then indeed the law would break down, and the ratio of 15^ to 1 would be altered, if notwithstanding this right the debtor could mulct his creditor, against his will, of so many centimes in the gold 20 franc piece, or in the silver 5 franc piece. For then the right conferred by the law would have been taken away. But where, for his own convenience, the creditor voluntarily pays the debtor so many centimes to induce him to forego a right which still exists, and on which he ipse facto insists, the law is not broken j nor can it be said that the ratio fixed by the law is in any way disturbed by a separate bargain which recognises its existence. 3609. {The Chairman.) Then to go to the prac- tical deduction from this, you would regard it as only of diplomatic value to have a very large bi-metallic area in the world ? — No, rather more than a diplo- matic value, because I have never doubted that if you have a country like France alone acting as a bi- metallic country with a large multitude of others drawing upon it continually, then you may have that which will be an inconvenience, you may theoretically have an enormous quantity of one of the metals poured in, which, as in the case of France when it received all that quantity of gold, would raise gold prices, and banish the other metal, but the country wiU not feel that which Mr. Giffen once described as misery, because in point of fact it is making a great gain in one part, and if it makes a loss in others, they balance. 3610. I now want to put an extreme case before you which is sometimes raised as an objection to bi- metallism. Let us assume the best circumstances that any bi-metallist can hope for, namely, that prac- tically the whole commercial world were joined in a common bi-metallic system at a common ratio, and let us suppose that in one of the metals enormous mines tJaat can be very cheaply worked are discovered. Would not the result of that be that the metal which could thus be cheaply produced will be produced in very large quantities, and the total currency, gold and 4 Mar. 188?. silver taken together, because they are tied together Mr by hypothesis, would depreciate ? — Yes, certainly. H. H. Gibbs. 361 1 . The fact that they depreciated would cause the mines in the metal in which the discoveries were not made, which we will call gold, the less productive mines, to be unworked. The result of that would be that the more silver was poured on the market the less gold could be poured on the market, and if it be an evil to have one metal in excess, that evil would be aggravated and not diminished by the iDi-metallic system, in other words the price of silver would be artificially kept up, the price of gold would be artifi- cially lowered. By the first of those operations the production of silver would be artificially stimulated, and by the second the production of gold would be artificially checked, and the result of that would be that there would be no reason why it should ever stop until gold was entirely excluded from the pro- ductive industries of the world, and we should simply use gold as long as 'the gold already in existence lasted, so we should practically become a mono-rnetallic world using silver alone ?~0f course if I must accept the hypothesis that gold would cease to be produced alto- gether, you must add that silver would be produced in sufficient quantities to serve for the measure of value in the world. What you suggest would no doubt happen. Whether there would be any tremendous mischief in it so happening is another matter. John Locke would have thought it the most fortunate thing that could have happened, because he thought that if one metal alone was to serve as the measure of value, silver was far the best, and for the reason, as it appeared to him, that silver was one that was produced with more regularity than gold. 3612. It is unlikely that it should happen, but if it did happen it would not be a very serious evil ? — It would not be a very serious evil ; and it must be borne in mind that however great the evil produced by such an influx of silver into the currency of the associated nations, it would be much greater if it poured into a single silver-using country. The Commission may measure it by the great influx of gold into England since 1853 ! The question could only be of practical importance if it were apprehended that the production of silver had been checked by the low price, and could be resumed in excessive quantity. I have great reason to doubt whether there is any such check to the production of silver, since silver has gone down in price ; because as far as I can gather from other people's account of it, and -what little I know myself upon the subject, the mines are always good enough to produce more than the present price of silver, and people do not wait, miners of all others do not wait for other years, but they go on producing, even when they are producing nothing, much more when they are producing something. We know as a matter of fact that the output of silver has largely increased of late years. 3613. {Mr. Courtney.) You would start beyond that point. If you made the ratio one to two you would extremely enlarge the circulation of the world, would you not ? — Yes, enormously. 3614. If you took all the silver that exists and made every two ounces instead of 15^ or 18, or what- ever it is now, equal to one of gold, would you not cause a tremendous rise of prices everywhere ?' That is the same thing as would follow the hypothesis of the Chairman, the immense production of silver mines ? — Yes, but there is the compensating action of the departure of gold in his view, aud it must be gradual. 3615. {The Chairman.) Of course, if you made silver artificially only half as valuable as gold not a single ounce of gold would be produced ? — You could not help producing it, because if you kicked a nugget you would pick it up, but no mines would be worked. 3616. {Mr. Courtney.) It would be produced as diamonds are produced ? — Yes ; only one seldom stumbles over a diamond. 3617. {The Chairman^ One question of a more general kind. You explained at some length in your 182 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. H. Gibbs. 4 Mar. 1887. evidence the other day the evils that you thought followed from the variation of exchange, and from the appreciation of the currency. Is your view that the healthy state of a currency is one which naturally expands as population "and commerce expand? — Yes; when that is the case, commerce is kept in a good groove, it is shunted out of it otherwise. 3618. If the supply of the precious metals remains constant, if at the same time there is no increase of what we have called hanking facilities, and at the same time population and commerce increase, of course you have an era of falling prices ? — Yes. 3619. You regard that as great discouragement to enterprise ? — It is an impediment to enterprise, I think. 3620. A great burden upon those who have fixed charges of long-standing debts ? — It is a burden upon those who have to pay. It is a burden, I may add, upon those who are making contracts if it is to be a continuous fall. 3621. A great burden on nations which have national debts ? — Certainly. 3622. And corporations which have municipal debts ? — Yes, and upon mortgagors who have to pay the interest on their mortgages. 3623. There is no doubt that in all probability the commerce of the world and the population of the world must go on increasing in the future as it has in the past? — Yes. 3624. And you would, therefore, think it the duty of those who desire to put the currency on a sound basis to do what they can to make that currency elastic to meet the new requirements that are certain to come upon it ? — Yes. 3625. And you are of opinion that the bi-metallic system which brings in silver to the assistance of gold in commerce is the best way of carrying out that ? — Yes. When I say the best way, of course there are other ways that may help it. 3626. A nd for those reasons as well as in order to obtain that certainty in the ratio of exchange between silver iind gold using countries, you are anxious to see some arrangement come to between the civilised nations for adopting the bi-metallic system ? — That is what I want to see. 3627. Have you any view as to what the ratio ought to be ? — Yes ; I have a very strong view upon that. It is that inasmuch as I should desire that the matter should be made one of arrangement with other powers, and that I think it extremely desirable that an attempt should be made to do that, it seems to me un- likely that the French or German should be willing to enter into an agreement for any other ratio than that of 15^ to 1, because that is the ratio now prevailing in Germany and in France, the ratio at which a very large quantity of coined money is current ; and if it be said, as of course it would be said, "Why should " we English depart from what is shown by the " present price ? That would seem to be the real ratio " to choose." My answer to that is that the present price is the price of silver when the demand for silver is in part desti'oyed. The one great demand for silver was that for coinage. There is a great deal of coined silver lying in the United States Treasury that is not serving the purpose of the measure of value, and there is much in Europe that is in the same case, and there is much yet in the mines in the same case, therefore, I think that if silver were brought back to its old position either by reverting to the status quo ante 1873, or if it was done by a bi-metallic agreement, between the Latin Union, the United Slates, Ger- many, Holland, Belgium, and England, I think that then it would be found that 15^ to 1 was as near the correct ratio as you could get. There never was an exact ratio, of course, because no one could possibly- tell either what the amount of silver and the amount of gold existing in the world was, nor what their relative cost of production had been. 3628. Then, as I understand it, you have two reasons for preferring a ratio of 15^ to 1, one, a diplomatic reason that it would be the easiest ratio to induce other nations to accept ; and the second, that if silver were rehabiUtated in Sther countries where it is now excluded from the currency, as far as we can guess, 15 1 to 1 would be approximately the natural rate of exchange between it and gold ? — I would say rather as near as ever it was. 3629. (Mr. Fremantle.) The adoption of the ratio 15| to 1 would necessitate, would it not, there-coinage of the silver currencies of this country and of the United States and other countries too ? — I wiU not tell you about other countries, because I cannot answer, but certainly not one single coin here. Our coins, as you know better than anybody, are tokens. The shilling, which is a token for the 20th part of 11. sterling, would remain. 3630. But in America where the silver dollar is standard coinage? — Well they are at 16 to 1. There would be a trifling difference in America, but they are, as we well know, willing to run that risk. They have already altered their ratio three times without method ; that is, without considering its accordance with that adopted by other nations. 363 1 . ( The Chairmati.) You contemplate having two sets of coins current at the same time, one of a standard fineness, and the other of what I might describe as a token fin eness ? — No, certainly not two sets, there would be a standard coin of the realm which would be a double florin I presume, and all the rest token. 3632. (Mr. Fremantle.) Will it not be necessary therefore to call in the whole or nearly the whole of the present silver coinage of the country ? — I cannot in the least imagine why. The double florin of full weight, so far as it was used at all for internal purposes, would replace gold more than tokens. There might be a few less tokens coined, but very few. 3633. {The Chairman.) Your view is that we should have three kinds of coin in existence, gold coin as it is at present, a silver token coinage as it is at present, and in addition to that, a new silver coin of standard fineness ? — Certainly. 3634. And weight ? — And weight, exactly the same as the French system. 3635. Under the system you propose would you have as at present all debts to be liquidated in token coinage up to 405. ? — Oh, yes, certainly. 3636. {Mr. Birch.) Not more?— That enters into quite another question, that is to say how far it wonld be as possible as it would be desirable to induce other nations to adopt the bi-metallic system without our doing so. That was attempted to be done. in 1881, on a suggestion of the minister of the United States, a suggestion that was adopted also by the Italian Government. Their proposal was in the first place that the Bank of England should issue upon silver in accordance with the Act of 1844, that is up to one- fifth part of the total amount of bullion, which would be one-quarter part of the gold, and that the token coinage should be legal tender up to 5/. 3637. {Mr, Fremantle.) My question was whether it would not be necessary to withdraw a quantity of the present silver coinage ? — I say not a shilling, except so far as the 4«. piece might be demanded for the same purposes as the tokens are. Crowns are rarely used, and so would double florins be. 3638. Then you would maintain the v;hole of the present token coinage and the new silver coinage besides in addition to the gold ? — Yes, certainly, so far as it might be demanded. •3639. {Mr. Cohen.) The new silver coinage being an unlimited tender and the old up to 40«. ? — That is the assumption. But let me say there would not really be a permanent addition, if there was a tem- porary addition. We coin token coins only when the public want them. As they were gradually brought in and melted they might possibly, aud for a short time, slacken the demand for token coinage. 3640. {Mr. Fremantle.) That is exactly what I wanted to know. Now you say the new sEver standard coinage would replace the token coinage ? — In a small degree, possibly. What I understood you MINUTES OP EVIDENCE. 183 to mean, and I may have been wrong there, was that the token coinage as token coinage would have to be recoined. 3641. {Mr. Cohen.) "Would you continue to coin token coinage under the new system ? — Oh, yes, cer- tainly ; the French did not do so immediately on the passing of the law of 1803. Their subsidiary coins were francs, double francs and 50 centime pieces of 900 fine ; then at a later period they reduced them to 835 fine. 3642. {Mr. Fremantle.) At the time of the Con- vention of 1865, 1 think ? — Yes, it was in 1865. Witness withdrew. Adjourned. Sixteenth Day. Tuesday, 26tli April 1887. Mr. U. H. Gibha. 4 Mar. 1887. PKESISNT : The Right Hon. LOED HERSCHELL, the Chairman, presiding. Mk. D. M. Barbour, C.S.I. Mr. J. W. BiECH. Mr. Henry Chaplin, M.P. Mk. L. Courtney, M.P. Sib T. Farrer, Bart. Mr. C. W. Fremantle, C.B. Mr. W. H. Houldsworth, M.P. Sir John Lubbock, Bart., M.P., and Mr. Geo. H. Murray, Secretary. Mr. Henry Hucks Gibbs, re-called and examined. 3643. {Mr. Barbour.) 1 think you are of opinion that the present state of the gold and silver question is a burden on the people of India, as well as on" the Government of India ? — ^Yes, I should say so. 3644. Would you like to make any remarks as to how that is the case .? — ^I do not feel disposed to say much about that, because I have so little personal acquaintance with Indian matters. All I would say is that we know there is a considerable loss in the Indian finance on the remittances that have to be made home, and that as regards the people of India, although there may be, for the moment, an alleviation of that loss, yet somehow or another, the loss that the Government suffers must necessarily fall ultimately upon them. 3645. Have you had any experience of countries where there is an excess issue of inconvertible paper ? — Yes ; that is, I have knowledge of the facts. In Chili that is the present case. 3646. And what is the standard for all ordinary transactions in such countries, is it paper, or is it coin ? — If the paper is inconvertible, and if, as is quite certain to be the case, it is issued in excess, then the coin will vanish ; I do not mean that all the coin will leave the country, but the ordinary transactions will be carried on by means of paper and not coin ; and the metal having been displaced, the paper may be considered in one sense the standard. 3647. Then T understand that in such a case, wages, fares, freights, and taxes would be ordinarily reckoned with reference to the paper money, and fixed in paper money ? — Certainly. 3648. But if tliB debtor, instead of paying paper, was willing to pay gold or silver, the creditor would take it at a premium ? — I suppose that would be matter of arrangement between the debtor and the creditor. If it suited the debtor to pay, and if it suited the creditor to receive, in metal, he would do so. Probably it would suit the debtor only if he got something by it. 3649. What I mean is this, that transactions are not entered into on a basis of coin, and payment made in paper at a discount ; they are entered into with reference to paper, and if payment is made in coin you get a premium on the coin ? — I do not know whether that is exactly the fact, because probably people would speak of the paper as being at a discount; but as matter of fact the coin would become a commodity which would be dealt in in terms of paper. 3650. {Mr. Fremantle.) Then the contracts are made in paper ? — ^Yes, practically all transactions are regulated with reference to paper. 3651. {Mr. Barbour.) Some of the witnesses who have been examined before this Commission, have held 24358. that the Bombay cotton spinner has gained in his 26 April 1S87. competition with the Lancashire spinner by the fall in exchange, though they have not agreed as to the exact value of the gain. With reference to this ques- ' tion it has been urged that, whatever the gain may be, it would be unfair to deprive the Bombay spinner of it by altering the ratio between gold and silver ; have you any remarks to make on that aspect of the ques- tion ? — A question seems to arise how the change has been caused. If legislation has caused it, legislation naturally might remove it if it was for the good of the country at large that it should be removed. I may say further that if it is for the good of English commerce that iu should be removed, I think it would be right that that should be done. I have heard people say that it is due to natural causes ; I do not know quite what is meant by natural causes. If it is meant that a great increase, for example, of silver produced at the mines has caused the "depreciation of that metal, that is a natural cause. I do not think it would liave been at all necessary or likely that we should have taken any steps in that case, because nothing would have happened to England at all. Silver-using countries would have found their measure of value increased, and prices would have risen. Nothing would have happened to us. I do not think it would have awakened anybody's susceptibilities at all in this countiy. People in silver-using countries might have complained just as people in gold-using countries com- plained between 185.3 and onwards when a great quantity of gold was poured in. They said, " Gold will be so frightlully depreciated that the best thing would be to give up gold altogether." Then, if the cause, the natural cause that is spoken of, is the action of Germany in demonetizing silver, I do not think that can be called a natural cause at all. It is not more natural to have gold than it is to have silver ; it is not more natural to have gold or silver, than to have gold and silver as one's coin. It is a matter which has grown up partly by custom, and partly by legislation ; what would have happened in that case ? The silver-using countries would have found their measure of value increased by the outflow of silver from Germany, and naturally the gold-using countries would have found their measure of value decreased by the drain from them of all the gold that was wanted by Germany, but nothing of very great im- portance would have happened to us, excepting the fall of prices here and the rige of prices there. There was another thing that did happen, and that was the action of France, which was as little natural as could be. They chose to do away with their old double standard, which had been our old double standard before. It was purely an arbitrary action on Bb 184 ROTAL COMMISSION ON GOLD AND SILVER Mr. H. H. Gibbs. 26 April 1887. their part, just as the taking of gold alone as our stan- dard in 1816 was an arbitrary action, and what it did was not only to affect prices, it affected a much more important matter; it did away with that which had existed up to that time, the immutable par of exchange between silver and gold. Therefore, lo answer your question exactly, I think that if anything happens, from whatever cause, whether it be natural or other, but much more if it be from legislative action, if anything happens which is hurtful to us, it is quite reasonable that we should remedy it without considering whether somebody else is temporarily prejudicfed, because as regards the gain to the Indian producer, I think it is only a temporary gain, and as regards the loss to ourselves, and the danger to our- selves, I think it is a continuous danger. Even if it were not, even if the loss were decidedly great to India and the gain to us were great, or if the present loss to us were groat and the gain to India con- siderable, I should prefer England to India for my part. 3652. (The Chairman.) When you say legislation are you refening to English legislation or the legislation of any other country? — I was referring to the legislation primarily of Germany and secondly of the Latin TTnion, but I may also add that English legislation was concerned too, because English legislation in 1816 made a very considerable change; and foreign legislation was based on English example and precept, as in the Bullion Report of 1810, and in the suggestions of the Chancellor of the Exchequer in 1869. 3653. {Mr. Barbour.) I understand you to hold the opinion that the advantage to the Bombay spinner, if there is any, is only temporary ? — Only temporary, because, as I explained before, the advantage is gained in this way, that the wages that are paid, and the price of necessaries of life, are paid in the depreciated currency. That is to say, that the same amount of wages is paid in depreciated currency as was paid before the currency was depreciated ; and I think it would be only temporary because the natural consequence of it is that the gold value of the produce is on the road to diminish, does diminish, and con- tinues to diminish, but has not as yet, at least as regards Chili, diminished to the same extent, though it is going on to do so. 3654. [The Chairman). Then if the gain to the Bombay spinner is only temporary our loss from that cause must be only temporary too, must it not ? — Our loss so far as it goes as to fall of prices certainly, but not as to the taking away of the common measure between the two countries. 3655. I was alluding to the evidence given that our trade was being diminished because of the advantage that the Bombay spinners had ; so far as that cause of mischief to our trade goes if the advantage is only temporary our disadvantage must be only temporary ? — Yes, certainly, with this difference that you have started the Bombay spinner with his mills, and he is quite certain to go on for a long time even though the gain that he has hitherto made be not continued. 3656. (Mr. Birch.) Then he would be working at a loss instead of working at a profit ? — He would, but it is none the less a loss to us. 3657. {Mr. Barbour.) Then we have come to this, that the gain to the Bombay spinner, if there is any, is only temporary, and the loss to the English spinner, if there is any, is only temporary ? — Yes. 3668. Is it not possible that, whether England acts or not, the rate of exchange might rise, and in that case, assuming it for the sake of argument, would not the reverse operation take place, and the Bombay spinner begin to lose, while the English spinner began to gain ? — Certainly. 3659. Then is it your opinion that it is desirable to put an end to a state of affairs under which industries in a silver country may sometimes be temporarily protected against industries in gold countries, and on the other hand and at other times industries in gold countries may sometimes be pro- tected against those in silver countries ; and to establish a system under which no industry shall, owing to the operation of currency laws, receive practical protection against any other industry ? — Yes. 3660. The Bombay spinner is supposed to get an advantage now, and the English spinner to suffer a loss. If exchange rises it will be the reverse ; Bombay will suffer a loss, and the English spinner will gain. Is it not desirable, if possible, to establish a system under which there shall be none of these fluctua- tions, neither loss at one time, nor gain at another, ovring to the alteration of the I'atio of excliange between gold and silver ? — Yes, certainly desirable if it is possible to do so, that there shall be no fluctua- tions from that cause. From other causes there will always be fluctuations, but that cause ceases so soon as you have a fixed ratio between gold and silver. 3661. Will you refer now to Question 3611 ? The Chairman, who was examining you, said : " The price " of silver would be artificially kept up, the price of " gold would be artificially lowered, the production of " silver would be artificially stimulated, and the " production of gold would be artificially checked." Is the answer that you gave to him entirely satisfac- tory to you, or do you wish to add anything to it ? — It is not entirely a satisfactory answer that I gave,' because I am not sure that I fully apprehended the question. By price in what you have quoted, I presume was meant value as measured in commodities. If so, the case was rightly stated in Question 3610 — the more silver was discovered and produced, the more would the two metals, silver and gold, in their proportion (that is the whole mass taken together) be depreciated as compared with the commodities they measure. That depreciation means that labour and everything else which goes to the cost of their production would rise in price, and that those mines, not of gold only, but of silver as well as gold, whose cost of production was thus increased beyond the value of the metal produced would cease to be worked. It is no doubt conceivable that the supposed new discoveries of silver viould shut up all existing silver mines and all gold mines, and that a thousand years might see the end by wear and tear of the gold accumulated during the past ages of the world; but such speculations have no real relation to the practical question before us, and if that which they suggest could practically happen, it would have much more powerful and far-reaching effect upon mono-metallic States than it could upon those subjecli to the compen- sating influence of bi-metallic law. But I think that the words which you have quoted from the Chairman's question mean that while gold became difficult of production and scarce, and silver easy of production and plentiful, the maintenance of the relation of 15^ to one would be an artificial exaltation of silver, and an artificial depression of gold. If so, my answer is that, as regards the measure of value of commodities, the scarceness of the one and the abundance of the other in no wise affect it. The quantity of both together is whataffectsit. As an addition to that quantity the discovery of one ounce of gold is exactly the same as the discovery of 15^ ounces of silver, if that be the ratio borne by one to the other as money. Take away from them their character of money, their quality as a measure, and they would find each its own level as measured in the money of the future whatever it might be. Take away from one of them that character, and it would find its level as measured in the other according to the natural laws of supply and demand ; and this is what has now in part happened to silver. 3662. Besides the effects touched on in the above question, apprehensions are sometimes expressed that a great production of one or other metal would cause great disturbance to commerce, and that these distur- bances would be aggravated by bi-metallism. Do you agree with that ? — No, I think that as regards the latter part of the question that is wholly erroneous. The disturbance under a bi-metallic system would be less than under a mono-metaUic system. I know that Mr. Mill seems to say that under a bi-metallic law the disturbance would be greater, but I think Mr. Mill has been misunderstood. Mr. Jevons has proved MINUTES OP EVIDENCE. 185 it in one way, my kte colleague Mr. Hunt proved it in another, and I can prove it in a third. Let me suppose two communities, A. and B. (which may stand for the whole commercial world), each employing 10,000,000/. sterling as money. I will first consider them as mono-metallic; A. using gold, and B. silver. (1.) If in any year 1,000,000Z. more gold is produced than suffices to provide for wear and tear, and the natural increase of population, the measure of value in A. is increased by 10 per cent., and prices, so far as that affects them, increase in like proportion. (2.) If in any year gold remains constant, but 1,000^000/. more silver is produced than is required for the objects above stated, the measure of value, and con- sequently the prices of commodities in B., are increased 10 per cent. (3.) If both gold and silver are produced in the same excess, prices are pro tanto raised 10 per cent, in both A. and B. (4.) If 1,000,OOOZ. less of either metal is produced than is needed for wear and tear and increase of population the opposite result is obtained, and prices are lowered 10 per cent, in A. or B., or both as the case may be. (5.) If one metal be produced in excess ami the other falls off by the same amount, 1,000,000/., the same disturbance takes place. Prices rise 10 per cent, in one community and fall 10 per cent, in the other. There is no compensatory action, no direct compensatory action, I think I should add. I will now consider the two communities as bi- metallic, A. and B. using 20,000,000/. between them, half gold, half silver. (1.) It is obvious that in this case the excess of 1,000,000/. gold wiU increase the measure of value, and consequently prices, o per cent. (2.) And that the like excess of silver would have exactly the same effect, 5 per cent. (3.) While the simultaneous excess of a million of both gold and silver would cause an increase of 10 per cent. (4.) The opposite result of a fall of price of 5 per cent, in two cases, and of 10 per cent, in one, would be caused by the production being in defect instead of in excess. (5.) But in the supposed case of abnormal increase of one metal and abnormal deficiency of the other to a like amount, no disturbance whatever is caused to the bi-metalUc communities. Thus, in two cases out of three, where any disturbance takes place in a bi- metallic country, it is half the amount of the dis- turbance which is caused in the mono-metallic country affected by the supposed excess or defect of produc- tion ; and in the third case the disturbance is the same in both the mono-metallic and bi-metallic commu- nities. But a fourth case occurs (5) in which the dis- turbance in the two mono-metallic communities is 10 per cent., and in the two bi-metaUic communities nothing at all. 3663. {The Chairman^ Are you supposing the bi-metaUic system to prevail in one country only, or to be universal ? — I suppose it to be sufGiciently uni- versal, if I may use such a phrase, to make it secure, but that really does not touch the question here, because the only point is, what is the effect upon a bi- metallic nation, as contra-distinguished from the effect upon a mono-metallic nation. 3664. {Mr. Chaplin.) When you talk about a sufficient number of countries to make ifc secure, how many does that mean ? — France and the Latin Union were in my opinion quite sufficient to make it secure ; but it was not the opinion I suppose of the majority of the ruling people in Prance, because they stopped it; but I think it would have been sufficient. If there had been two nations, Germany and France together, a fortiori it would have been secure ; the security would be doubled. If there were the United States as well, perhaps it would be quadrupled or quintupled, one cannot say, but the greater the num- ber, the greater, in an increasing ratio, the improbabi- lity of their suffering any inconvenience at all. 3.665. Would you say that either Germany and France, or either one of those countries and the United States, would be sufficient in your opinion to make it secure ? — ^I believe it would. 3666. {The Chairman.) Do you mean then that it would not matter whether we were bi-metaUic or raono-metallic ?— I have great difficulty in giving a confident answer to that question. I have said often, and I am inclined to think, that it would make no difference to us, that if we could return to the position of affairs before 1873 it would be all that we could desire ; but I know that there are some in Germany who think that by all means they should leave England out of the question, because it will be very much better for them that she should be so left, and very much worse for England ; and there are some here who think that it would be a great misfortune to us that we should be left out, and should remain mono-metallic, in face of a bi-metallic union. I have never supposed that it would be more than an additional bond to the Convention that we should be in. 3667. {Mr. Houldsworth.) In reading the very im- portant evidence you pave last time in reference to Jersey, I found some difficulty, and I want to clear it up. Do you hold that if bi-metallism at a fixed ratio were established in one small country it would produce any effect in the world in maintaining the standard level ? — I do not think that is really a practical question. It depends entirely upon the size of the commerce of the nation whether it would have any or none effect. Its coming to have none effect would be of course owing to the destruction or the exhaustion of the producing power of that country. 3668. It would answer my question if you said that in the case of such a small country as Jersey it probably would have no effect ? — It would have no practical effect. 3669. {Mr. Barbour.) Do you think there would be any practical difficulty in coming to an agreement with foreign governments to have a fixed ratio between gold and silver ? — I do not. I have good reason to think that there is none at all. The United States has been continually striving for that agreement. When I was in Paris in 1878 the Frenchmen who were concerned made no secret of their wish that the Convention should be come to. That was the case with other countries, not with all of them, some of the minor countries did not wish it. Germany has all along said that they would be perfectly willing provided we were willing. Germany has put it always upon that. 3670. Do you think that even if an agreement was made, there would be any danger of any nation breaking it ? — Well, I have shown, I think, in that article in the Fortnightly Meviewhow extremely difficult it would be for any nation to break through it, and if they did break through it it would be for their misfortune rather than for their gain. It is at page 493. " Any Government might no doubt withdraw from a bi-metallic treaty if only it could be shown that it was its interest to do so. It could indeed in three ways cease to be an active member of the confedera- tion. " 1. It could suspend cash payments and issue a forced currency. This would be no withdrawal ; the machinery would be in working order and the law intact ; but when once the paper had become depre- ciated, and had practically driven out the specie, no one would pay in specie, and no one would bring gold or silver to the Mint. Its gold and silver would have flowed over into the other nations, bi-metalKc and mono-metallic, and increased the metallic circulation of the rest of the world. But it would have had no other effect on the union, inasmuch as it would have ceased to exist as a metal-using nation. It could take the same step now, whether it was bi-metallic, mono-metallic gold, or mono-metallic silver, and with precisely the same kind of effect on other nations. " 2. It could do as France has done — suspend the coinage of one of the metals. But it could not have the same inducement, because, while France stood alone, the nation in the case supposed would be one amongst many, and could have no fear of becoming the receptacle of either metal to the exclusion of the other. " 3. It could do as Germany has done, refuse bi- metallism, and proceed to the sale of one of the metals. It seems very doubtful whether the sale B b 2 Mr. H. H. Gibbs. 26 April 1887. 186 ROYAL COMMISSION ON GOLD AND SILVER: H. Mr. H. Gibbs. would be possible; for, on the hypothesis that the other principal nations were in the union, there would be no market. Neither silver nor gold could be sold 26 April 1887. to a bi-metallic nation, and could only be remitted without loss if the balance of trade demanded specie remittances. But, supposing that it could be done, the result would be a frightful contraction of the currency in the country so acting. It is not always that there is a war indemnity to fill the gap. These two last operations would have been real withdrawals. Those, therefore, who think that such a union could not be maintained should, I think, eschew general assertion, and be prepared to show, step by step, what circumstances could make any particular nation dis- contented with it ; and, step by step, the course such a nation could take to free itself from it ; and, finally, and with the same detail, what would be the conse- quence to that nation and to the others." 3671. I suppose the strongest guarantee for the maintenance of the agreement is the fact that it would not be to the advantage of any nation to depart from it ? — That is so. 3672. And I suppose the experience we have had since 1873 shows that it is not as a rule an advantage to a nation to attempt to change its standard ? — Certainly not. The demonetization of silver has been a very great loss to Germany, and so must de- monetization always be to any nation. 3673. And most of the nations that stopped the coinage of silver, at any rate America and France, and probably Germany, appear to have been anxious to go back again ? — They have certainly shown their anxiety to go back again. 3674. {Sir T. Farrer.) The impression given by Mr. Strachey's recent report is that the Germans do not • wish to go back ? — It just depends on who the persons are who are consulted on that point. I was told by a very good authority that the agricultural part of the popu- lation in Germany were to a man auxious for the adoption of the bi-metallic standard ; that the bankers and merchants were for the most part not anxious to do so. There are very considerable exceptions to that rule as regards the bankers, and in France the banking contingent is very strong in favour of the double standard. / 3675. {The Chairman.) I understand the view that you have just presented to us to be this : assum- ing that the increase or diminution of the volume of the currency affects prices proportionately, then you would be safer with your bi-metallic than with your mono-metallic system ? — Yes, I think I would a little vary your mode of laying it down. It is not assuming that it affects it proportionately, but admitting that it would cause a disturbance, that disturbance, whatever it may be, and whatever its effects, would be greater and more certain in mono-metallic than in bi-metallic countries. 3676. {Mr. Barbour^ As I understand it, whatever the disturbance may be if you have a fixed ratio between gold and silver it is spread over a wider area, and consequently is less in degree ? — Yes, it is spread over the whole area, that is really what it comes to. 3677. In times of monetary crisis is it not the case that considerable sums in specie or bullion are usually transmitted from one country to another ? — Yes, cer- tainly. 3678. And do you not consider it an inconvenience and a serious disability that the difference in the standard or currency between the two countries may prevent or delay the transmission of specie or bullion between them, to be used as a means of alleviating monetary disturbance in one country or the other ? — Yes, I should think it may. It is certainly an inconvenience, whether it delays I am not sure. 3679. You consider that the removal of such difference in standard or currency between the two countries would remove such a possible difiSculty ? — Certainly. 3680. I believe that one-fifth of the total amount of coin and bullion in the Issue Departmp.nt of the Bank of England may under the Act of 1844 be held in the form of silver bullion ? — ^Yes. 3681. In 1848 the Governor and Deputy Governor of the Bank of England gave the following evidence before the Select Committee of the House of Lords on Commercial Distress. This is what the Governor said : — " I consider silver quite as available a means ' ' for the convertibility of the note as gold. We have '' been limited to keeping one-fifth of our amount of " bullion in silver, I think that limitation too restricted. " The silver can be readily sold in the market and " bank notes obtained for it. There is no merchant- " dise that will sell easier than silver. By dropping " a fraction in price we could get bank notes out of " the market immediately." Did the evidence of the Governor and Deputy Governor of the Bank fairly represent the opinion of the Bank authorities at that time ? — Yes, I should say it did, and if it will not be too much trouble to the Commission tp listen I should like to read them a paper by Mr. Morris, who was then Governor, on the amount of silver to be held by the Bank in the Issue Department ; sent by him to Sir Robert Peel at the time he was introducing the Bill of 1844, and laid before the Secret Committee of the House of Commons on Commercial Distress in ] 848, by Mr. Mprris, in the course of his examination on the 7th of March : " It would be highly inconvenient " to limit the payments of the Circulation Department " to sovereigns. This would give a direct encourage- " ment to the export of that coin in preference to " foreign coin and gold or silver bars, each of which " description of bullion answers the purpose of export " when the exchanges require it, and do not occasion " the loss of the expense of coining, as sovereigns " when exported and melted do. The facility of " exporting silver in preference to gold, when such " export is expedient, is the true remedy against the " inconvenience of our standard differing from that " of other countries, and unless the Circulation Depart- " ment is allowed to issue against silver, that " inconvenience will be real and severely felt. So " long as a silver standard is not recognised, and " silver coin is used only as tokens under 40s. no " quantity of silver likely to be in the Bank can " affect the standard value of the gold sovereign; " but the sale of that silver may save useless coining " of sovereigns, and answer the same purpose. Silver " generally arrives from America, and latterly from " China, in large amounts and at pretty regular " periods. If the Bank is restricted from purchasing " that silver^ it will always be bought by merchants " who will export it immediately, the principal demand " being for the Continent. No capitalist will find it " to his advantage to hold it ; the variations in price " seldom, if ever, compensating him for the loss of " interest when the exchange is low and the price of " silver high, this export acts advantageously in " liquidation of payments due to foreign countries ; " but when the exchange, is high and silver low, the " silver will sell at a lower price than if the Bank " were allowed to buy it, and it will be exported " solely for the purpose of bringing back gold, the " expense of the export of the silver and the import " of the gold being au actual loss on the transaction. " The practice of the Bank has been to buy bar silver " at 4s. 1 \\d., and dollars at 4s. 9\d., which at the " French mint prices, is equal to buying gold at " 77s. 9rf. When the exchanges fall, and there is a " demand for remittances to the Continent, the Bank " has sold the silver, which has answered all the " purposes of gold, has left a small profit to the Bank, " and saved the expense of exchanging silver forgold. " An unnecessary export of silver, that i.s, when it is " not required to rectify the exchanges, causes a " momentary rise in the exchange, which again falls " back to its original rate so soon as the operation is " ended. This momentary rise in the exchange, so long " as it lasts, is prejudicial to all parties who may have " to draw bills upon the Continent in payment for " goods and other exports. A stock of silver in the " Bank is convenient to our trade, particularly with " India and China ; merchants often require that " metal as a remittance, and would have to send to " the Continent for it at a greater expense-if they did MINUTES OF EVIDENCE. 187 ' not find a supply at the Bank. It can never suit " the Bank to hold silver bullion in the Banking '* Department, if ever it should do so it will he an " exception and not the rule. It is possible, from " some unforeseen circumstance, that gold may becomf " more valuable on the Continent than its present " relative value in silver ; in vsrhich case, gold might " be withdrawn from the Bank and replaced by silver " to a large amount. To prevent this being carried " to an inconveriient extent it might be well to limit " the issues against silver to one-third of the whole " of the issues against bullion. Would it not be " better to legislate that the issues should be made " against bullion, leaving it to the responsibility of the " Bank direction whether those issues should be " against gold or silver ?" This letter was sent to Sir Robert Peel, and was in fact incorporated by him in his speech in 1844 on this subject. He did not follow Mr. Morris' advice to limit it to one-third. He limited it, as you put in your question, to one-fifth, and I think while on this subject I might as well read a few passages from the evidence to the House of Lords on March 6th, 1848. Mr. Glyn said (Question 1832): — "I would suggest that the Bank should " advance en silver bullion. (1833.) To a limited " extent ? — I think they might advance without any " precise limitation, because they can always export " it. Mr. Falmer. (994.) Silver can only be " purchased when the exchanges are in favour of " this country; (998.) Gold and silver are equal " in their power of connecting the foreign exch.anges. " (1001.) It affords a marketable commodity at all " times saleable, thereliy preventing the export of " gold, which it may be desirable to retain for the " maintenance of our own currency. (1004.) In " truth silver is not the only commodity with which " you miglit act on the exchanges, but it is a com- " modity which, being money in every part of the " world, is therefore the most direct commodity " which you can possibly have for the purpose. " Except as regards the United States. The United " States latterly have taken gold alone. (1005.) Is " not silver a legal tender, have they not in fact the " old standard of this country, a double standard, '' but regulated in a manner which makes it more " favourable for the trader to pay in gold than in » silver ?— Yes." Mr. Morris— Feb. 8th— "(341.) I " consider that it is immaterial whether it is gold or " silver. The Bank have purchased the silver " because, if the Bank had not purchased the silver, it " would have gone to the Continent. The principle " upon which the Bank buys silver i.s this : — When " the exchanges are high, and consequently the " price of silver low, we purchase it at a price equal " to buying gold at 77*. 9c?. The whole of it " probably went in payment of the imports of the " country. (342). The silver is no part of the " medium of your circulation. You cannot pay '• your debt in silver, nor can you convert it into " sovereigns, which are part of the legal tender of " the country ; and therefore, though it is a very con- " venient description of merchandise, it is not to be " looked upon for the purpose in the same light as " o-oid ? — I consider silver quite as available a means " for the converti,bility of the note as gold . . . There is " no merchandise that will sell easier than silver. By " dropping a fraction in price we could get bank '• notes out of the market immediately." Another the Commons Committee. Mr. Morris says, — " (3242). Silver bullion gives a command over gold, " and over bank notes, therefore, provided we hold a " moderate amount.of silver bullion, I do not think " it at all interferes with the power of converting " notes into gold." That is, of course, all before the action of France and Germany ; and I think it is rather important as showing what the view of the people was in that day; I will read that portion of the report of the Secret Committee of the House of Lords which refers to this. " The limitation of " the amount of silver bullion which the Bank is « entitled to hold under the Act of 1844 has beencom- " plained of by many of the witnesses whether their in opinions are favourable or adverse to the other pro- visions of the Act. Cases are stated in which the export of silver has been made, and may be made in future, the means of rectifying an unfavourableforejgn exchange. Such is the opinion of the Governor of the Bank : ' I consider silver quite as available a means ' for the convertibility of the note as gold. We ' have been limited to keeping one-fifth of our ' amount of bullion in silver. I think that limita- ' tion is too restricted. The silver can be readily • sold in the market, and bank notes obtained for ' it. There is no merchandise that will sell easier ' than silver. By dropping a fraction in price we ' could get bank notes out of the market im- ' mediately.' After Mr. Horsley Palmer had de- scribed a former operation, effectually completed by the Bank for rectifying the foreign exchanges by a remittance of silver, he was asked, — ' Do you think ' that you have as much facility under the Act of ' 1844 of effecting such an operation, if it should ' appear desirable, as you would have if your hands ' were not so much tied ? There is one material ' defect in the Act of 1844, as it has always appeared ' to me, in the Bank being precluded from holding ' more than a certain amount of silver, with refer- ' ence to the gold in the Bank's possession. The ' bank is thereby precluded from holding a large ' amount of silver (it is curious that he says that), ' which would in times of an unfavourable exchange ' be equally beneficial with gold in meetingthe foreign ' payments.' Your Lordships will bear in mind that the legal standard of this country is gold, whilst that ()fthe Continent of Europe is silver. In times of deranged foreign exchanges it therefore seems obvious that the export of silver in preference to gold should be encouraged rather than impeded by any forced legislative restriction. This is the more important, as, from the mint regulations of the United States, an unfavourable exchange with America is equalised by the remittance of gold ; a' fact exemplified in the efflux of gold in 1847, when 9,000^000/. in gold were withdrawn for export. These consequences are well described in Mr. Cotton's evidence. ' Do you con- ' sider that there is any public advantage connected ' with the restrictions imposed upon the Bank by the ' Act of 1844 in relation to the amount of silver ' which it holds ? I do not think there is any public ' advantage in that restriction. You think it might ' be left perfectly free to the Bank to determine the ' description of bullion which it should hold .' I ' think it might. In particular states of the foreign ' exchanges is not the possession of a considerable ' amount of silver bullion a matter of very great ' convenience to the Bank ? When silver was at such ' a price that it could be purchased so as to be ' secure of importing gold to a profit it was preferred. ' You think that in that respect it would be wisei- ' and more prudent if the Bank were left unfettered ' with respect to its purchases of silver ? I think ' the Bank might be left unfettered. I would state ' that if the drain last year had been for any place ' but America the silver would have gone first, and ' we could not have had a surplus quantity.' The Committee add the following extracts from the further evidence of Mr. Horsley Palmer and Mr. George Glyn. ' Mr. J. H. Palmer : You stated that under the ' Act of 1844 the proportion you have of silver to ' gold must be only one-fourth part of the gold, or one- ' fifth part of the whole amount of bullion ; do you ' think there is any inconvenience arising from that ' regulation ? I think there is a material incon- ' venience attending that regulation. Will you have ' the goodness to state what that inconvenience is ? ' Silver being equally available for Continental 'payment as gold, and perhaps more so, it is ' desirable that the Bank should not be restricted in 'the extent alluded to in the purchase of that ' description of bullion, which is always marketable, ' and which answers every purpose of correcting the ' foreign exchanges. Would not an increased power ' of holding silver bullion in proportion to gold tend ' to diminish any danger of a sudden change of the Mr H. H. Gibht. 26 April 18S7. 188 ROYAL COMMISSION ON GOLD AND SILVER : Mr. H. H. Gibhs. 26 April 1887. " 'foreign exchanges? It does not diminish any " 'Sanger from a change in the foreign exchanges " 'further than as it affords a convenient mode " 'to the Bank of rectifying them. It gives " ' them the power over an article -which is market- •' * able, and which, being the currency of the whole " 'Continent, affords an equal facility with gold in " ' making the foreign payment. Do you approve " ' of that clause of the Act which restricts the Bank " ' in the purchase of silver bullion ? I certainly " ' do not. I think the restriction to one-fifth is very " ' inconvenient, and practically in the spring of last " ' year was found so. Merchants from the Pacific, " ' whose returns are very much in silver bullion, " ' found when it arrived last spring thsit there was no " ' market for it here, and they had to send it over to " ' Paris for returns in bills of exchange, and when " ' they came back there was a difficulty in dis- " ' counting. The interval lost, which is about six " ' weeks, is a very serious thing to a mercantile house ; " * and there is another evil in it ; supposing the " ' amount of bullion held in the Issue Department to " ' be in the exact proportions allowed by the Act, " ' with one-fifth silver, and supposing that 400,OOOL " ' of notes go in taking the same amount of sovereigns " ' out, that immediately alters the proportions right ; " ' and this reduces the circulation another 100,000/. " ' to keep up to proportion. Did you not hear of a " ' case in which a merchant with a large amount of " ' silver bullion was unable to obtain advances upon " ' it .* Decidedly he could not obtain an advance " ' upon it or sell it. I could never see any reason " ' why the Bank should hold only the proportion of " ' one-fifth silver There can be no reason why the " ' Bank should not make advances upon silver bul- '' ' lion, which they can always export to get sovereigns " ' back or remittances from Paris.' In expressing " their entire concurrence in these opinions it is " scarcely necessary that the Committee should ob- " serve that no question of alteration of standard is " involved in them ; nor do they countenance such " an alteration of the law as would render the coined " silver of the realm depreciated as it is, compared " with the mint price of silver, available, by sale, in " payments beyond a restricted amount." Mr. Mor- ris, and Mr. Prevost, and Mr. Cotton were, one may say, the fathers of the Act of 1844. They were thoroughly conversant with all its provisions. Mr. Grlyn and Mr. Palmer, whose words I have also quoted, were thoroughly acquainted with the whole matter, but were opposed to the Act of 1844. 3682. Have you any objection to say whether the Bank now holds silver in this way ? —No, they hold none. 3683. And in the present state of affairs would the Bank authorities regard the holding of silver with favour ? — Certainly not ; we could not hold silver at present. We could by law, but it would be indiscreet to do so. Shall I tell you what amount we have held since 1844 ? In 1844 the Bank held about 1,700,000/. in silver, in 1846 about 2,700,000/., in 1848 it ceased to take silver, and by 1853 (August) it held none; in 1860, by arrangement with the Bank of France, the Bank held 2,000,000/. in silver for a short time. 3684. (The Chairman.) Then it had ceased to hold silver, entirely independently of the change in the practice of the Lation Union, and the demonetization ? — Entirely. 3685. {Mr. Barbour.') Would it be said at the present day that silver was as available for the con- vertibility of the note as gold ? — No, certainly not. 3686. I suppose the objection to holding silver at the present day is due to the fact that silver fluctuates largely in value in relation to gold, and that the French mint is not open to free coinage as before at the old ratio ? — That is so. 3687. I will now turn to another portion of the subject. If the balance of trade turns against a country exchange, I believe, becomes what is called unfavourable for that country ? — Yes, certainly. 3688. The effect of the alteration in exchange is to make it somewhat more profitable than before to export goods from that country and slightly less profitable to import into it, and this result tends to adjust the balance of trade ? — Yes, if there is no common measure. 3689. But if the countries have the same standard the alteration in exchange cannot ordinarily be carried beyond specie point ? — Certainly. 3690. If an alteration in exchange up to specie point has not suflBcient effect on the trade to adjust the balance, the country which is in debt would discharge its liability by a remittance of specie ? — Yes. 3691. But if the two countries have not got a cur- rency which is interchangeable the debt cannot be discharged by a remittance of specie, and in such case the alterations in exchange must proceed to whatever point may be necessary to adjust the balance between the two countries by stimulating exports and checking imports ? — Yes. 3692. Would you therefore say that it is the case that international balances must be settled by commo- dities when there is no international money available for the purpose ? — Certainly. 3693. If two merchants had numerous transactions together from time to time, and if on making up their accounts a balance were found to be due by one to the other, that balance would most conveniently be settled by the payment of money ? — No doubt. 3694. If the merchants had no common money the balance could only be settled by commodities ? — Yes, only by commodities of course if there is no money ; or by that which might be a commodity to one but money to the other, but still it would be a commodity. 3695. That might be very inconvenient ? — Yes. 3696. There might not be any commodity which the debtor could buy at the moment, except at a sacri- fice, and there might not be any commodity which the creditor would be willing to accept unless at a rate which would involve great loss to the debtor .? Yes, I suppose that is the case. 3697. 1 suppose if balances between merchants and traders had to be settled by goods, because they could not be settled by money, that fact would give rise to much hardship, and be a great hindrance to future trade ? — Yes, I suppose it would be a hindrance to future trade. 3698. I will now read you a passage from Groschen's " Foreign Exchanges " which bears on this subject. Mr. Goschen is illustrating the difficulty which a country like Russia with inconvertible paper ex- periences when she has to pay a balance on her trade, and exporting commodities is, for the time, practically impossible. "A Eussian spinner has imported cotton " and owes the amount thereof in Enghsh sovereigns " to a merchant in Liverpool. He has roubles suf- " ficient in his hands in paper money, but what steps " is he to take to procure sovereigns for them ? " Being debarred from sending bullion, he has only " two courses open, either to buy a bill on England " from others who happen to have sent produce " thither, and thus have a claim on an English house " which he can buy and transfer to his Liverpool " creditor ; or to send the produce, which will sell " for sovereigns, himself. Where there is a pause in " exportation, as is the case during a large portion of " the winter season in Russia, he would be absolutely " unable to send any remittances at all, unless he " could find bankers or others who might draw on " England, or on some other foreign banking centre " in anticipation of future exports, and would sell " him the bills. But it wiU be apparent, that, as to " price, he is entirely in their hands. If, as is often " the case, such Russians as are indebted to foreigners " are bound at any cost to place funds in English " money into the hands of their creditors by a given " day, there would be no limit to the price which " might be exacted from them — in other words no " limit to the fluctuations in the exchange. The " relative value of their paper roubles to bullion MINUTES OF EVIDENCE. 189 " seems not to enter into the question at ail. Supply " and demand alone determine the price. And if " the exports of such a country do not equal the " imports (and this is by far the most general case) " so that the demand for bills to pay for the imports " exceeds the quantities of bills which is supplied by " the exports, the balance which the country has to " pay can only be settled by an enormous sacrifice, " in fact, cannot be settled at all except by a cessa- " tion or diminution of imports, or by a foreign loan, " the latter being only an expedient to gain time and " an adjournment of the payment of the balance " due." The case quoted by Mr. Goschen is an extreme one, but do you think that something analo- gous to what Mr. Goschen here describes may occasionally occur in the case of England and India ? — Yes, it seems rather an extreme case, but I suppose it would happen in other countries, India, and else- where, so far as the cu'cumstances were the same. 3699. (Mr. Courtney.) Does the difficulty pointed out by Mr. Groschen in that passage turn at all upon the use of the paper rouble ? Does it not turn on the interruption of commerce during the winter months ? The ultimate difficulty in the case is the interrup- tion of commerce in winter, which compels the merchant to abstain from sending commodities for commodities, and he therefore has to go to the bank, and he is in the hands of the banker ? — No, not so, because if he has a right to demand gold from his banker, he gets gold and sends it. He waiis no doubt, but he sends ultimately the gold with which he can pay his English creditor. That is how it strikes me. 3700. (The Chairman.) Still applying this theory to the case of India, must not the matter depend upon the banking facilities that would be afforded there, and the amount of banking competition ? — Certainly it would. The banking competition would alleviate the matter very considerably to him, but still he would be in the hands of the banker. There might probably be some individual bankers who would help him out of his trouble with the other. 3701. (Sir John Lubbock.) A banker would not have an inexhaustible source ; he would only help him to a certain extent ? — Certainly. 3702. (Mr. Barbour.) If the balance of trade turns against India at a time when exports cannot profitably or readily be increased, it is not practicable for India to remit specie to England, and consequently exchange must go on falling until exports are either thrown on an unfavourable home market, or the import trade is suddenly checked to the loss and inconvenience of all concerned ? — I should think so. That seems to be right. 3703. ( The Chairman.) Will you tell me what you mean by the balance of trade at any time ? Do you mean transactions that have gone on for a certain time, or a balance of trade to be considered day by day ? — I should say " balance of trade " is not a good expression. A better expression is " balance of in- debtedness " between the two countries. I rnagine the two countries to be two men having transactions with one another, and remitting the one to the other either gold or silver, or produce or manufactures of any kind, the " balance of indebtedness " is that which at any moment may be found to exist between them. 3704. (Mr. Barbour.) In practice, India would very seldom require to actually remit specie to England, but she may suffer from being forced to take silver at a time when, from other causes, the balance of trade is turning against her, and when silver would not be im- ported if there was a market for it as currency else- where ? — I suppose that is so, but I do not feel quite certain about it. I think it is so. 3705. (The Chairman.) Supposing the balance of indebtedness on a particular day wereagainst India, she would not remit the rupee at its artificial value in relation to gold, she would not necessarily transmit silver, as the next day the indebtedness might be the other way ?— Oh, Certainly. 3706. It must be a continuing indebtedness, or an anticipated continuing indebtedness, must it not ? — It would be shown, as by an index, by the rate of exchange on bills on that particular day. She would not neces- sarily remit silver certainly, but somebody would wish to remit bills, and the differing cost of the bills would show the fluctuating state of the indebtedness of the two countries, not with India only but with any country. 3707. (Mr. Barbour.) And the exchange would not be carried beyond specie point if they had the same standard ? — Certainly. 3708. (Mr. Birch.) And the expense of bringing it over ? — Specie point includes the expenses ; Mr. Barbour's question referred not to par point, but to the specie point. 3709. (Mr. Barbour.) Is it your opinion that the want of a fixed specie point between England anf' India tends to cause panic in the Indian Exchange ? If there were a constant ratio between gold and silver in Europe, merchants and others would know that however great the difficulty of making remittances might bo for a time, exchange would soon be regulated by the cost of transmitting specie, and they would have no alarm about the future ? — Yes, I do not like to commit myself about the question as to whether it would cause panic or not, but certainly a country can always deal more satisfactorily with one where there is a point below or above which the exchange cannot go. 3710. I suppose you know there have been panics in the exchange market m late years ? — Oh, certainly. At this very moment, as I am told, there is a kind of panic, the banks will not sell forward exchange at all. 371 1. If there was a fixed par of exchange between gold and silver the ground for alarm as regards the future would be very much removed ?^-Certainly, there is nc question about that. 3712. But as matters now stand, when a fall takes place the merchants cannot conjecture at what rate the exchange will ultimately settle, and consequently they are subject to and act under the influence of panic ? — Yes. 3713. Do you consider that these difficulties would he obviated or greatly mitigated if England and India had a common money available for international pur- poses ? — Yes, I do. 3714. We have seen that in the case of England and India the balance of indebtedness must be settled Dy commodities, and cannot be settled by money ? — Is not this to some extent a return to barter, and attended with many of the inconveniences of barter ? — Yes, certainly when you pay with commodities instead of paying with money you have come back to a kind of barter ; it is not quite the same, but it is a sort of barter. 3715. So long as there is no constant ratio between gold and silver, and no international money available for the settlement of balances between gold and silver countries, is it your opinion that a country with a silver standard has a material advantage over a country with a gold standard in trading and dealing with other countries that employ the silver standard? — Yes, I think the evidence shows that to be the case. 3716. I believe you have given some attention to the history of the use of gold and silver as money in modern Europe ? — Yes, certainly. 3717. Is it the fact that in very early times silver was practically the sole standard, the few gold pieces that circulated being taken at their market value "^ Yes. 3718. And when gold began to be more largely used as money, was it used as the sole standard, or was it used as legal tender at a fixed ratio to silver ?— At a fixed ratio generally. 3719. As far as you are aware it was always the case? — It was always the case. 3720. I believe that all countries in Europe did not use the same ratio, but that the ratio varied slightly in diflferent countries, and that even in thff Mr. H. H. Gihos. 26 April 1887. 190 KOYAL COMMISSION ON GOLB AND SILVER : Mr. H. H. Gibbs. 26 April 1887. same country the ratio was sometimes changed ? — Yes, and the difference of ratio between different countries was really the cause of the fluctuations of the currency in each country ; that is to say, the causes of the changes in the circulation. 3721. {Mr. Courtney.) How is this ratio deter- mined y — I suppose by law. 3722. But the universal medium of exchange and payment was silver ? — Mostly silver I think, but then there were gold coins, and a decree was made by the Government that the gold coin should be current for so many shillings if it were in England, or so many livres if it were in France ; but whether it was obeyed or not is another thing. 3723. But did these gold coins form a considerable proportion of the currency ? — That I cannot answer. I should say they did not. 3724-5. {Mr. Barbour.) But so far as your in- formation goes, gold was always effectively linked to silver up to 1873 ?— Yes. 3726. And is it your opinion that its being linked to silver in this way materially affected or influenced its purchasing power ? — I think it did. 3727. So that even wlien England adopted the gold mono-metallic standard the purchasing powei of that standard was materially affected or influenced by the ratio between gold and silver prevailing in Fraace and other countries ? — Certainly, the two metals were practically linked together there in England as else- where although silver was not legal tender. 3728. Is it not the case that since 1873 the pur- chasing power of gold has ceased to be aflepted or influenced by the existence of an effective fixed legal ratio between gold and silver ? — Yes. 3729. And would you say that the use of gold since 1873 as a monetary standard on an extensive scale unregulated by its being linked to silver is an experi- ment, the results of which cannot be foretold from any experience we have had in the past ? — Certainly, it is entirely a new state of things. We have never had the experience before of a standard such as we now have, a single mono-metallic standard with no connecting link between it and silver the standard of other countries. It is a new experiment, and a very unfortunate one, entered into in 1873. Sir Eobert Peel's Act in 1816 was also an experiment, and it was only successful because it was safeguarded by the French Monetary Law. 3730. {Mr. Birch.) I understood you the other day to assert and desire to prove that given an important commercial and banking centre, that centre can work the bi-metallic system ; but you would not admit that Jersey or the Isle of Wight has a banking or com- mercial position which would in any way enable these islands to work the system in the same way that France worked it for years r — Certainly not. .3731. Theories in treating of currency require that the example should be such as can be recognised by the light of experience ? — Oh yes, certainly. 3732. You said that there never had been any difference in the value of gold and silver in France, and that it was only a question of a small agio at times which travellers paid for the convenience of having either coin ? — No, I do not say precisely that. I say that what we observed in France our- selves was chiefly ns it affected travellers as they were passing through; but as I stated in one of my answers, the extent of the agio altered the specie point. I made my statement with that qualification. 3733. Now agio simply means a premium on one or the other metal. It may not affect the interior trade operations of the coimtry itself, as one coin has the same purchasing p"ower as the other in respect of commodities, but it has an effect in inter- national operations, and therefore in the value of the metals when one or the other becomes scarce, and is required for export — gold to England ; silver to the East. You said that if you had money in Paris you could always get gold for it. Of course you can get gold here, for our standard is gold, but supposing the balance of our cash account with France to be in our favour, and gold in France to be scarce, it would command a premium, and this premium would be shown in the exchange, in the following manner: We will suppose that you have 100,000 francs with your agent in Paris which you desire to transfer to England. If I were certain that your cheque in Paris would be paid in gold I would give you the exchange of 25'30 to-day, and would pay you in London 3,952/. 19s. 3d., but as under present circumstances your cheque would be paid in bank notes or silver, I could only give you the exchange of 25 '42 J, and I should only pay you 3,933/. 2s. 8d., which would be equivalent toapremiumin Paris of half per cent, on gold. Silver, bank notes, and gold are equally available for all payments in France, but bank notes and silver will not serve to pay in England the cash balance due to this country, and therefore a premium is paid for gold, which as you are probably aware is being exported, although in small amounts, to this country at the present moment ? — That is perfectly right. 3734. Can you give the Commission any idea of what in your opinion would be the immediate efl^ect of the free coinage of silver as regards England ? — I pre- sume the Commission will accept the fact as stated by Hume in his essay on money, that au increase of the measure of value enhances the price of commodi- ties. He says, " It seems a maxim almost self-evident " that the prices of everything depend on tJie propor- " tion between commodities and money, and that any '' considerable alteration of either has the same effect, " either heightening or lowering the price. Increase " the commodities, they become cheaper, increase the " money they become dearer ; as on the other hand, " a diminution of the former and that of the latter " have contrary tendencies." If then the linking together of gold and silver as the measure of value will increase the quantity of that measure, no doubt a rise of ])rices will follow, not necessarily to an absolutely higher level than that at which they stand now, because other circumstances may affect commodities, but to a higher level than they woidd otherwise attain. What then would the increase be? — Nothing very considerable at first. In France and the Latin Union, and in Germany also, the coined silver is legal tender at its full nomuial value. So also iu the United States, go far as it is in circula- tion in specie or in certificates. In India all the silver coined and coinable has very nearly the full purchas- ing power of country produce which it had before, so that there would be no great addition to the measure of value on the score of these admixtures with the existing gold money. But the unissued dollars in the United States Treasui-y would come forth with the purchasing power indicated by the ratio, and would swell the quantity of purchasing metal. So also the uncoined silver held in Europe, which now would only sell for 46f/. an ounce, would obtain a greater purchasing power, the open mints of the bi-metallic countries receiving it and all the annual produce of the mines, for coinage. If it be true that some silver mines have been closed because of the low price of the produce — a statement which must be received with much caution — their produce would be a further addition to the mass of the world's measure of value, which thus being somewhat larger than it was in comparison with the existing mass of commodities, would involve an enhancement of prices. So far as the mass of silver would gain in present pur- chasing power, the total mass of silver and gold together would lose, so that the effect on England would be a slight diminution of tlie aggregate value of the amount of gold in the country. But the gain would be, that the future supply of gold and silver together would better suffice to fill up the gap caused by wear and tear and loss, and to correspond to the new demands of incieasing population in the countries adopting ^the bi-metaUic standard, than would gold alone in the gold using countries, or silver in the silver-using countries, ;ind that we might therefore expect greater stability in the relation of money to commodities. Here I have only spoken of the effect upon prices, MINUTES OF EVIDENCE. 191 but the other eHect of the bi-metallic standai-d, that of establishing a par of exchange between gold and silver, has a somewhat different bearing. 3735. But what I wanted was the immediate effect in England. What would be the immediate effect of our opening our mint to the free coinage of silver ? — I think I have shown that there would be no very- great difference, but the immediate effect would be that silver would return more or less to its price before 1873. I think that that would be instant. I cannot see how it could be otherwise for the reason that I have given, unless there should be any great change in the state of indebtedness between England and France. Supposing the French mint was open or the English mint was opened under like conditions, immediately the price of silver would rise to about what it was before, but tlie effect upon prices gene- rally, that is prices of commodities, would be only that which would be produced by the enlargement, no very great enlargement, the enlargement of the general measure of value by the addition of these portions of the general mass of silver that now are not money. 3736. For the present moment I am not referring particularly to the question of price, I am referring to the great volume of silver which exists in America, and which as you are aware is perfectly usable there, but they do not like to use it. Supposing our mint to be open and a very large amount of sDver to come over here and be coined into English dollars or whatever it might be, would not that affect immediately our stock of gold, as they prefer gold? — In the first' place 1 must point out that the only silver that is so affected is that lying in the vaults of the Treasury, represented by certificates in the possession of the Treasury. That represented by certificates in the hands of the public is in circulation, just as the gold in our banks is in circulation by means of bank notes. Certificates are not so freely accepted, but they are in circulation. Another thing I would say. You assume that they prefer gold very much. I think they, or some of them, prefer gold so long as there],is no bi-metallic arrangement. They are anxious to have a bi-metallic arrangement. Those, therefore, wlio prefer gold only prefer it now while such an arrangement does not exist ; but I will assume for the purpose of your argument that they do prefer gold, and that they would wish to buy it. Then the result would be just what you say, that they could not make us take their silver, |or rather they could not make us give gold for it. They could make us take their silver, because it would be what may be called a forced import inasmuch as, by the hypothesis, it is money, but they could not demand gold for it, and therefore, if they really desired to have it, the probability is that they would give us ultimately a premium for it; that is to say, tiiat we should get the advantage of having, say, 16 ounces of silver for one of gold, when ISJ will buy our com- modities. That is what would be the case, but there could be no very great amount. 3737. If they gave us their silver at the rate,, of 16i-to one, and we should be entitled to return it to them at the rate of 15^ to one, it would be rather profitable to us ? — Yes, supposing a man sent a quantity of silver here and did get gold for it, which he might do by paying an algio, it would be quite open to the Englishman at Once to make a remittance of silver, and restore the thing to what it was before. 373'8. And supposing the mints of the world generally' were open to the coinage at the market ratio of to-day do you think any effect at all would follow ?— None ; I think that what you have described is a gaine that would not be found worth playing. 3739. Evidently yoKr idea would be to raise prices by adding to the currency ?— No, that is not so. My desire is to restore the monetary standard of England at least to the position which it occupied before 1873. It was then by law a gold standafd, and gold was our only legal tender; but it was, in fact, a gold standard with an immutable par of exchange between it and o 24358. the standard of silver^ using countries. That is to say, that 15^ ounces of silver having in France the same paying and purchasing power as one ounce of gold, and one ounce of gold here being 3^. l7s. lO^d., it follows that 15| ounces of silver were equal to that sum in sterling ; or in other words that one ounce of silver was equal to a little more than QOd. The effect of a return to that condition of things, or to the older condition which existed prior to 1816, would, no doubt, be that trade with silver-using countries would be placed on a firmer footing, and a subsidiary effect would be that there would be some rise in prices, and that a stop would be put, once for all, to the fluc- tuations of price springing fron this particular source. My impression upon the whole matter is that it is better for commerce that causes of instability should be, as far as possible, removed, inasmuch as trkde prospers more when prices are more or less stable. Trade prospers more when prices are somewhat flattering to trade than when they are depressing to trade. My main object is to restore the par of exchange between gold and silver. The consequential effect of whatever enlargement of the volume of the currency might ensue, would be, as history will show you, a tendency to improvement in the condition of trade. The mere increase is not lai-ge, but an increasing volume of currency corresponding to the increase of population and the increase of production of comiiiodities 'has been favourable to trade rather than the contraty. 3740. {Mr. Barbour.') Do you mean that the ideal we should aim at is a good monetary standard .' — The better, the more stable the monetary standard, the better for trade. The whole object of Lord Liverpool in his treatise (beyond that of regulating coins, which was the main thing that he desired) was that there should be a unity of standard between people having commerce one with another between London and York, consequently I say it follows from that, that there ought to be an unity of standard, so far as it is practicable, between London and New York or between Loildon and any bther part of the world. Everybody is will- ing to allow this, and would perhaps desire that standard to be gold or silver. If you can satisfy me that it would not be productive of evil to haye a single mono-metallic standard all over the commercial world, I should say theoretically that is the best, only that as I have shown before the single metal is more liable to fluctuations of production than the two metals. . ' ' ' 3741. {Mr. Birch.) The value of money is increased in an inverse ratio to its quantity, the supply of commodities remaining the same ? — YeS. 3742. But a large increase of the quantity of com- modities must of course make prices fall? — Yes, certainly. 3743. The raising of prices would affect the labouring classes more than any other ? — I do not think it would. I think, as I said in my last examina- tion, the working classes are the last of all to feel any change; for example, now the wage fund has diminished, but the wages of particular wage-earners have not, we are told, fallen in nearly the same proportion. 3744. {The Chairman.) Do you mean to' state that as generally affecting all wage earners, that as a rule, the wages' have not fallen ? — I say in many cases they have not fallen, but the wage fund has diminished, fewer people are ' employed, therefore yOu may" say wages have fallen in the aggregate, and in many instances they have fallen in individual cases. 3745. {Mr. Courtney.) Wages are last to be moved whether they rise or fall ? — Yefe ; and when they are moved, it is first shown in the rise or fall of the num- bers fetnployed, not in the wages of individual work- men. '' ' • <■ : .'n 3746. {Mr. Birch.) France and Germany mUst have suffered a good deal ttiore than England if the suspension of the coinage of silver 'has curtailed the (•urfency; for' England maintains' the same cotirse as she has followed for the 'past 70 years, and her banking system has economised currency to an Cc Mr. H. H. Gibbs. 26 April 1887. 192: EOYAL COMMISSION ON GOLD AND SILVER ; Mr. U. H. Gihbs enormous extent ? — Your question seems to lose sight of the distinction between the idea of currency and — ;— the idea of measure of value. The currency in France 26 April 1887. aQ^ Germany has been very little altered, for silver is still current. The contraction of the measure of value must have affected them as it has us. It appears to me, that in saying that England maintains the same course as she has followed for the past 70 years, you grasp the shadow instead of the substance. For 70 years from 1803 England possessed an excellent monetary system, resting on the foundation of practical unity of money in all the world. The acts of 1873 removed the corner stone of that foundation, and totally destroyed that continuity which you imagine to be still existing. As to economy of currency, there has been hardly any since 1873. 3747. There is an enormous increase of banking facilities, banks have increased ? — Yes, but I doubt whether that has made much difference. Bank notes greatly economize gold, and clearing houses greatly , economize bank notes, but the only thing that has happened of late to touch currency and the employ- ment of gold is the use of postal orders, of which a very large quantity are in use; but they only econo- mise gold or notes so far as they remain in circulation and pass from hand to hand. Their chief use is to enable small remittances which before could not be made. 3748. {The Chairman.') But would not the fact of a very large number of branch banks going into small towns and villages, which would make cheques much more used in place of money, would not that be nu economy ? — Certainly, if cheques were used in place of money, it would. 3749. But has not that been the case of late years ? You will find two or three banks in almost villages now wlicie you saw nothing of them a few years ago ? — But all that requires provision of money for the meeting of cheques, and the postal notes really require a very large provision of gold in all the post-offices which was not required before. 3750. (JSlr. Courtney.y You would not say that the multiplication of banks or rather the multiplication of cheques causes an increase in the use of gold ? — No, what I meant to say was that our using more cheques requires the banks on which they are drawn to keep a greater store of notes and gold ; I meant to say that it is not all diminution of the need for currency. It is very difficult to say what has been the economy of gold produced by banking expedients. Cheques have increased no doubt, but the fiduciary issues of the country have diminished, the Bank of England only taking up a portion of the lapsed issues of the country banks, and those banks themselves not issuing nearly to the extent allowed by law, but presumably supplying the void by Bank of England notes issued in gold. I think also that inland bills have greatly diminished in number, and that their place has been filled by cheques. 3751. It may be necessary for the bank to keep one tenth of what private persons would be circulating at their hand ? — Well, I cannot answer for the fraction. It depends upon the balance the bankers have to pay to one another at the end of their clearances, a 6Z. note might balance 500,000/. 3752. {Sir T. Farrer.) When you say that there have been no economies in the use of gold, do you confine that to this country or do you extend it to the foreign countries ? — I speak only of the years since 1873. In foreign countries there has been economy in the use of gold, that is to say, that the use of cheqries has much increased in Prance. In other countries I cannot say whether it is or not. It is now the case that an Englishman's cheque will be taken if he is travelling abroad, but that only takes the place of ordinary bills of exchange. 3753. The foreign practice is as important for our purpose as the English practice is it not ? — Certainly, only that we have not I think much evidence about the foreign practice, and we certainly know that it has not got to anything like the point of perfection that our practice has. Whatever may be the economy due to banking expedients, it can be as nothing compared to the extension of the use of gold as money since 1873. 3754. {Mr. Barbour.) Are you aware whether the reserve of gold in the banks of this country has actually increased during the last 10 or 15 years. If there has been a great economy of gold, other thino-s being equal, one would expect the reserves to increase .'' — I do not think you could exactly expect that, because the reserve is affected by so many things. 3755. {Mr. Birch.) There is practically only one reserve ? — Tliere is practically only one reserve. 3756. {Mr. Barbour.) Is it larger than it was 10 or 15 years ago ? — It is very difficult to make a useful comparison. The banking reserve varies from day to day, and is governed by causes apart from this question. It is now 15,500,000/. In 1877 at the same date, it was 14,441,000/.; in 1871, 17,861,000/. The average in the six months, March-August, 1886, was 12,600,000/.; in 1877, 13,000,000/. ; in 1871, 17,861,000/. The gold on the same date was 24,500,000/.; in 1877, 25,700,000/.; in 1871, 22,900,000/. The average for that half year, in 1877, was 26,200,000/. ; in 1871, 24,600,000/. ; last year it was for March-August half year 21,200,000/. ; for September-February 1877, 21,000,000/. The figures are roughly stated. I think the other bankers may keep more in their tills now than they used to do, chiefly because there has been such an outcry against them for not doing it. That is only a con- jecture of mine ; I have no knowledge on the subject. 3757. {Mr. Courtney.) The issues of those country bankers who are entitled to issue notes of their own, do you know how they stand with respect to their limits ? — They are very much below their limit. 3758. Would not that point to a reasonable cause of the diminution also of their reserves in cash ? — I suppose it would. They use more Bank of England notes than they did, and for these, of course, they need no cash reserve. 3759. {Mr. Chaplin.) I think you said just now that,, although it was not your object, one effect of adopting the bi-metallic system would be to raise the price of all commodities generally ? — Would be not of necessity to make the price of all commodities higher than it otherwise was, but to raise it pro tanto. That is to say, other circumstances might combine to keep them low, or even to lower them. 3760. Other things being equal, that would be one general effect ? — I must believe that it would, if I believe that the scarcity of the measure of value com- pared with the commodities it has to measure has lowered prices. Some people, I observe, use the mutually destructive arguments (1) that gold is not scarce, and that there is no consequent fall of prices (2) that we must beware of augmenting the measure of value lest prices should rise. 3761. Now the chief commodity that a working man has to dispose of is his labour ? — Yes. 3762. Then I presume on the same principle the price of that commodity would be increased ? — Ultimately. 3763. In other words one effect of it probably would be to raise wages ? — I think so. 3764. {Mr. Courtney}) Not real wages ? — No, not real wages ; because commodities also, the means of life, might rise. 3765. {Mr. Chaplin.) But in all probability the labourer would receive an actual gain, an improvement in the actual wages that he received ? — Yes. 3766. {Mr. Houldsworth.) Supposing the apprecia- tion of gold has not affected his wages in lowering them, and that this bi-metaUic law came into operation what would you say then ? — I think that the probable effect would be that the old impetus that was given to all commodities would ultimately reach him, and that his wages might even go still lower, notwithstanding the effect of the increase of the measure of value ; then MINUTES OF EVIDENCE. 193 would begin the effect upon all others, and he would be raised again. 3767. (The Chairman.) But assuming all other things to remain the same everything would be raised equally ? — All commodities. 3768. Then supposing all other elements to be constant, the wages would be raised, and everything else would be raised, so that of course he would be no better off than he was before, and inasmuch as he would be the last to get his wages raised, would he not be worse off than before ? — No, not necessarily, because, though the commodities en gros would rise, with the wages I put retail commodities also, and the necessaries of life ; 1 mean that there is a differ- ence betweeen the prices of the seller of corn and the miller, the miller and the baker. The seller of loaves does not raise his prices in the same proportion, nor at the same time, as the seller of flour ; nor does the seller of flour in the same proportion, nor at the same time, as the seller of wheat; but of course it all equalizes itself. 3769. Is not that rather less the case than it was, that distinction between the alteration of price in the wholesale commodities, and'its being felt by the work- ing classes since the introduction of co-operative stores ? I suppose it may, from one cause or another ; I think the action is much more rapid than it used to be. 3770. (^Mr. Barbour.') A good monetary standard is an advantage to a country, both as regards produc- tion and trade, and tends to increased prosperity? — I think so. It gives the country with a good monetary standard more profits than are made in a country vfith a bad one. 3771. And the working man, I presume, like everybody else, would share in that prosperity ? — There would be more funds to pay him out of. 3772. (Mr. Chaplin.) I have arrived at this point that one probable effect of adopting this system would be to raise the wages of labourers generally ? — Ultimately. 3773. The question whether that would constitute a real gain to him or not is another question ? — I think the general prosperity would benefit the labourer as well as other people. 3774. Then I understand that the owners of all kinds of commodities, of every species of commodity, would gain by the adoption of this system ? — Yes. 3775. They would be in a better position than they are ? By placing the commerce of the country in every point on a better footing. 3776. Now what would be the effect on the owners of gold or of securities which are bound to be paid in gold?— The effect on the owners of gold would cer- tainly be a little against them, slightly against those who live upon fixed payments. What somebody de- scribed, Mr. Grenfell I tliink, as a thousand miles of old maids, that is those who are living upon Consols, are those who would be affected. The 3/. that they receive upon Consols may produce a little more now than they would then, very little, because as I say, it has not reached in a great extent the necessaries of life. 3777. Then does it not to some extent become a quewtion between the interests of the owners of gold or securities which are bound to be paid in gold on the one hand, and the interests of owners of all other com- modities on the other ?~Yes ; between owners of fixed incomes and those who have to work for their maintenance and increase of their incomes; and, in some degree, between debtor and creditor. 3778. I want to ask you one or two questions about the ao-ricultural interest. Is it your opinion that that 'interest is injuriously affected by the present state of things ?— Very much so. . ., t. • 3779. And how does that injury arise i'— Jt arises from the stimulus that is given to foreign producers who are working on a depreciated currency, not neces- carily that they are making great profits, though in many cases they are making profits, but tlie stimulus that is given to production which enables tliera to send tlieir corn here at a cheaper rate. That is one of the Mr. causes. The other is the general fall in prices which H. H. Gibhs. affects them like other people ; some of them have to — ;— pay mortgage interest, some to pay fixed rents on lease, ^® April 1887. the farmers having to pay rents on an old basis, and to sell the produce of their farms on a new. 3780. Do you consider that the corn growing industry is the branch of agriculture that is chiefly injured at the present time ?■ — ^I suppose it is. 3781. I gather from you that the present system then acts like a bounty on wheat exported from India to England ? — Yes, what amount of bounty I will not venture to say. 3782. Then I suppose that it acts upon all other commodities that are exported from India to England w hich are ,ilso produced in this country in the same way ? — Yen. 3783. What is the effect upon commodities ex- ported from England to India ? Does it ack like a protective duty in India ? —I never did export any myself, and I feel diffident about answering questions as to the trade between England and India, except upon trade principles. I think you will probably have before you somebody who can answer that better than I could. 3784. But you are clear upon this, that it acts like an export bounty on commodities exported from India to England, and to that extent the English producer is injured by it ? — Yes ; also that the Eastern manufacturer is able to interfere with the Lancashire trade in dealing with other silver-using countries. The operation is different ; the exports to England being stimulated by the depreciation, the exporter to silver-using countries being free from the risk of a sudden fall in the value of the money for which his goods are sold. 3785. Then as a remedy to that state of things you recommended " the adoption of the bi-metallic law "? — Yes, the French bi-metallic law, which was the English bi-metallic law with some variation before the suspension of cash payments. 3786. I understand you to say the present difficulty is owing not to natural causes but entirely to legis- lation ? — To foreign legislation entirely. 3787. Beginning in 1873 ?— Yes. 3788. Did I understand that you would be satisfied to go back to the state of things which pre- vailed before 1873 if that were possible ? — Yes, I think certainly, and I think also that the Frenchmen have re- pented of their repentance. They altered their law in 1874, and I think they are sorry for it, but it is a very difiicult thing to retrace one's steps, more particularly if you have no one to stand by you while you do it. 3789. In fact what you are asking then, or what those whose interests you represent are asking is nothing new ? — Nothing new at all. 3790. You merely wish to revert to the old state of things ? — I should be content to revert to the old state of things. 3791. You see no difficulty in getting other nations to do this ? — I think there is none in conjunction with England. There would be considerable difficulty in getting Germany to move without England, and I think Franco also without Germany. Whether the United States will ultimately take the bull by the horns I cannot say. 3792. But assuming that England was willing to take the first step there would be no difficulty in your opinion with reg-ird to other nations .' — None at all. 3793. But in order to induce them to do so is it absolutely necessary that England should make the first move ?~A move, whelfcer the first move of promising to join them is another thing. 1 think I said in my former examination that something short of our a,bsolutely adopting the bi-metallic law might be sufficient to satisfy other nations, because in 1881 there was a certain willingness expressed to act if England would make some concessions. 3794. (Mr. Courtney.) You saidjust now in answer to a question of Mr. Chaplin's that the bi-metallic Cc 2 194 KOTAL COMMISSION ON GOLD AND SILVER: Mr. proposal was to go back to what had existed ? — H. H.Gibbs. Yes. • 3795. As far as England was concerned it is going 26 April 1887. back 70 years? — Yes, if you mean our adoption of bi-metallism. If you mean procuring a return to that system on the part of others, while we remain wholly or partially aloof, it is going back 14 years, during all which time our 70 years' condition has been greatly impaired. 3796. During which period there have been innumerable contracts now existing, created ; — Now existing, I do not know. 8797. Are there many contracts of debtor and credi- tor now existing which date before 1817? — "Well, I should have thought there were not. 3798. Almost every operative contract of the present day is later than that ? — I should think so. 3799. It came into operation under the mono-metallic law ?— Under the mono-metallic law, yes. 3800. Now you said in answer to Mr. Chaplin, that the change would be beneficial to debtors but injurious to creditors ?— r-Yes, there would be no doubt some theoretical injury to creditors, inasmuch as by the hypothesis the gold that the creditor has a right to receive would not purchase him quite so many com- modities as it did before, but it would be for the benefit of creditors also, inasmuch as it would be for the benefit of the country and its commerce. 3801. Yes, but in respect to the relations established by contract, all of which are subsequent to the crea- tion of the mono-meta.llic law, the change would be for the benefit of debtors and to the injury of credi- tors ? — Yes, I think it would, in theory. In practice you would find it difiloult to assess the damage : the advantage to the producer would be great, the efiect on the creditor very small. 3802. Is it not a very serious thing in your opinion to suggest a change of law which would operate to alter contracts in that way ? — Well, the contracts have been altered without our action very considerably since 1873 for the benefit of creditors and for the harm of debtors. 3803. Not by any action of England ? — No, but by legislative action. 3804. Well assuming it to be such, it may have been altered by natural causes also ? — Yes. Of course I should not advocate interference on the score of natural causes. 3805. It is a matter of dispute how far the contract which exists, which came into operation under the mono-metallic law, was made with reference to all kinds of changes that might happen in the future in- dependently of the action of our own legislature ? — Yes. But I would defend our commerce and our people against the consequences of adverse foreign legislation, even though the doing so deprived some portion of the people of some small advantage which that legislation had given them at the expense of their neighbours. 3806. And you propose that our legislature should alter the character of contracts to the injury of creditors on account of something which may have been done outside of England ? — I would not say on account of something that has been done, but because we see that the action of foreign govenments upon the trade and commerce of this country has been prejudicial, and we wish in the interest of trade and commerce, therefore in the interest of the whole country, to remedy that ; and when you^say an injustice is done, injustice is one thing and harm is another. Injustice was done in 1816, very great and instant injustice was done to the debtor class ; injustice was done in 1797, though rf&t with such immediate results, to the creditor class, when England thought it necessary to do one or either of those things it was done for the good of the country at large in the mind of the people who then acted, and not with the view to the consideration of particular interests. I believe that the harm that would be done to the one and the good that would be done to the otlier, by that particular thing, would be infinitesimally small, and I should find it extremely difficult to assess the damages to anyone. 3807. But if the harm is infinitesimally small the good is infinitesimally small ? — To the debtor but not to the country. You must try to separate in your mind the question of the beneli i, to commerce from that of the temporary gain to individuals. 3808. Then what is the sufficient advantage which you admit to be a serious thing i' — I wish to establish a par of exchange between all the constituents of this realm, that is the thing that I desire. The efiect of alteration of prices is a subsidiary and secondary effect, harmful possibly to some (though 'as I say the difficulties of ascertaining it are great), but the advantage to commerce of an immutable par of ex- change has been tried over and over again in the case of those countries that have had the same standard, and ought to be carried to those countries which have not the same standard now. 3809. Passing from this question of justice or injustice you allow that it is a serious matter to be considered? — Yes, that is my demand; I wish the whole question pro and con to be seriously considered. 3810. You defend the change on the ground of establishing financial relations between the commerce of the different parts of the empire ? — Yes, and not only parts of the empire, but between the whole commercial world. 3811. You say the existence of an exclusively gold standard here and an exclusively silver stand^ard in India operates by way of a bounty on the productions of India which are imported here ? — I should not put it in that way. My answer was that a depreciated standard operated as a bounty, not the fact of there being a different standard. 3812. Well, we will put in the missing link then. The existence of a gold standard here and of a silver standard in India, coupled with the facts which have caused the depreciation of silver relative to gold, has operated by way of a bounty to the production of things in India? — Yes, I explained in my former examina- tion that it operated by way of a bounty to me, and I was very glad of it. 3813. But you regarded that as a bounty that would not be permanent ? — It would not be permanent for two reasons, in the first place that the wages and the cost of the necessaries of life would tend to rise in those countries, and in the second place that by degrees the advantage which they get is cancelled by the fall of the gold prices here. 3814. Do you consider that if the bounty were permanent it would be injurious to the people of Great Britain ? — Yes, I should think it would if the bounty were permanent, that is to say, if they could always make a profit by sending produce here, pro- duce that competed with our produce, I should say it was injurious to the people of Great Britain, looking not only at the producer but at the consumer. 3815. If produce that can be produced here can be permanently produced in another country at a cheaper rate and imported here so as to undersell the producer here, that would be injurious to the interests of Great Britain ? — I think on the whole it would be injurious. Of course I see the benefit of it. It gives a man something much cheaper than he had it before, but if it gives him less wages in order to buy it I do not think it is much advantage. I see the good but I see a balance of evil. 3816. Does it not lead to this proposition, that the satisfaction of our wants at an easier rate is injurious to ourselves ? — That our wants should be satisfied at an easier rate is of course an advantage. But you assume the satisfaction. That foreigners should be able to export their commodities at an easier rate is no necessary advantage to our people, if they cannot buy them at an easier rate. If such and such a thing be reduced to 3d. from 6d. it is very little advantage to the man if he has not got the 3d. 3817. But the fact that it is introduced and sold shows that it can be bought ? — That is true. It will not be sent hither when it can no longer be bought, MINUTES OP EVIDENCE. 195 and thus the evil may tend to correct itself. But we are all consumers, and not the working men only, and may continue to buy when he cannot. The effect is not directly on him, but upon the producer, and upon the general trade of the country, and thus in- directly upon working men, many of whom lose their employment and their wages, which is bad not only for them but for the country. ,. 3818. Have you been in the habit of regarding the cheapness of sugar in consequence of foreign bounties as an injury to the people of Great Britain ? — ^We do not produce, sugar here. If we did I should say it was. In so far as we refine it, it is a great misfortune to this country. 3819. Do you speak of the people at large ? — Yes, the people at large. 3820. {Mr. Barbour.) Do you think that the increased cheapness of sugar, due to the bounty on its production, is on the whole an evil, taking the whole world into consideration ? Do you think, in short, that it is a good thing that the production of sugar should be stimulated by a bounty ?— I cannot think that it can be a good thing. 3821. {Mr. Courtney.) You think that the pro- duction of sugar, so far as it interferes with a domestic industry here of refining, at all events, at a cheaper rate is an injury to the people of Great Britain ? — So far ; you must put stress on so far, but I do not say it may not be good, but so far as it hurts us it is an evil. 3822. And the importation of wheat from India at a reduced price, in consequence of a supposed bounty for its production in India, is an injury to the people of- Great Britain ? — So far again as it interferes with our production here. 3823. But the matter is comparatively immaterial, because these bounties are not permanent ? — Happily. 3824. I come again to the question, is it not a very serious thing to propose an alteration of the law which affects the rights of debtor and creditor upon contracts entered into, in order to avoid the doubtful operation, whether for good or bad, of a bounty which is not a permanent one ? — ^If that were the only cause, if that were the only doubt that I had, I should say it probably was, but because I think it is of the utmost importance to commerce that there should be an unity of money throughout the com- mercial world for other causes than that of the bounty on sugar or wheat, or whatever it may be, I think it is desirable, and I think we should not look too closely upon the infinitesimal gain or loss that there may be to debtor or creditor any more than our fore- fathers did in 1816 and 1797, in returning to what was the ancient law of England. 3825. {Chairman) Do you think that the varia- tions in the depreciation by embarrassing the trade tend to some extent to counteract the stimulus given by the depreciation ? I understand you to say that one of the evils which embarrasses trade between this country and India is the variation in the exchange owing to the variations in the depreciation of silver. Well, I want to know if that operates in the other direction too, in the trade between India and us, whether the variations do harm ?— Yes, I thmk it miffht but then the main question is that the currency there as measured in gold has depreciated, and that the man is paying the same wages that he did before, although the coin which he pays is not nearly the same amount. Just as in Chili I pay two dollars, though the doUar is only worth about 2s., whereas before it was worth 3s. 6d. , wi. x i,- i, 3826 But when once a point is reached that HigJier wages are also paid, which would be reached some- time or other, then you would have, according to your view, precisely the same variation of the depreciation ? —I think it may be so. , , . i-i 3827. {Mr. Courtney.) I should like to recur again' to those questions and answers we interchanged list time about Jersey. Suppose the case we started from ; Jersey the only country bi-motallic, with a fixed ratio of 15^ to one, and both gold and silver in circulation ; circumstances arise which cause silver Mr. to be produced with much greater swiftness and H. H. Gibbs. cheapness than gold. The producer of this silver — — taking it to the gold monometallic country, finds 26j\priM887. that the value of the silver is, at once depreciated ? — Yes, they do not want it at all. 3828. He carries it to Jersey, where he can get the gold at the ratio of 15^ to one, as long as gold exists in Jersey ? — He cannot get gold in Jersey at all. 3829. Well, he carries the silver to Jersey, and he can get it coined there ? — Into silver coin. 3830. Into silver, and by an interchange of the silver into commodities, and commodities into gold ? — No, he camnot change his commodities into gold as of right. He gets it coined into shillings, which is the coin we will suppose in .Jersey, sovereigns or golden shillings being also coin. The only thing that he could possibly do as of right is having got that credit to his name of so many thousand shillings in Jersey, would be to draw upon it, and sell his bill here. That is the only thing he could possibly do. It has nothing to do with the gold. 3831. We do not, I think, mean the same thing by the statement of facts. I suppose that when we speak of Jersey being a bi-metallic country with gold and silver in circulation, there a man having a credit at a bank, and going into the bank and saying, " I want 100/.," the banker would say to him, " Will you have it in gold or silver ?" — Certainly not, unless it suited his (the banker's) purpose to say so. 3832. I admit that by law the banker could say, " I am' not bound to give you one or other at your choice," but as long as the two things are in actual potential operation and circulation the transaction would be in that way ? — This is what happens, not only in theory but in practice. If the banker does not like ^to do it, he says, " No, you shall give me two centiines in each napoleon, or 10," or whatever he pleases. - It is at the option of the debtor, and must be so, and that is the explanation always of the agio. You could not have an agio if it was othei'wise. 3833. {Chairman.) Would not he by paying some premium be able to get gold in exchange for his silver ?— Certainly, it is at the option of the debtor to give gold or silver, therefore the debtor is quite entitled to say, " You must make it worth my while if I am to waive my rights." 3834. And in that way might not the country become denuded of the gold ? — Yes ; of course it could, and that I have admitted, and all along have admitted, that the banker may say after a time, " I am willing to take so much." He goes to a banker always, a banker is a necessity of life, and he says, "I must have so much of gold;" the banker says, " If you will have it you must, but you must pay for it." 3835. {Mr. Courtney.) The producer of silver, the man who has got his silver takes it to Jersey, gets it coined, and deposits it in the bank there. If he wants gold he has to pay a certain agio ? — He may. 3836. And if silver gets more and more brought in he will have to pay a larger agio ? — Yes. 3837. But by paying an agio he may, as long as gold is there, get gold and bring it out of Jersey ? — Yes, I think he would ultimately. 3838. And in that process if Jersey is the only place where goldand silver are both coined, he can always, at the cost of the agio, which would probably go on increasing, get his silver exchanged, for gold ? — I suppose he can. Of course one may imagine that for one reasSn or another the Government of the country may not choose to part with their gold, and may put impediments in the way, 3839. The bank's agio would increase ? — Yes, probably it would, but even then Ihe gold would not all leave the country. 3840. What was in commercial life would ? — Yes, I think so. That is what was the case in Prance. 196 ROYAL COMMISSION ON GOLD AND SILVER : Mr. H. H. Gibba. 3841. So that ultimately you might, and if Jersey under the circumstances were the best place for dis- — — posing of your surplus of silver, you would ultimately 26 April 1887. ggj ^11 youj. commercial gold out of Jersey ? — Yes. 3842. Well, now, what would happen with the silver that was produced subsequent to that ? — It would go into Jersey, and inasmuch as the produce of Jersey must very shortly be exhausted, (because when you compare it with the amount of silver that you are supposing, and that might be brought in from all other parts of the world, you must take not only the silver produced year by year, but the silver existing; you must take 700,000,000/. of silver we will say,) that would of course very soon exhaust the productive power of Jersey. There would be nothing wherewith to pay, that is all. Silver would go to the point of being used for making kettles or horseshoes or anything ehe; it would be simply a commodity like copper. 3843. Then would not it come to this, that the ultimate result would be a rise of prices in Jersey and a corresponding depreciation of silver outside Jersey ? — I cannot say whether it would be a corresponding depreciation. Depreciation there would be and that would induce demand. 3844. So that ultimately you would get the same dislocation between gold and silver ? — Yes, greater, infinitely greater of course. 3845. And the power of Jersey to absorb your silver and to maintain both in circulation would be lost? — Would be lost. I must repeat that the whole of this argument is foreign to the question, and is merely academical. The true example, as Mr. Birch said, is France, whose producing power would never be exhausted, and in fact was not exhausted in this century, though the precious metels poured in upon the country more than they are ever likely to do 3846. You said just now, I think, that it was for the benefit of the industry and commerce of the country that its circulation should be large and should be increased ? — That it should be sufficient, and that it should increase proportionately to the population and the commerce of the country, not that it should be continually increasing, because that might, I suppose, produce other evils of a different kind, but that it should be abundant in the sense of being enough, and progressively enough. 3847. I should like you to explain why you regard it as beneficial to the country that its circulation should increase, say pari passu with the population ? — Because I think that falling prices are always depressing both to trade and to the spirits of the trader. 3848. And rising prices are stimulating ? — Rising prices are somewhat stimulating. One wants moderate stability of prices, and it is better that the tendency should be rather on the whole to the rise than to the fall ; and I say that because all our experience has shown that a real increase of the circulating medium (not a forced increase) has coincided at all events with an increased prosperity of trade. 3849. Then your argument goes beyond increasing the circulation pari passu ■with the population ? — No ; what I mean is this, that trade has in former times not unfrequently languished by reason of the too great contraction by natural causes of the circulation, and has been stimulated again and brought back into a prosperous slate by increased production of the precious metals, as was the case in 1863 undoubtedly, and I think has been the case at other times. Paterson states the case very well indeed in his " Golden Age. " He states it in the different periods of history in which that has happened. 3850. I thought your argument was that a rise in prices, supposing it was real, not caused by an artificial expansion of the currency, was always beneficial ? — 'So, I did not put it quite in that bald way, that a rise in prices was always beneficial, but that a fall in prices caused bj' a contraction of the currency is harmful for trade, consequently the increase of the currency to that point that is needed by the population and by commerce is for the good of trade. What commerce aspires to is not that such and such a thing shall be higher in price necessarily, but that there should not be that impediment to a natural rise in price, and not that tendency to a fall in price, which is caused by a curtailment of the measure of value. 3851. You want to prevent a diminution of prices ? — Yes, a diminution caused by arbitrary acts. Prices will diminish and will rise from time to time, and that is no harm at all to commerce, but that there should be a continuous depressed and declining condition of prices is certainly bad for commerce generally, and particularly for all those people who have made contracts. 3852. Yes, but that at all events is a natural opera- tion ? — Partly. I do not want to fight against any- thing that is for the good of the world, or that comes by nature, but it is generally I think an evil for the whole world of commerce that the price should fall through a forced diminution of the medium of exchange. 3853. That comes simply to this, that you think that it is unfortunate for commerce and industry that the supply of the precious metal or the precious metals does not go on increasing l—Pari passu. 3854. Or subject to diminution? — Pari passu with commerce. I do not think it is desirable that they should increase if commerce fell off, and com- modities fell off and population decreased. But I might retort this argument by asking if it is thought desirable that the supply of the precious metals should not increase — tfiat it should diminish — and if so, to what point. 3865. Well, suppose the bimetallic law were established, you have already considered what effect it would have upon contracts ; what effect would it have upon the production of the two precious metals, gold and silver, relatively ? — Relatively it seems to me to be of very little importance what it would have. Positively it would have this effect of course, that if the precious metals were produced in such great abundance that prices were continually rising, prices of labour continually rising, the cost of the production of the precious metals would be greater than might be worth while incurring. The result of that would be that production would fall off, and the too great abundance would be remedied. 3856. At present silver is much cheaper if depre- ciated in value relatively to gold ? — Yes. , 3857. The establishment of the bimetallic law would be to increase the value of silver relatively to gold ? — Yes. 3858. Would not the effect be, on the least profitable gold mines, to diminish their profits ? — I doubt that . extremely, except to the small extent to which the whole measure of value in the world would be en- larged. I doubt whether there is a gold mine in the world that is so worked that it depends upon the purchasing power of the metal extracted, whether it shall be worked or not ; that is to say, 1 do not the least believe that the amount of labour consumed in getting out that gold from those mines would be so much greater by reason of the quantity of gold produced, or of the two metals produced-, as to make them unworkable. It is conceivable, but I do not believe it. 3859. I do not know whether you can give any figure of your supposed appreciation of gold which would be corrected upon an adoption of the bimetallic law ? — Oh no. 3860. You allege, of course, a very great alteration of prices in consequence of the monometallic law which is to be corrected by the adoption ? — In con- sequence not of the monometallic law, but in conse- quence of there being no union between gold and silver, and in consequence of gold, which is our measure of price, being produced in less quantity, and being more in demand. 3861. But that alteration of prices is to be corrected either by the rc-establishment, in operaticu of the Latin Union, or of some other union of bi-me(allic law ? —Yes. MINUTES OF EVIDENCE. 197 3862. (Chairman.) I do not quite understand ; do you assert as your view that there has been great decrease of price owing to the existence of the niono- metallir; law hero ? — No; the mono-metallic law lias existed here since 1816, safeguarded till 1873 by the bi-metallic law of France. What I assert is, that there is a considerable scarcity of gold owing to the falling off of the production of gold, and the greater demand for its use as money, and that, so far as scarceness or dearness of the measure connotes cheapness of the things measured, that involves a decrease of price. 3863. {Mr. Courtney.) Might I put it as high as this, that if, instead of the present system, we adopted a bimetallic law, or managed to set at work again the Latin Union, we should find a rise in prices of 20 per cent. ? — Certainly not. 3864. Ten per cent. ? — I will not say what ; I sup- pose the general run of the fall in prices has been 25 per cent. ; I imagine it has been so said, no one can tell exactly what it is, but if the fall in prices has been 25 per cent., I am certainly not disposed to put four- fifths of that to the account of the greater demand and the less production of gold. 3865. But it is desirable to know, in view of the alteration that we propose to make, it is desirable to know, if possible, the magnitude of the evil to be corrected, or the magnitude of the fall to be brought about by your proposed alteration ; cannot you give any estimate ? — No, I cannot, nor is it possible for anybody to give any estimate. Yon may give an estimate, but it is sure to be a wrong one. But you . are now speaking of price, and that is, as I have said, a secondary condition. I want to further stability of commerce between gold and silver-using countries. 3866. {Sir T. Farrer.) You would then not at all agree with what Mr. Manning says in his letter to the Congress last year that the price of all agricultural produce in England and in America would be raised 26 per cent, if we adopted a bimetallic system ? — I cannot say that I agree or disagree, for I make no computation. I should be inclined to disagree if he says that that is the exact amount of the rise. No one can know either the precise rise which would be caused in agricultural produce in common with other commodities by the expansion of the measure of value, nor the precise amount of the much greater rise resulting from the removal of the stimulus to foreign production, 3867. {Mr. Courtney.) But supposing it did rise 1 2 \ per cent., that would mean that gold was depreciated relatively to commodities to that extent ? — That is quite a correct statement, because the gold is de- preciated with respect to commodities wherever commodities are depreciated with respect to gold. That is to say, that whatever be the cause, it is appreciation of gold and depreciation of commodities. If you say it is \2\ per cent., and say that you adopt that as the quantity of depreciation caused by the specific appreciation of gold, that is the appreciation of gold in respect of gold, and not in respect of any increased production, facility of transport, or decrease of demand for commodities, of course that is so. 3868. I was not turning on the figure. Mr. Secre- tary Manning apparently says that if the bimetallic law replaced the monometallic system, certain com- modities would go up 25 per cent. ? — One would — silver. 3869. Apparently he says it of agricultural produce. That is the main thing he had in view. You, I suppose, would hold that commodities would go up something ? — Oh yes, I presume they would. How- ever you assess the specific appreciation of gold, so you must assess the augmentation of price, which the bimetallic system might produce, so far as it would counteract the now increased demand. This I have explained under question 3734. It would only operate so far as existing silver now unused would become money. 3870. Though you decline to fix the particular limit to which they might go ? — I will not even say that commodities will go up auy per-centage at all, because the one commodity that you would expect to rise in price might be reduced from some other cause. If they would not rise it would be because something would have caused them to fall ab extra. 3871. In speaking of the operation of this cause, we always speak of that cause detached from any other ? — An addition of 12J per cent. 3872. I do not care the least about the figure, 10 per cent. ? — 3873. To that extent (10 per cent.) would not the value of gold relatively to that one cause only be de- preciated with respect to commodities ? — Yes, it is the same thing. 3874. And therefore would not the produce of an Australian mine be not quite in the same proportion, but in something approaching that proportion, be diminished in value ? — Well, yes ; inasmuch as the value of the gold that is produced by the Australian mine is the value of the commodities which it pur- chases. 3875. And therefore an Australian mine, if barely profitable before, would become unprofitable ? — Yes, it might ; but I neverfheard of such an one, and I do not believe in any such present amount of depreciation of the measure of value, by the admission of the now unused silver to its place as money. 3876. There are many on the margin ? — I will not say that there are not, only I have never had any evidence either in respect of silver or gold. Strange to say, since the silver has been depreciated many of the mines that were not producing before have pro- duced; but that is only the circumstance of their finding veins or not finding veins. Such evidence as I have heard has been against the fact of any mines having been abandoned by reason of the low price of silver ; but I have been told that in some cases ores that have been brought up are put aside, because the value of the silver to be extracted is not sufficient to meet the expense of the chemical process of reduction. But this cannot, I think, reach to any very important amount. Mr. U. H. Gibbs 20 April 1887. Witness withdrew. Adjourned till Friday. 198 KOYAL COMMISSION ON GOLD AND SILVER: Seventeenth Day. Friday, 29th April, 1887. PRESENT : The RiGOT Hon. LORD HERSCHELL, the Chairman, presiding. Mk. D. M. Baeboue, C.S.I. Me. J. W. BiECH. Me. Henet Chaplin, M.P. Mr. L. Couetney, M.P. Sir T. pi. Faeebe, Bart. Mr. C. W. Feemantle, C.B. Mr. W. H. Hodldswoeth, M.P. Sir John Lubbock, Bart., M.P., and Mr. Geo. H. Mureat, Secretary. Mr. J. S. Nicholson, — —' 3877. (Chairman.) You are professor of political 29 April 1887. economy in the University of Edinburgh ?— Yes. 3878. You have given considerable attention to the subject of the currency and the relative value of the precious metals ? — Yes, especially during the last two years. I may say that I took my degree in 1876, both at Cambridge and London chiefly in political economy. At that time I wrote one of the Cobden prize essays in Cambridge on a subject which was the effect of industrial progress on the rate of interest, and then I gave some attention to the historical aspects of currency. Since then I have studied it more or less in connection with my general work, but especially during the last two years, since it became a popular question. 3879. First of all with regard to the fall in the gold price of silver, will you state what in your opinion has been the cause of that fall ? — Briefly expressed I should say it was due to the demonetization of silver by several nations. 3880. That is to say, to a diminution of the demand ? — Yes. I do not think, that is to say, that the change that has undoubtedly taken place in the supply would in itself have had any effect upon the ratio at all. 3881. There has been some increase in the supply of silver? —Yes, so I understand, but still judging from the effects in former times especially, I do not think that the increase in production would have really had any effect in disturbing the ratio. 3882. Have you estimated at all what has been the increase in the production ? — I have only taken the generally quoted estimates, and I have no means of estimating myself. 3883. But taking the statistics to which you have had access, do you come to the conclusion that you have expressed on account of the small extent of the increase of the supply ? — No, not on that ground, but partly from theoretical reasons and partly by analogy from former times. For instance in the 16th century the relative production of gold and silver was suddenly reversed, silver becoming much more abundant, and yet the disturbance in the ratio was only from 11 to 1 to 12 to 1, although there the difference in the production of silver and gold changed from about 1 to 3 to 3 to 1. And then again, in the 19th century, gold increased in a similar Tray with no appreciable effect on the relative values. 3884. Are there statistics which you think can be relied upon with reference to the relation of the two metals- at the former date ? — As far as I understand the investigation was made by Humboldt in the flrst place and corrections have been made by Jacob, and ater by German writers. The figures that I quoted, were taken from an essay by Nasse in Schoaberg's hand-book on political economy. I think they are Mr. J. Shield Nicholson was called and examined. generally accepted. At any rate arguments on all kinds of currency questions have been derived from these statistics. They are the best that we can obtain, 3885. 'fhen I understand your view to be this, that the cliange in the supply in the direction of increase, though it has been much less than at the date you have mentioned, has produced a much greater effect,, and therefore you do not think that the effect can be attributable to the increased supply ? — Yes, that- is my position. In my paper on the effects of great discoveries of the precious metals I have quoted the statistics on pages 46 and 47, of the production in the 16th century and in the 19th century. At page 46, I give the proportional amounts. " According to " the latest and most carefully compiled statistics I " have been able to obtain, in an essay by the cele- " brated economist Professor Nasse, the facts of the " case in the 16th century are broadly stated as " follows : — At the commencement of the 16th " century, the relative production of silver compared " to gold was about 34 '3 silver to 65"7 gold, and " the relative values of the two metals were in a ratio " of nearly 11 to 1, the highest computation for the " value of silver being IQito 1, that is, IQi to 11 oz. " of silver were worth 1 oz. of gold. In the course " of the century the proportion of the production of " silver to gold rose to 78-6, as compared with 21-4 •■' of gold, and the ratio of the relative values became " only by gradual stages 12 to 1," the relative positions of gold and silver as regards the total production changing in the meantime. 3886. How do you account for there being such a very slight change, and that only a gradual one with that very remarkable change in the relative production of the two metals ? — I suppose it must be due to the fact that the silver was used mainly as standard money all over Europe, that it was absorbed as standard money; that it could be readily coined, while at present it is only taken as token money. 3887. But when you speak of its relation, was it then a fixed legal relation ? — No, I refer to the market relation. As Dr. Soetbeer points out, the ratio fixed by the Mint regulations in various countries was deter- mined by the previous market rate. (Materialen, &c p. 23). 3888. But why should the market relation change so very" little, scarcely perceptibly ? — Because of the silver being absorbed as standard money. At the same time there was an enormous increase of the trade and commerce of the world stimulated by the increase of uilver. That is brought out in the passage that I quoted, from Tooke and Newmarch's " History of Prices," at page 44 of this paper of mine on " The effects of great discoveries of the precious " metals." It is asserted by Tooke that, " "We have MINUTES OF EVIDENCE. 199 " the fullest warrant for concluding that any partial " inconvenience that might arise from the effect of " the American supplies of the sixteenth century in " raising prices, was compensated, and repaid an " hundred-fold by the activity, the expansion and '• vigour which they impressed for more than one " generation upon every enterprise, and every act " which dignifies human life, or increases human " happiness." It is one sentence chosen from an essay in the form of an appendix to one of the chapters in volume 6, on the effects of the gold dis- coveries. It is intended to illustrate the effects of the gold discoveries by what happened in the case of silver in the 16th century. 3889. Yes, but I am not quite sure that I under- stand why if there were no fixed legal relation between the precious metals there should be this almost imperceptible change in the market relation, notwithstanding the immense discoveries of the one as compared with the other ? — I should imagine it was due to the fact that the surplus silver instead of being thrown on the market to be sold as a commodity for making orn.'iments and so on, really was minted and used as standard money, and that in consequence of the great increase in trade at the time was prin- cipally absorbed as standard money. Therefore there there was really no very great addition to the supply which would govern the market price. 3890. But would it not come into the market in the first in.«tance ? How would it get to the point of being minted. Would it not in the first instance be bought and sold ? — T believe silver was the principal standard coinage at the time all over Europe, so that silver bullion would not be bought as at present with gold. One would naturally have expected a rise in the silver price of gold bullion, and T presume this did not happen, because so much silver was required for com- merce. As matter of fact the distribution was rather curious. It came to Spain in the first place, and Spain tried to keep the silve/ to itself. But it was gradually distributed over the world, through com- merce, especially by the Dutch, and it acted really as money in settling international transactions. I have not investigated that part of the subject in detail, but I simply take the fact that there was a great change in the supply, and that there was no corresponding change in the ratio, and I presume that it must be due to the fact that there was a large demand for currency purposes. Similarly, Dr. Soetbeer ascribes the great change in the ratio in the 17th century to the greater demand for gold, and not to the over-supply of silver. 3891. Still one can hardly arrive at a satisfactory conclusion from a comparison of the change in the relative production at those two epochs without going into the circumstances of each epoch to see how they affected the case ? — No, I should not rely simply upon the facts. I think it would be most illogical to argue simply from two facts to a general theory, but still these facts fi-om the 16th and the 19th centuries do illustrate the position that you may get a very great change in the supply with a very small effect on the ratio ; and the few facts that we have to go upon are evidence in favour of the view that the demand is the most important. 3892. (Sh- T. Farrer.) Do we know that at that time silver was very much more used for currency than gold ? — That is my impression. 3893. But you do not know it as matter of fact? — In England, Jacob states that from 1272-1609 the silver brought to the Mints was 1,185,198^., and the gold, 446,908/., and certainly all countries used silver as standard money. 3894. {Chairman.) You come, then, to the con- clusion that there was not suflicient difference of supply to account for the change in the gold price of silver ? — Yes, and I believe it was established in the report of Mr. (^oschen's Committee that the fall could not be attributed to the increase in the supply. 3895. Therefore you turn for the explanation to an alteration in demand ? — Yes. 3896. You find that alteration in the demand, as I o 243,58. understand, in the demonetization which took place in 1873 by Germany ? — Yes, followed by the changes in other countries, such as the Latin union ceasing their free mintage of silver. 3897. And what other element do you lake into consideration ?— Then Norway and Sweden, I think, changed their currency at the same time ; and in the United States there was the adoption of gold currency with a subsequent modification by the introduction of the Bland Act. Then there was also the additional demand for gold due to the change in the policy of Italy, substituting gold for inconvertible paper. 3898. Those are matters that would affect the value of gold. I was rather dealing with the change in the gold price of silver resulting from the changes in relation to silver ? — I should say a lessened demand for silver, the change being not only in degree but in kind ; that is to say, that a demand for silver for token money is not the same as a demand for silver for standard money. 3899. Before we go into that, I understand you to point to this, that theie was also some change in the demand for gold, an increase in the demand for gold ? — Yes, owing to the substitution of gold for silver, or for notes, as the case might be. 3900. But which do you consider the important element, the diminished demand for silver or the increased demand for gold ? — I never tried to separate the two, that is, in estimating the effects of the demonetisation of silver. 3901. You deal with them together ? — Yes. Silver was sold for gold, and less silver was wanted for standard money. I'hus there was a greater demand for gold than for silver. 3902. I am now speaking of the depreciation of silver as compared with gold, not of gold in relatioii to commodities at all ? — I should look upon that as as due primarily to Qauses affecting the relative demand for currency, rather than to causes affecting the ap- prechation of gold relatively to commodities. 3903. So far as that is concerned, it would affect silver, as I understand you, only in the same way that it would affect other commodities ? — Yes, the appre- ciation would only affect silver so far as it would affect other commodities, if silver is regarded simply as a commodity, but then there are special causes at work which would depreciate silver. 3904. I think we had better keep those two entirely separate. You would agree probably that the question of the general appreciation of gold in relation to com- modities may be dealt with as an entirely separate question from the question of the depreciation of silver ? — Yes, I generally do treat them separately in anything I write on the subject. 3905. Then we will continue our investigation as to the depreciation of silver, deferring the other question till afterwards. You say that the monetary changes to which you have alluded have diminished the demand for silver ? — Yes. 3906. And, therefore, the result has followed which you would have expected, that the price of silver has fallen ? — Yes. 3907. You suggest that the fall in prices may affect the amount of silver that is required even for token money ? — Yes, but that is bringing in the question of the appreciation of gold, and rather refers to the future. It seems to me that, sup- posing there is a great fall in prices which would be expressed by the appreciation of gold in the gold- using countries, then so far less token money will be required. You do not require so much money to circulate commodities when prices are low as when prices are high, so that in this case there would so far be a diminution in the demand for silver for token coinage. If all prices fell, we will suppose a half, then I would imagine that less token money would be required. I do not know that the change would be exactly proportional, but less token money would be required to circulate commodities just as less standard money would be required. Dd Mr. J. S. Nicholson. 29 April 1887. 200 EOYAL COMMISSION ON GOLD AND SILVER: Mr. J. S. Nicholson. 3308. Might you not want more of your token money, because there would be a greater demand for smaller sums. Supposing you had no half-sovereign 2» April 1887. coinage at all, but only a sovereign coinage, and then ■ your sovereign became appreciated, and prices fell, would not there very likely be a greater demand for token money, because there would be more trans- actions in which you would want the smaller coin ? — > Yes. I did not consider it in that light, I simply considered the question from a kind of necessary pro- portion between prices and the quantity of money, and, I confess, I assumed this without thinking of the point you mention. 3909. (Mr. Courtney.) Suppose it were necessary to resort to the use of farthings in purchasing commo- dities ; we do without farthings now, but we should be compelled to have farthings coined ?— Yes. 3910. {Chairman^ Then another aspect of it is that you might have lower prices and a largely increased number of transactions ? — Yes, of course, that would be possible. 3911. Then we should require more token money, and not less, should we not ? — Yes, so far, but then I do not see that there would be any connexion between the fall in prices and the increase in the number of transactions. 3912. No, I am not suggesting that iiecessarily you would have an increase in the number of transactions because you had lower prices, I am only suggesting that one must not assume the contrary as matter of fact ? — No, not as matter of fact. I am only assuming that the effect of this particular cause would be that less siher money would be required if prices fell. Of course, at the same time, the number of transactions might increase. In this way the cause mentioned might be entirely neutralized, even though it operated in the way I thought. 3913. {Sir T. Farrer.) Have you at all verified, or attempted to verify, that supposition by reference to the actual quantity of silver coined in European countries and the United States ? — No. I do not see how verification would be possible, because there are so many other causes which would have to be taken into account that one could not get direct evidence ; for instance, the increase in the number of trans- actions just mentioned. 3914. The coinage is always a very uncertain thing, is it not, because coin may be remelted, so it is an uncertain statistic ? — Yes. 3915. But so far as that goes, according to Dr. Soetbeer's tables, it would appear that the quantity of silver coined in those countries from the years 1876 to 1880 was very considerably larger than it had been in any previous years ? — Yes ; I remember seeing that ; but I think the recoinage is not accounted for. 3916. Well it would appear that, to take the time just before the German demonetization from 1866 to 1870, the coinage of silver was 1,172,180 marks ; in the next period 1871 to 1875 it was 1,387,908 marks; in the next period 1876 to 1880, 1,738,499 marks ; and in 1881 to 1885 it fell off to 1,120,312 marks ; but the proportion of silver to gold continued much about the same all through those periods ? — Yes. 3917. {Mr. Barbour) Was there not in those years a large substitution of small silver coin for other forms of currency ? — Yes, and I think the figures are vitiated, from the fact that no account is taken of re-coinage. 3918. {Sir T. Farrer.) The whole does not show a falling off in the quantity of silver coined for token coinage ? — ^No ; but at the same time there has been In Germany, I believe, an increase in trade, and that of itself would require more token money, and more money of all kinds. 3919. ( The Chairman.) Do you know whether there was a great difference in the amount of token money in this country as between say, the time prior to 1873 and the time subsequent to 1873 ? — No ; I do not know as matter of fact. 3920. Your view is that countries where silver is standard money cannot obtain it except in payment for commodities. But the prices of their commodities are falling in the western markets, and thus silver is not absorbed in such large quantities ; does that result from the depreciation of silver ? — Yes. The question is sometimes put, how is it that since silver is depre- ciated it does not flow in large quantities to the East ? Well, I should say, that the effect of the depreciation lowers the prices of the Eastern produce, and there- fore, so far less silver is due to settle the balance of trade. ^ 3921. And the price of the commodities exported from silver-using countries is also falling ? — Thus, so far as that cause is concerned, less is due. Of course I am taking the question analytically, and taking one cause at a time, if the exports from silver-using countries have fallen in price, then so far there is a less balance due. If prices had remained as before, then the exports would have increased in value, and very much more silver must have been sent. 3922. {Mr. Birch.) If the volume of commodities was greater, the price being the same, they would draw more silver, of course ? — It depends upon the extent to which prices fall. 3923. Therefore it is not a fixed rule ? — No. 3924. {The Chairman.) One of the points that you make is, that the fall does stimulate the exports very largely? — Yes. I have no doubt that on balance there is an increase in the amount of silver sent so far as this cause is concerned. That would show that the exports increased in volume more than they fell in price ; but still this fall in prices is one cause, it seems to me, which ought to be taken , into account in explaining how it is that silver has not gone at once in large quantities to the East. 3925. At all events your point would be that although it stimulated the exports, yet the full effect of that was not felt in attracting silver because the exports sold at a lower price ? — Yes. 3926. {Mr. Courtney.) They sold at a lower price measured in what ? — Measured in silver. That is to say, they obtained less silver than they would have done but for the fall in gold prices, 3927. Taking a concrete illustration, that the export is brought from India to England, are you saying that the prices are lowered in the English market .' — If prices on this side remain steady, then very much more silver, silver being depreciated, would be obtained than is the case at present ; but this depreciation of silver lowers the gold prices of these commodities on this side. 3928. Well, if they are lowered in this market in gold, and silver is lowered in this market in gold, it might possibly happen that silver and the commodities themselves may remain in the same ratio ? — Yes ; that might happen certainly, 3929. Then would your reason against the export of silver to the East still hold ? — Simply taking the effect of one cause so much silver is not sent as would be the case were it not for the depreciation, if the volume of trade increased in the same manner. 3930. {Mr. Fremantle.) But if silver were depre- ciated as regards commodities, you would require more of it in payment of the commodities in the East, would you not ? — ^Yes ; that is, if silver prices in the East had risen, but I was assuming they remained steady. 3931. {Sir T. Farrer) You mean that if gold prices had remained as high as they were, and silver had depreciated, then a larger amount of silver would have been needed ? — Yes ; that is the point. 3932. {Mr. Birch.) That is provided always the same quantity of commodities had come ? — ^Yes. I thought that was the assumption made by Mr, Bagehot and others. They supposed that prices on this side would remain the same, and in consequence largo quantities of silver would be due. ^ But prices do not remain the same owing to the prior depreciation of silver. 3933. ( The Chairman.) When did the last of the causes to which you attribute the change in the value MINUTES OP EVIDENCE, 201 of silver relatively to gold take place ; the demoneti- zation by Germany was in 1873, the French ceasing to mint -was shortly after that?— The suspension of the coinage by the Latin Union took place very shortly after the German demonetization. 3934. Would you not expect the effect of Ihe changes from these causes to be developed to its full extent at once or in a limited time, and afterwards that matters would settle down to a condition of equilibrium ? — You mean that silver should have fallen at once 20 per cent., and then remained steady. Well I should say because silver no longer being used as standard money, at least not being freely minted as standard money on this, side then there is not the same demand for it, and a very small addition to the supply being thrown on the market as a com- modity, that operates upon the price. At this stage the supply does come in, only it comes in under different conditions. 3935. Therefore, the subsequent changes and fluctua- tions you would attribute to the changes ia the supply ? — Very largely to changes in supply, but of course also you might get the operation of any sudden change in demand. I believe recently there was some oscillation upwards in the price of silver owing, it was explained in " The Times," to some demand on the part of France for Tonquin. 3936. {Mr. Barbour.) Then you think that in the present state of affairs the price of silver for the time being would depend a good deal on the balance of indebtedness between the East and the West .' — If there is a demand for silver, then it will depend a great deal upon that. It also wiU depend a great deal upon the supply. The changes in supply would operate considerably now owing to the change in the demand being a change, not only in degree, but in kind, that is, the silver cannot be minted freely, so that practically it all of it becomes a commodity in the Western markets. 3937. {Mr. Fremantle.) But then to what would you attribute the fact that since 1878, when the Bland Bill was passed, notwithstanding that 6,000,000^. sterling have been coined ever since by the American Govern- ment, therff-has been still a great and continuous fall i — I should say it must be largely due to the increase in supply relatively to the total demand. 3938. {The Chairman) That change, the mintage of 5,000,000/. a year, you would have expected to make, would you not, other things being equal, a change in the price, a tendency upwards ? — And I have no doubt that it did, so far at any rate, prevent silver from falling so much as otherwise it would have done. I imagine that if the Bland Act were sus- pended to-morrow, there would be a considerable further fall in the price of silver, and so, I presume the passing of the Bland Act checked that fall. 3939. {Mr. Barbour) Do you know whether at the time the Americans began to coin silver largely, there was a considerable cessation in the coinage of silver in Europe, which may to some extent have counterbalanced the coinage under the Bland Act ? — Yes, I should think that was the case, but at the same time I cannot refer to the facts, and it seems to me the facts are difficult to follow owing to the question of re-coinage. 3940. {The Chairman) If I remember the figures that were given, there was a considerable fall which went steadily on after the Bland Act was in operation ? I should only say, that taking one cause at a time, that Act must so far have prevented the fall from being so great as it otherwise would have been. It caused the absorption of a certain amount of the silver. If that silver had been thrown on the market it must have lowered the price. But of course it might have been counteracted by other causes. 3941. What rather struck me, looking at the figures, was, one saw a progi'ession downwards in the price of silver, and hardly saw any sufficient change in the supply to account for it, considering that the Bland Act came into operation? — Well I should only say that had it not been for the Bland Act the fall must have been greater ; I do not see how it could have been otherwise, but at the same time the price of silver would depend upon so many causes and so many changes in the demand of various kinds, that it is quite possible that they might more than have neutra- lized this absorption of the supply through the Bland Act. It seems to me always so very difficult to argue from any single fact to the-general question. 3942. As I understand in your view this depreciation of silver is likely to remain permanent, so long as the existing monetary arrangements continue ? — Yes, I do not see any reason why it should rise in price to the former level. 3943. Except by a considerable diminution of pro- duction ? — Except, of course, if there was a consider- able diminution of production, or, of course, it is possible that there might be a very great increase in the demand for the purposes of the arts, if wealth were more evenly distributed, and a large amount of silver was used in that way. 3944. {Mr. Fremantle.) And large discoveries of gold would have the same effect ? — I suppose large discoveries of gold would have to some extent that effect also. 3945. {The Chairman) Then under present con- ditions you anticipate a continual downward tendency in the price of silver, and, subject to that downward tendency, frequent fluctuations ? — Yes, in view of the apparent increase in recent years in the supply of silver, the want of a demand upon this side for the purposes of coinage, and the comparatively small export to the East at present, a further fall seems possible. s|3946. {Mr. Courtney.) You anticipate a further increase of supx^ly ? — Not a further increase, for I have no means of judging, but the amount actually produced at present, if that continues, is more than can be absorbed on this side, I should suppose. But I should certainly expect constant fluctuations in the price. 3947. {Mr. Birch) Have you any particular reason for looking forward to those constant fluctuations ? — The price of silver is determined by the changes in the demand and supply practically in the London market, and there constant changes will occur. There is no reason to suppose that the demand de- pending upon various elements will exactly balance the variations in supply. 3948. {The Chairman.) Before these monetary changes were there fluctuations in the price of silver ? — Yes, there were fluctuations between 1803 and 1874, but I believe that these fluctuations were at any rate very small. I think they have never been more than 2 per cent., and they were probably due mainly to causes affecting the exchanges between different countries. 3949. Apart from the question of the downward tendency, do you think that the fluctuations are likely to be greater now ihan they were then, that is to say, the slight changes resulting from changes of demand or changes of the rate of exchange? — I should think that the conditions being altogether different, we should expect much greater fluctuations, and more frequent fluctuations, because, whilst France was bimetallic, that practically steadied the price. 3950. What have you to say with regard to the question of the evil caused by the depreciation of silver ? — It seems to me that it is necessary to separate the two questions of the appreciation of gold due to the fact that gold does the work formerly done by silver to a large extent, and the question of the depre- ciation of silver, and the fluctuations in the price of silver affecting international trade particularly. 3951. Before we come to the evils resulting from the appreciation of gold, will you state what are your grounds for asserting that there has been an apprecia- tion of gold in relation to commodities ? — ^In the flrst place the ordinary calculations founded on the index numbers which show that in a large group of com- modities, at any rate there has been a faU in prices ; and then I should myself found a good deal upon the Dd 2 Mr. J. S. Nicholson. 29 April 1887. 202 KOYAL COMMISSION ON GOLD AND SILVER Mr. J. S. want of expansion in the revenue retui'ns showing that Nicholson. there must have been general appreciation, not onlj'' 29 April 1887 ''^^ regards those commodities on which index numbers ., ' are founded, but as regards commodities generally. 3952. With regard to the commodities which have been dealt with by index numbers, there have been several different groups formed, have there not? — Yes. 3953. The " Economist " group, I think, consisted of 22 articles, and the Hamburg group of something over 100?— Yes. 3954. You do not find, whichever group you take, anything like an universal fall of prices in all the numbers of the group ? — No, not in the same degree. 3955. Not only in degree, but you find some of the ■group rising during the time others have fallen ? — I should think it is quite possible. I do not remember at this moment if any commodity has actually risen during that period, but T should think it would be quite possible. 3956. It is possible entirely to alter the results •arrived at, is it not, by leaving out one or two of the elements of the group, I mean as to the results at particular dates ? — I should think in. tliose particular cases, comparing the prices between 1874 and the present time, that you would not change the result ■^■ery much by leaving out one or two of the items. 3957. In the two or three years immediately pre- ceeding 1873, was there not a very great rise in the price of pnrticular commodities that are largely dealt in ? — Yes, I believe so. 3958. But you would not attribute that great rise of price which took place in the few years preceding 1873 to any monetary change, there had been no more gold discovered ? — No great quantity, and no important metallic monetary change. 3959. It would be attributable, would it not, to the great demand that there was owing to speculation and the number of enterprises that were started ? — I suppose the great rise in coal and iron would be largely due to that, but I should also imagine that the expansion of prices was largely due to tlie after results of the Franeo-Germnn war, leading to a greater demand for commodities from this country to replace the capital destroyed or disorganized in France a;id Germany. 3960. Would you not have expected, entirely inde- pendent of the monetary changes of 1873, that if speculation had exhausted itself, and people had come to be less willing to lend their money to specula- tive enterprise, and if other countries had supplied themselves freely enough, prices would have fallen quite independently of any monetary change ? — ^Yes, I should fully expect that, because that seems to me to follow on the analogy of all the periods of expansion tliat have taken place over more than a century. You get nearly every 10 years a great expansion followed by a necessary reaction, the ex- pansion being due largely to the inflation of credit. But then I should have expected also, had it not been for this monetary disturbance, that a recovery would have taken place, such as appeared to begin in the autumn of 1879 and beginning of 1880. 3961. Would not that to some extent depend upon whether credit had revived, and people were willing to trust, for example, foreign States whom they had trusted before, but were not quite so ready to trust now with their money ? — But the history of at least 100 years seems to show that you would get such a revival of credit in a much less time than has taken place since 1874. 3962-3. But what I would call your attention to is this, which, I think, may be worth attention : In the previous crises, you have had financial difficulties, which have led to the failures of banks, and so on, through overtrading, and it has taken some time before confidence has been revived, but was not a feature of the break up of confidence about that time, that it arose not from banks failing, or great financial or mercantile difficulties, but from people ceasing to trust foreign states that previously had executed great works by means of the money which they derived from this country ? — I have no doubt that was an important element ; but in other crises also an important feature was the advance to foreign states of loans for different purposes. Such was the case in 1825 and in nearly every crisis since foreign influences have been felt. 3964. (Sir T. Farrer.) And is not this feature peculiar to the last crisis ; take the article of coal to which you have alluded, would not the result of the enormous price of coal cause an immense deal of capital to be expended in the development of coal mines ? — Yes, I should think so. 3965. And is it not the result that coal is only recovering its previous position, and the coal miners have been since permanently injured, and that they have not yet recovered — the demand has not yet reached the supply ? — I should think that is pi-obably true as regards coal. 3966. Iron depends upon coal largely .'—Yes. 3967. And that would follow, probably, the same rule ? — Yes. 3968. Again, is it not the fiict, that the great boom in shipping during that period, has caused an immense over supply of shipping, and the demand in that case has not yet reached the supply ? — There is certainly a great increase in shipping, but I am not able to say at present whether the supply is greater than the effective demand. 3969. (Chairman.') With regard to iron, I do not know whether you are aware that an enormous number of new furnaces were erected, and there was an immense amount of extra production at that time ? — Yes, I am qwito prdpared to admit, that if you take a number of very important commodities, you, no doubt, may explain the fact of the fall in prices by purely relative causes affecting those particular commodities, but then it seems to me that when the fall pervades the total mass of the commodities, you cannot arrive at the causes simply by examining the relative eombiuation of the demand and supply of a few particular com- modities. 3970. But take the case of the j^reat increase of carrying facilities which was brought about by that speculative period, in the making of the large addition to the railway system in foreign countries ; would not that of itself tend to some extent to bring into the market a great increase of commodities which would tend to reduce prices. If you had a very rapid increase of carrying facilities, would not that tend to flood the market with commodities which would be likely, if in excess of the demand, to diminish the value ? — I have no doubt that would operate in that direction, but I should thinlc it was not a sufficiently general cause to account for the universal fall in prices. 3971. But has there been an universal fall in prices ? That is what at present, I think, we have no evidence of. Some prices have fallen very much indeed, and if you take a number of articles and look at the total result, setting rises against falls, you will get a large fall; but then, would it not be per- fectly possible to find an efficient cause for each one of those fallings in price, without any general cause affecting the whole ? You do not suggest that there is to be traced anything like an universal fall of prices of all commodities ? — Yes, I should say that there was a general fall in prices of all commodities. Of course, the fall is not uniform. 3972. But that is exactly tiie poiiit that I want you to throw further light upon. Might it not be true that there is a fall upon the whole, and that fall upon the whole only results from setting falls against rises and arriving at the total result, and yet that there is an efficient cause for each fall apart altogether from any generd depreciation ? — But every particular price depends partly on general and partly on relative causes. You see that best with inconvertible paper. Some prices might fall for special reasons, in spite of a general rise through depreciation. Besides, I should argue that if the fall were due simply to these relative causes of themselves, a re- action must have set in long before this. MINUTES or EVIDKNOB. 203 3973. Take coal for example; Are you aware that a year or two prior to 1873, an immense number of new collieries were started ? — Yes, I believe so. 3974. And are you aware that they came into operation after the depression had begun, and the demand had diminished ? — Yes, I should imagine that was the ease. 3975. Would not that be likely for a considerable time to cause low prices in that particular article if that had taken place on a large scale throughout the country ? — Yes, I should think so. I should be quite prepared to admit that as regards that particular article. I have no doubt that as regards many com- modities that might be the case. But still I cannot understand how this fall in prices can be due purely to relative changes in supply and demand. 3976. Of course yon would agree that a great increase of carrying facilities would tend to bring into this market large quantities of commodities which would not otherwise come if freights were very low, for example, and you had a very large number of vessels seeking employment ? — Yes, I suppose it would if freights kept low. 3977. Then, taking the other result, which you suggest from the depreciation of silver, namely, the sti- mulation of export, we will suppose, of corn from India. Would not that, quite apart from any general apprecia- tion of gold in relation to commodities, of itself be sufficient to bring down the price of corn ? — Yes, quite so. I think that in some cases the fall in prices is due directly to the depreciation of silver. I should like to add that I do not rely only on the index numbers, but I was paitly confirmed in the view that there had been a general fall in prices by applying the method that I have used in the paper published in the " Statistical Society's Journal," March 1887. This depends in its practical application upon the revenue returns, or rather the gross assessments for the income tax returns, where you have no expansion on the whole ; and I should say that the want of expansion could only be explained by the fact of a general fall. 3978. But yon have had a great expansion, if you take the present time as compared with twenty years ago ? — Yes, but not taking into account the increase in population and the increase in the volume of trade. So far as I could get evidence, the increase does not seem so o-reat as it ought to have been, but for a change in the level of prices. 3979. Let me ask you this : In what way do you think a change in the volume of gold for currency affects the prices ? Supposing that to-day a bargain is being made for any commodity you please. The buyer and the seller will consider probably what price it closed at yesterday, and they would anticipate with regard to future supply and future demand, whether trade is likely to be brisk, and so on. All these considerations will enter in, and then they will fix the price to-day. The same operation will go on to-morrow, and also day by day, say, for a couple of years. Supposing that during that lime there has been a change in the volume of gold; say, a decrease. Where does that touch any of the transactions ? It is not a point which would be considered in any of these daily bargains which I have suggested ; and how, if nobody considered the question of the volume of the currency, does it touch the price ?— I think it may operate in one or two ways ; in a country with highly-developed credit institutions, the contraction of ^ the gold supply might operate on the reserves of banks ; the conse- quence being a rise in the rate of discount, and then it would be difficult to obtain the same advances of capital, and there would be in that way a fall in price such as is constantly exempUfled. That is one way ; but then there does not seem, so far as I can gather, to be any evidence that there has been such a drain on the reserves in this country. 3980. Is not the evidence exactly the other way — that money has been so cheap during all this time ?— Yes, and not only as regards this country, I believe, but as regards the other National Banks, there has heen apparently great abundance of gold, so that it cannot, .29 April 1887. it seems to me, have operated in that way. At the ^'!'\'^; ^' same time it must be observed that with falling prices Jyicliolson. there will be a lessened demand for advances, and also that even low rates are more onerous. But then there is another way in which the quantity of gold can operate, and that is, because in some places it seems to me the currency is directly connected with the level of prices. In countries where there is very little credit, there the level of prices depends really upon the actual quantity of money in circulation. If this depression set in to a large extent in these undeveloped countries (and that seems to be the view taken by Mr. Giffen, in his essay on the depression), it is just in those very countries where there is very little credit and where the contraction of gold would make itself felt directly. I should have said also that there is no sharp line between developed and unde- veloped countries. All the latter have some banking, and their banks may have had insufficient funds, and have been unwilling to lend. Then if there is a fall in the price of any important staple commodities, even in those undeveloped countries, that fall will be reflected to other markets, so that we may get the contraction of gold operating directly through' the want of circulating medium, in some place or other ; but it does not matter really where it operates, owing to the great inter-connexion of markets in modern times. 3981. But that would not depend upon any appre- ciation of gold here, it would only be that a particular country offered itp commodities at a lower rate, and that brought down the price of those commodities ? — But then I should say it is impossible to consider the value of gold, taking one country alone ; you must take the value of gold in the sense of ej^change value. It is necessary to take all the countries which have trading connexions. 3982. Then, if you do that, does it matter in which country the gold is, if you are to look at the total quantity of gold in relation to the total quantity of commodities in trade ? — Yes, I think it does. 3983. It would not have occurred to me that it would matter whether Germany had this additional quantity of gold or not, if the same quantity of gold has found its way into the currency somewhere ? — But you require a certain amount of gold as reserve, . and you- require a certain amount of gold as currency and supposing that for the currency, which '.vas formerly silver, you substitute gold, then you must take that gold from some other place, so that you then have less gold altogether for currency compared with the commodities. 3984. Yes, but if these undeveloped countries were silver-using countries, no such effect would be produced, because they would have all this silver set free ? — If they were all of them silver-using countries, then it would not have that effect ; but I should say that there are different undeveloped countries which use gold — our colonies, for instance — and there are always certain parts of other countries which must be considered as undeveloped, also where you require gold. 3985. (Sir T. Farrer.) You may say that as regards the gold in the reserve in the highly civilised coun- tries, there is as much of it as there ever was, if not more ? — I believe so. 3986. And that the guardians of that gold "have no greater difficulty — rather less difficulty — in maintaining and replenishing their reserve ? — I believe that is the case with the present demands of trade, and the present state of prices. 3987. It is a thing we have been always taught to believe, that gold will flow from the countries where it is less wanted to the countries where it is more wanted, and if there is a deficiency of gold in those undeveloped countries, would not that tell upon the reserves of the civilised countries ? — I do not see how these undeveloped countries are to draw upon the reserves of the banks of this country. 3988. Take Australia, which is one of the few undeveloped countries that uses gold; if there was really a deficiency of gold in Australia, would not the 204 ROYAL COMMISSION OX GOLD AND SILVER ; Mr. J. S. Nicholson, 29 April 1887, effect be either to stop tlie transport of gold from Australia to this country, or to draw gold fronl the banks in this country to Australia ?— It depends on the way in which the deficiency was felt in Australia. I suppose if there was a deficiency felt by the Australian banks which resulted in a very high rate of discount in the Australian banks, that would tend to draw gold from this country. 3989. Or if the price of wool was to fall very much in Australia ? — I do not see how that would attract gold from this country. 3990. Or a general fall in prices? — I do not 'see how that would necessarily attract gold from this country. 3991. {Mr. Fremantle.') Are you aware of the fact that a year or two ago, there was a balance of export of gold in the year to Australia ? — Yes, I had that in my mind when I spoke about the rate of interest. 3992. {Sir T. Farrer.) When I say a fall of prices, I take it upon your hypothesis that prices ai-e con- nected with gold. If, upon your hypothesis, prices fall in Australia would not the result be a large purchase of Australian goods, and an export of gold, from this country to Australia ? — Well, if there was a large purchase of Australian goods, the point would come in there again that I mentioned before, if the price had fallen in Australia, so far, less would be due. It is possible then, that our exports might still balance the exports from Australia, and that no gold might be due on that account. Of course, I admit the general 'theory that a relative fall ' of prices in any country stimulates exports, and thus tends to turn the balance of trade in its favour. 3993. {Chairman^ Supposing that the view you have suggested be the correct one, that in these undeveloped countries, there being a scarcity of gold, prices fall, and so things sell at a lower price, would not the extent to which that affected prices generally depend upon two things, first of all, what the com- modities were in which those countries dealt, and next the volume of commodities in which they dealt, as compared with the general volume of those com- modities ? — ^Tes, I suppose that must be so. It would be very difficult to estimate the total effect. 3994. But taking Australia as an instance, what are the commodities in which you would suggest that that effect would be produced ? — I suppose the most important Australian export is wool ; well then, I should imagine that the relative deficiences of gold in Australia, compared with the amount that there was before, might lead to there being less circulating medium in the country, and, consequently, less wages paid to the shepherd, find so on, and ultimately a fall in the price of sheep. 3993. Of course the wool produced in Australia is much more than would be used for any Australian purpose. Supposing there was a very largely in- creased production of wool, would not that equally account for the fall in the price of wool ? — Yes, I should think so, certainly. But I only take that as an example. I should say that to illustrate from the con- verse case, if we look into the effects of the great gold discoveries in Australia, we know at the time they were made there was an enormous rise in all prices in Australia in 1850. 3996. Yes, but might not one give a very good explanation of that without supposing that it depended on the increase of the volume of the cur- rency, for instance that it arose from the number of people who went out there, the activity produced in shipping, and building railways, and so on. All that one can quite understand independently of any change produced in the volume of the currency ? — But I should say that it would be impossible to maintain this high level of prices, unless you had currency to circulate the commodities. If you had attempted to circulate the commodities on any credit system, that would have produced a strain on the banks, and one did occur, producing a great financial crisis in Australia. It really was necessary to have a large quantity of gold coined in order to support that high level of prices. 3997. But still, -supposing some effect were pro- duced in that way, you would not suggest, would you, that the change in prices bore a percentage pro- portion to the percentage increase or decrease in the volume of currency as compared with commodities ? — No, I do not think we can get an exact proportion, but I express it rather by saying that the general level of prices is a function of the volume of gold, though I cannot say what precise function it would be. 3998. The more extended and perfect the system of credit, the less its effect would be ? — I should not like to answer that question on the spur of the moment ; it seems to me so very complicated the way in which the gold affects prices, when you take into account a highly organised system of credit. For instance, supposing the amount of gold which was generally deposited with the great national banks were doubled, it seems to me that it might possibly make wholesale prices rise only very little, or it might in certain conceivable cases make them rise greatly, but we could not say at once what the effect would be. In the converse case it is easy to see how a drain of gold might affect prices more than proportionately. 3999. But supposing that the transactions -were carried out by an actual exchange of gold for com- modities, the relation between the change in the quantity of gold, and the change in the prices of com- modities, would be much more direct and constant, would it not ? — Yes. I should think under hypo- thetical conditions that you might lay down that it would be exactly proportional, the change in price to the change in the quantity of gold. I have described the conditions in my essay on " Money." 4000. But when it is stated that prices depend on the relation of the volume of the currency to the volume of the commodities, does not that rather assume that all transactions are carried out by the direct exchange of the commodities for the currency ? — I do not think so, because" you have to consider also the amount that is required by the banks as a reserve. 4001. {Mr. Courtney.) Might I put a rather fanciful illustration that might perhaps bring out your view. Supposing the Government suddenly possessed themselves of a treasure of 10 millions of sovereigns coming from nowhere, and could dispense in con- sequence with the collection of the income tax for one year ; and that an additional 10 millions of sovereigns were thus thrown on the market, through the Govern- ment making its payments, and not drawing from the taxpayers, as hitherto, those 10 millions, what would you conceive would be the effect upou prices ? — I think there would be so far a rise in prices. 4002. Can you suggest any proportion of any kind ? — I cannot suggest any proportion at all. 4003. Would the effect be different from the result produced if instead of having that 10 millions of sovereigns so discovered the Government issued 10 millions of inconvertible notes ? — I should think if they were inconvertible notes, it would operate in the same way. If they were convertible notes of the same denomination as those already in use, I should think, probably, they would not circulate, because the number used is proportionate simply to the convenience of people. 4004. The hypothesis is that the Government is issuing these notes, which are undistinguishable in form, appearance, and declaration from the ordinary notes, and are being taken in payment of the demands of the Government ? — To carry out the hypothesis so long as they remained in circulation, and were prac- tically inconvertible notes, they would raise the general level of prices. 4005. You would not say in what proportion ? — I would not say in what proportion. 4006. {Chairman) Let me take the hypothesis Mr. Courtney has put of the 10 millions which the people have to spend instead of paying it in income tax ; would the effect upon prices arise from the fact that the people had so much more to spend upon MINUTES OF EVIDENCK. 205 the articles they wanted, and, therefore, there would be so much more demand for the articles? — I should think that is the form it would take. 4007. Then would not the extent to which that affected prices depend rather upon the proportion which 10 millions bore to the general spending power of the community than upon the proportion which 10 millions bore to the amount of the currency ? — The way, speaking generally, in which an increase in the quantity of currency operates upon prices is by enabling people to increase their demand ; they offer more of the currency, having more currency, against the commodities ; that is the form it takes, the way in which it works. 4008. {Sir T. Farrer.) Is it not the fact that advanced countries use less cash and less bullion in proportion to their transactions than less advanced countries do ? — I suppose so. 4009. And that a country at a more advanced period of its commercial dealings will use much less cash in proportion to the volume ot its dealings ? — Yes, in proportion. 4010. Then, on the one hand, if cash is used for the purpose of commercial dealings, and causes a demand for gold, there is, on the other, some counteracting agency which makes a country require less cash as it advances ? — The increase of credit. 4011. The increase of what we ordinarily call credit ; there is some such agency as that ? — Yes. 4012. {Chairman.') Do we know what the relative strength of those two agencies is, or how far they counteract one another ? — No, I think not. 4013. As to that increase of credit, may it not be regarded as an increase of the arrangements for setting off one transaction against another, rather than an increase of credit ? — Yes, I should think so. If I used the term " credit," I did so as including every- thing that improves the general organization of industry, indeed, anything that facilitates exchange of any kind. 4014. One object of a currency may be the deter- mining the relative values of articles, may it not ? When you say that so many quarters of wheat are worth so many pounds, and so many bags of cotton are worth so many pounds, that determines the relation which the cotton and the wheat bear to one another ? —Yes. 4015. And if you have a variety of transactions in a variety of articles, the result may be that you may settle all those transactions without any money passing ? — Yes, certainly. 4016. And the more you increase that system both within any country, and internationally, the less would you require currency in the transactions of the world ? — Certainly. 4017. And would not that diminish the effect which changes in the volume of the currency produce upon prices ? — So far, it would counteract any contraction that might occur undoubtedly, but yoTi would still need reserves and till money in the banks, and a drain upon the banks would affect prices. 4018. {Sir T. Farrer.) The word "credit" rather implies a belief on the part of sorueone that somebody else will be able to pay at a future time, does it not ? — Yes, I think that is a good definition. 4019. Therefore, that hardly includes all those forms of arrangement in which merchants at present do without currency, although they express their agreements in the form of promises to pay. When a merchant sells commodities, and obtains a bill or any- thing else in return for them, what he gets is really something that is an equivalent to an order for other commodities, is it not ?— Yes, I suppose so. 4020. And you hardly would call that credit, at least, not in the sense in which I have used the word just now? — It involves an element of belief in the existence of other commodilies which_ he will get in return for commodities that he parts with ? — Yes. 4021. {Mr. Barbour.) A belief that he will get coin .?— I should think a belief thnt he would get coin, if necessary, would enter in. 4022. {Sir T. Farrer.) It may be a la(.ent belief Mr. J. S. which in certain extreme events he might have to fall Nicholson. back upon, but in the great bulk of transactions the . . ,.. . idea of gold never enters into the merchant's mind at all, does it ? — I. should think at the time of selling, the buying of the other commodities does not enter into the merchant's mind at all, but the gold in some shape, or the representation of the gold — that is " money." 4023. Do you say that when a manufacturer makes cotton goods and sends them out to India, that he thinks of purchasing raw material or of purchasing silver ? — I should think, in the first place, that he thinks of incieasing his balance at his banker, or something of that kind — of the money he will get. He thinks of everything in terms of money. 4024. {Chairman.) But, supposing he draws upon the person in India to whom he sold his goods, and has given his acceptance to the person from whom he has bought the raw material, both those transactions being carried through by means of his banker, he looks to the one to pay for the other, leaving a balance of profit. He never thinks about getting so much coin for the goods, nor of paying so much coin for the goods ; he never will see or hear of either, but the result will be that he will- find ultimately, at his bankers, the balance of the one over the other ? — The only stimulus to trade is profit, and profit is the balance in that way, but still you have a comparison of two transactions, made both of them on a currency basis, and the difference in the result is the profit or loss. 4023. {Mr. Courtney) As matter of fact, a great manufacturer would conduct his business from one year's end to the other, and the only coin he would get from his banker would be coin to pay wages with ? — Yes, I should think so. 4026. All his payments for material would be paid through the bank, and all his receipts would be received in bills through the bank ? — Yes. , 4027. {Chairman.) Do you consider that the evil of the existing state of things v% not only that arising from the appreciation of gold, but also the evil arising from the depreciation of silver ? — Yes, I think that there is a disturbance of international trade as well as this disturbance of contracts caused through the appreciation of gold. 4028. Then will you state what you regard as the evils of the existing state of things. As regards the depreciation of silver, or, assuming it to exist, the appreciation of gold ? — Assuming the appreciation of gold to exist, I should think that the evil there comes in through the fact that contracts are made with the element of time; for instance, in the case of agricul- ture, farms if not actually taken on lease are taken with the idea of a rent fixed for a long time. Then if there- is any great fall in general prices, that, of course, operates very prejudicially on the interests of the farmer by the increase in the burden of his fixed charges, while the prices he gets are smaller. 4029. Supposing, with regard to the fixed charges for mortgage, that money is cheaper, might not that more than counterbalance the loss by appreciation ? Supposing a man, for example, to borrow a good many years ago at 5 per cent., and he can now borrow at 3 1 per cent., even taking it that gold has appre- ciated, may he not be better off now if he can pay off his old creditor and borrow at 3| per cent, than if he was paying 5 per cent, without any appreciation of gold ? — That might possibly happen, I should think, in some cases, but in the case of the farmer, I do not see how that would operate. His principal burden is rent. 4030. It is not clear, is it, that if money be much cheaper, even though gold is appreciated, the position of the debtor may not be quite as good as it was ? — Of course, the rate of interest depends upon different causes from the value of money in the sense of its exchange value. A man might lose, for instance, on the exchange value of the commodities that he sells ; 206 EOYAL COMMISSION ON GOLD AND SILVER: Mr. J. S. he might gain by the fall in the rate of interest on the ■Nicholson, capital that he borrows. TiRoy 4031. When you are looking at the total position ^ ■ as compared with the previous time, inasmuch as the appreciation of gold, if it exists, at all events has not affected the price of money, the position of a debtor now may not necessarily be worse ? — Not necessarily. That is, that so far the fall in the rate of interest might in some cases balance the fall in the price of commodities, but taking the case of mortgages on lanJ, I should think that there the diminution in rents on the part of the landowner is much greater than any difference lie might make of a half per cent, in the interest that he pays on those mortgages by renewing them. 4032. Within the last few years a very considerable amount of money th.it had been borrowed formei'ly at 5 per cent, now stands' at 4, does it not, on the mort- I g3ge of land in this country ? — I am not able to speak as to the rates in this country of the mortgages, but I think in Scotland the rate has fallen from about 4 per cent, to 3^ per cent, in recent years ; but then I should think that the real rental of land had fallen probably from 25 to 30 per cent. 4033. {Mr. Courtney.') Of course, a fall from 4 to 3^ per cent, is a fall of 12^ per cent. ? — That would be about one-half the fall on the rental. 4034. {Chairman.') I gather from your previous answers that you attribute in part the prejudice to the agricultural interest to the increase in the supply of the commodities in which they deal ? — The increase in foreign supply, of course, operating on the prices. It would not matter to them how much came in if they could sell their own produce at a good price. ' 4035. {Sir T. Fari-er.) The appreciation of gold is the same thing, is it not, as a fall in prices ? — Yes, it seems best to use the word in that sense. 4036. But that may arise from two causes. It may arise from something inherent in the gold, or from something inherent in the commodities ? — Yes i it may arise from causes primarily affecting the currency or the commodities. 4037. What you have been stating about the evils of appreciation applies only to the former of these, does it not ? — Yes, I should think so, because in general any cheapening of commodities (the level otherwise remaining the same), is beneficial on the whole. 4038. And as regards the position of debtor and creditor, how will that operate ? Take the case first of the debtor, the mortgagor in this country ; he is in no way recompensed, as he takes less by the increased abundance of foreign corn, or to a very small extent ? — Only to a small extent as a consumer. 4039. But that is because he produces the very same thing at a higher cosi: which is produced at a lower cost elsewhere ? — Yes, if that is so. 4040. Therefore it is the foreign competition that injures him ? — Yes, in that case. 4041. And not the appreciation of gold? — Yes. It is the fall in the price of a particular article ; a relative not a general fall. 4042. Then I want to go on to a further case. I admit that he is injured, but I ask you whether that is by reason of anything in the relation between gold and commodities, or by reason of the commodity which he produces, being produced in greater abundance elsewhere ? — By the greater cheapness of the com- modity under your hypothesis. That cheapness may be due either to improvements in the communication, for instance, between the West of America and this country, or it may be due to the depreciation of silver and exports from India. 4043. I put aside depreciation of silver as a separate cause. Eailways in India, the Suez Canal, transport by sea, breaking up of new land in America or India; from all those causes the English landlord suffers by the increased abundance of the commodity he produces, and that on the whole is a benefit to the world if it is a prejudice to the English landowner ? — Yes. 4044. And a benefit to England? — Possibly, on balance. 4045. Well, that has been our theory, has it not ? — Yes, but the injury to agriculturists must be considered. 4046. Now I want to take the case of a producer of commodities, who is at the same time a borrower, and has to repay the principal or to pay interest upon it in gold which will buy more commodities than it would have bought at the time the loan was made to him .■' —Yes. 4047. If be has to pay more for his gold by reason of the increased jjroduction of the commodities which he produces, then, although he has to pay more, he has more to pay with, has he not .'' f^or example : India has borrowed very largely from this country, and has to pay a fixed interest in gold. India is pro- ducing, very much more largely than it did, corn, cotton, and other commodities, which it sends to this country, and is importing into this country very largely, and we will assume for the present that the increased production of these commodities is due to increased facility of communication, and, amongst other things, to the railways which have been built by the money borrowed from England ; then, although India has more to pay by way of interest, the gold in which she has to pay interest is of more value than when the loan was made. India is better able to pay than she was ? — ^Yes, precisely ; it is quite possible. 4048. And that has to be set against any increase in the burden on India by this gold debt ? — I certainly think that that is a most important consideration as regards India. 4049. {Mr. Barbour.') And suppose simultaneously with the cheapening of production that there had been an increase in the currency, sufficient to keep prices at their old level, the advantage would have all gone to the producer and not to the mortgagee ? — Yes, I should think so. That would have been a still greater advantage for India. 4050. {Sir T. Farrer.) Therefore to sum it up, if the appreciation of gold or fall in prices aiises from something inherent in gold, it alters the relation of debtor and creditor in a different way from the way in which it alters it if the appreciation of gold and the fall in prices arise from the increased abundance in commodities ? — Yes, I think so. But I am not sure that I have seized your point. A fall in the prices of a few commodities cannot be properly called an appreciation of gold. 4051. {Chairman.) The next point on which I will ask you to make some observations is whether the evil calls for legislative interference ? — I say undoubtedly. There is no natural tendency to equilibrium with reference, not only to the appreciation of gold but also to the depreciation of silver. 4052-3. The volume of gold is year by year added to, is it not ; it has been down to the present time, very considerably. Several millions a year applicable to coinage have been added to the store of the world. Why, if that is added year by year, should prices fall, supposing the fall arises from there not being a sufficient volume of gold currency ? — Because, in the lirst place, there is a great increase in the amount of work to be done by the gold, through the increase of trade and population. For instance, com- pare America now with the America of the beginning of the century. America requires an enormous mass of gold compared with what it did at the beginning of the century, and the same with all our colonies,, and a number of other countries. 4054-5. Yes, but you must take America compared with five years ago ? — But even taking all the great progressive countries over such a short period as five years, I should think that it is quite possible that their effective demand for gold, if prices had remained at the same level, is not met by the additional supply of four or five millions a year, or whatever it may be. 4056. Now, if you take the annual production of MINUTES OP EVIDENCE. 207 gold and silver according to Tooke and Newmarch, for example, from 1861 to 1865 it is 20,000,000/. ; from 1866 to 1870 it is 20,000,000/. odd; from 1871 to 1875 it is 20,000,000/. odd ; therefore, you have there a tolerably constant addition annually of 20,000,000/. ? ■—Yes, roughly speaking. 4057- Now if the trade was expanding largely, and the population increasing as it did during those years, why was not there an appreciation of gold then and prices going down instead of going up as they were ? — Well, I should say thai, on the whole there was a tendency towai'ds appreciation. 4058. But that is the time during which the prices were going up, and the great prosperity was pre- vailing ? — The view of Tooke and Newmarch is that the effects of these ggld discoveries were neutralised very much more speedily than is generally supposed ; and even according to Jevons's calculation, I believe, on index numbers the depreciation was only about 16. per cent, from 1850 to 1865. I remember that Tooke and Newmarch say, that even in 1857 there was really no great rise in commodities generally, although it is supposed that there was. So I should say that there was even then, in fspite of this enormous increase in the production of gold, a tendency, owing to the great increase in population and trade, towards appreciation. 4059. You mean that this steady addition of so many millions a year, would not be enough to keep pace with the increase of trade ? — That is my opinion. It is not enough to consider the supply, we must also look to the demand all the world over. There is one other element which I think ought to be taken into account, which is also emphasized very much by Tooke, and that is, the wear and tear of the coinage described in Vol., VI., p. 412. Now the greater the volume of your coinage, so much greater is the absolute loss by wear and tear ; so that if your coinage becomes doubled you get double the absolute wear and tear that you got before, and you would require double the supply merely to keep up the volume of coinage. 4060. But if you had a country starting a gold coinage for the first time, like Germany, when their coinage was all new, for some years you would not need much for wear and tear, would you ? — ^Not in that case ; but that is an element that has to be taken into account, in considering the future. 4061. I see that according to Sir Hector Hay, whereas from 1861 to 1870 the gold production amounted to 22,000,000/., as nearly as possible, from 1871 to 1875 it went down to 19,000,000/., a slight diminution, but that would cover part of this period of high prices, would it not ? — Yes. My own view would be, that there has been a constant tendency to appreciation the whole of this century ; that there was a very great depreciation between 1821 and 1841, which is shown by any method of calculation that has been admitted. I think that is generally recog- nised. This appreciation was continued until the gold discoveries took effect; then these gold discoveries momentarily gave a rise in prices, a depreciation, but this was neutralised much sooner than is generally supposed, and afterwards the appreciation set in again Well, then there was that great expansion which took place in 1873-74, due to credit causes which dis- guised the effects of this appreciation, and then as soon as that inflation was over, this appreciation set in again in full force, and it was intensified through the demonetization of silver. 4062. Have you any remedies which you would desire to suggest for the evils to which you have called attention ? — The remedy that I propose is con- ventional bi-metallism, that is, an international agree- ment between several of the important commercial nations to coin both metals at a fixed ratio. 4063. And you think such a convention would be possible. Would it last, if such a convention were aiiived at .!>— In my opinion, there would be no doubt that the ratio would remain stable under any con ditions which uic likely to occur, provided the o 24358. * 1 Air J S agreement was made between the principal commercial j^ichoison. nations. 4064. You propose that silver should become a 29 April 1887. legal tender, and be minted at a fixed ratio to gold ? — Yes. I think it would be essential that the silver should be minted freely. 4065. What ratio would you propose t- — Well, I should propose the ratio of 15^ to 1 ; but I do not think that it would matter very much what ratio was chosen, provided it were somewhere between 15^ to 1 and 20 to 1. It would not matter as regards the fixity of ratio. Of course, the effects would be dififerent as regards prices and as regards various interests. 4066. Xou propose \h\ because that is the ratio that did exist in the case of tlie Latin Union ?^That is the ratio at which a large quantity of money is still legal tender to any amount in several countries, and that is the ratio which was kept up practically for several years during this century in spite of' the great changes that took place in the production of gold and silver. 4067. It would be a great advantage to the holders of silver at the time, would it not, if you changed its relation from 20 to 1 to 15 J to 1 ? — ^Yes, I suppose it would be au advantage to holders of silver if the change took place at all suddenly ; but supposing the change did not take place suddenly, and they were to hold back their silver for a long time, losing any interest that it might have gained, it is possible that they would not gain very much. 4068. ( Mr. Courtney^. How could you prevent the change taking place suddenly when made ?~Well, I should imagine that what would happen would be this : as soon as the question began to be con- sidered as ' practical, and as soon as this country entered into negotiations with other countries, im- mediately there would be some rise in the price of silver, and as the convention seemed to be more and more possible, and as the results seemed to be more and more favouralale to the adoption of this ratio then the price would gradually rise until it approached this ratio, just as in the case of the Grovernment offering to buy up a gas company or a water company or anything of that kind ; the shares would gradually rise in price as the rumours gained credence that such was to be the fact. 4069. It would discount the rise ? — Yes, and that is one reason why I think the ratio of 15| to 1 is one which people should look to as the ratio which would be established, because it would be expected that would be the ratio, and that would tend to force up the price to that ratio. 4070. ( Chairman^ So that you think that it would not result in any rush of persons to get their silver minted, because before the time arrived for their being able to get it minted, silver would go up very nearly to the price ? — That is what I imagine would happen. 4071. {Mr. Birch.) Do you think that that would be convenient for India, the ratio of 1 5| to 1 ? — Well, I suppose that if a change were made suddenly, so that the change operated to-morrow, that it would dislocate trade altogether for the time being, but then, I should imagine that the rise would be gradual. Any change from the present ratio, the actual market ratio, to any higher ratio, if it were made very suddenly, I should think would .dislocate a good many trade operations. 4072. {Chairman.) When you had fixed that ratio, you would expect, I understand, only limited fiuctua- tions after that in the comparative value of silver and gold ? — After this ratio was fixed, I should not expect any fluctuations in the value. I should suppose that the ratio would really remain stable. You might get in particular places, and, perhaps, at particular times various local and temporary fluctuations. You might get special demands for one metal or the other which would lead possibly to an agio being paid upon one ui' the raetals, but that really would not be a disturbance of the fixed ratio between them, taking the world all Ee 208 ROYAL COMMISSION ON GOLD AND SILVER: April 1887. Mr. J. S." over. It is possible that tlie agio at one place might Nichohon. \^q ueutraliied by a diiferent agio at another. 4073. You have stated that the remedy that you, would propose would be bi-metallism of that character and that you think that practical. Would you be good enough to state to the Commission what benefits you think would be derived from the introduction of such a system ? — In the first place this appreciation of gold would be neutralised to some extent through the greater abundance of the standard money; that is, instead of relying merely upon the supply of gold, you have also the supply of silver to rely upon. 4074. You would add to your currency only so much of the production of the silver of the world as is not now used for coinage purposes, would you not ? — Yes, some would still be used for the arts and some would be exported to the east ; but as far as the western countries are concerned, a certain amount, at any rate, of the silver newly produced would become standard money, and it would so far act really in the same way, it seems to me, as if gold discoveries were made. 4075. Do you think that this fixed relation between the rupee and the sovereign would tend more to the use and hoarding of gold in India than exists at present ? — I am not able to say on what the hoarding of gold in India depends. I have seen it stated that the dearer gold becomes,, the more likely people are to hoard it. But I have also seen it stated that the rise in the price of gold makes it more difficult for them to get the gold. I am not in a position to give an opinion as to which operates most. I should think both of them are valid causes. 4076. The gold hoarded in India would not be so much added to the cuiTency, although that is what you would desire to see ? — No ; I may say I look upon the effects of great discoveries of tlie precious metals as having been proved to be exceedingly beneficial, and I think that it would have been a great misfortune for the world at large if on the discoveries of silver in the 16th century silver could not have been used as standard currency. In the same way with the gold discoveries about 1860, if the world had taken to using silver as the standard, and not availed itself of gold as currency, I think that there would have been much less expan- sion of trade than took place ; so that I think any discoveries of either of the precious metals, under this system, would act beneficially by increasing the quantity of money and stimulating trade. But I do not think there would be any very great disturbance of prices. I think, as Tooke and Newmarch have shown, the general effect of these discoveries, if you allow the metals to be freely minted, is a great expansion of trade and commerce, and no very great inflation of prices ; that you get a tendency towards a rise in ptdce, and this tendency towards a rise in price stimu- lates trade. Under the present system you get, in the first place, depreciation of silver, and then you get as a consequence a depression of trade. 4077. But why should the depression of trade follow the depreciation of silver ? — It follows from the fact of all those exports from silver using countries being sold at a lower price. Take, for instance, wheal. 4078. If they sell a great deal more of it, and at some profit, though a smaller one, that may be a very good trade, and as good a trade as the other ? — For the silver-using country, probably ; the effect at first would be a stimulus to the trade of the silver-using country ; that I should allow. 4079. {Sir T. Farrer.) You mean, the apprecia- tion of gold produces depression in the gold-using countries ? I wish to consider the case of the effects of silver discoveries under bi-metallism as proposed and under existing circumstances? — Under bi-metallism as proposed a great increase in the quantity of silver would act precisely — so long as the ratio was fixed — as the gold would act. You would get all the beneficial effects coming from the great gold discoveries in 1850, and in the 16tb century from the silver discoveries. But under the present system, if you get great dis- coveries of silver, the first effect is a depreciation of the silver ; then, as a consequence of this depre- ciation of the silver, you get all the exports from silver-using countries sold at a lower price. Then that fall in price is reflected to other commodities. For instance, if you get a fall in the price of some great agricultural staple like wheat; well, that imme- diately induces all the farmers to take to agricultural stock, or roots, or something ; that increases the supply of these things beyond the demand for them : so you get the fall in wheat leading to a fall in all agricultural produce. 4080.. That is a temporary effect, is it not ? — Only temporary ; but I mean temporary as oppose'd to permanent. Temporary may be a long time for practical purposes. 4081. It will only last till silver has gone to the silver-using countries to raise prices again ? — Well, I think the ultimate effect would be that some time or other this artificial stimulus to exports from the East, and the corresponding check on imports will cease, and that then the depression which had been felt in western countries would go to the eastern countries. That is what I believe may be the case if this is allowed to go on ; that in the end India, which at present gets an artificial stimulus in some ways, will, when silver is sent there and prices move there, feel a corresponding depression to what is now felt here. But it is extremely difiicult to forecast the distant future, and I am considering only one cause. 4082. Have you proved that it has felt the stimulus hitherto ? — I understand that there are certain kinds of cotton exports from this country to India, certain kinds of cotton goods which are pro- duced now only in India which were formerly exported there, and as regards exports from India, I believe there has been a very great increase in the export of wheat fi-om that country. 4083. Are you aware that taking the whole exports of the two countries together, the increase of exports from England into India has been greater than that of the exports from India to England during this period of the fall in silver ? — Yes, I believe there has been a very great increase of the exports into India. 4084. {Chairman) How would you account for that ? Would not you expect that the exports from India would be stimulated, and the imports into India checked ? — I should expect that the natural effect of the fall in silver would certainly be to check the importa- tion of commodities into India, but that might be neutra- lized from other causes ; for instance, if there is a corre- sponding fall of prices on this side, and Manchester manufacturers must sell their goods somewhere, they cannot sell them any better on this side than on the other. Although they get a very low price when it is converted into gold in India, still that may be as well or better than they can sell anywhere else. 4085. {Sir T. Farier.) That is the appreciation of gold, is it not? — Yes. 4086. {Mr. Barbour.') The gold price of articles imported into India has fallen largely ? — Yes, I believe so. The Manchester people really cannot stop their works. As long as they go on producing, if they cannot sell at a profit on ihis side then they lower their jirice and sell in India. 4087. ( Chairman.) But the price of cotton goods you would expect to go down, would you not, con- siderably, if the price of cotton went down, and the profit of the manufacturer might remain the same though the value of the goods exported might largely decrease ? — No doubt, and one reason the Manchester people have been able to export to India is that there has been a fall in the price of raw cotton, and they have been able to some extent to throw the loss upon tlie producer of the raw material, but at the present moment I understand there is a tendency to rise in the raw material, and with the fall in the exchange with India the trade is practically stopped, because they cannot do business unless they get cheap material or a rise in exchange. 4088. {Sir T. Farrer.) When did that happen ?— MINUTES OF EVIDENCE. 209 I heard from Manchester only yesterday, that just recently there is a tendency for the raw material to rise, and it was stated that in four or five weeks there had been a very great check on the export trade to India on that account. Profits are already at a mini- mum, and if the raw material rises, or silver falls further, or both, I should think wages must be lowered, or exports must be seriously checked. _ 4089. {Mr. Birch.) Then the rise in the price of silver would have an exactly coiitr.iry effect in India to what it would have here ; our manufacturers \vould prosper but the Indian manufacturers would be preju- diced ? — Yes, I suppose that would be the immediate effect. 4090. {Chairman.) That would be brought about by the conventional arrangement which you suggest ? — The momentary efi'ect no doubt of this conventional arrangement would be prejudicial, I should imagine, to those newly started cotton manufactories in India. 4091. {Mr. Barbour.) But if the ratio fixed was the market ratio of the day, Indian industries would escape that, would they not ? — Yes, I suppose they would, and, so far as they had any natural advantages, they would not.be injured permanently. It would operate like the abolition of a protective duty. 4092. {Chairman.) I understand your reason for suggesting the ratio of 15^ to 1 ; but would there be any impossibility or practical objection to adopting, say, the existing ratio at the time of the change ? — ^I think there would be a difficulty as regards the large quantities of silver held by those other countries who would join the convention at the old rate of 15^ to 1. 4093. {Mr. Fremantle.) Then the whole of the United States standard silver currency would have to be recoined if the ratio of 15^ to 1 were adopted ? — I believe the ratio there is 16 to 1. 4094. And the adoption of the ratio of \o\ to 1 would involve great re-coinage in this country, would it not ? — I think in this country it would be one way out of the difficulty with the half-sovereign. 4095. Do you anticipate that all the present token coinage in this country would be required if there were standard silver coins ? — Y'es, I should think that it would not make much difference to the token coinage. 4096. You would propose to have the present token coinage, and, in addition, large pieces of standard coin silver ? — Yes. I am not able to form an opinion as to the best form the standard silver should take, but I should think it would be best on the analogy of the other nations to make it a double florin, or something of that kind. 4097. {Chairman.) Then you think that if the present system continues, that the time will arrive when gold prices will cease to fall, and silver prices begin to rise in the East, and then the stimulus will be exactly the opposite to that which you say exists at present, the stimulus will be to imports into India, and a check on exports from India ? — Yes, that is what I should expect. Eventually the depreciated silver will be sent to the East, and laise prices there, and the process of depreciation of silver must stop some time or other. 4098. So that what you suggest is, that though the bi-metallic system would make a change, which at the present moment would be prejudicial to India and beneficial to England, it would prevent a time when the state of things would be reversed ?— Yes, and I may put it on more general grounds, that I think that any change in trade that is due merely to a currency disturbance should be neutralized, if possible ; that all currency disturbances are evil in themselves ; that the great thing we want to get, if we can get it, is stability in the standard as regards the general level of prices ; and as regards the countries using different metals, 1 think that it is very im- portant that we should get stability of ratio. 4099. {Sir T. Farrer.) You do not think that the change that you propose would probably make any very great difference in existing prices ?— It would of course be very difficult to say, what would be the immediate effect, because ])rices depend so much upon credit influences as well, and all kinds of things, but I do not see any reason, as regards the supply and the demand for ilie metallic currency. I do not «ee why there should be any great change in the level of prices. 4100. Your object would not be to produce any great alteration in prices, but to produce stability for the future ? — Yes, that would be the principal object. 4101. {Mr. Birch.) But can you imagine any greater disturbance of our currency than what you propose now ? — It never occurred to me as being a great disturbance to the currency of this country. 4102. {Sir T. Farrer.) Well, is it not a fact that the transactions of the world are now to a very large extent settled in London, and that they are settled in London upon the basis of the pound sterling ? — I am not able to say. I thought, founding upon, I think, something in Goschen's "Foreign Exchanges," that fewer transactions were settled now in London than was the case some years ago ; for instance, I thought that formerly, the American trade with the East was largely settled through London, but now it is settled directly with the East ; but I am not able to speak of my own knowledge. • 4103. At any rate, London is a very great financial centre ? — Yes, London is a very great financial centre. 4104. And the pound sterling of the London market is known throughout the world ? — Yes. 4105. Then is it not a very considerable change to alter that language, supposing it to be merely the language, the language which the commercial world understands? — They, would be able, anybody who wanted gold would be able, to get the gold all the same. I do not for a moment suppose that this country would be deprived of its gold. 4106. They would be able to get the gold, but a pound sterling would mean something different to what it does at present. It would mean either so much gold, or a certain quantity of silver ? — Yes, there would be a change in the meaning somewhat. 4107. {Mr. Barbour.) Did the pound sterling at one time mean a pound of silver ? — The first meaning of the word sterling was in connexion with the silver penny, and the common name of the silver penny was sterling. The pound sterling was a real pound of silver. 4108. {Mr. Fremantle.) But the pound sterling all over the world is the sovereign ? — The pound sterling at the present time is the sovereign. 4109. Have you ever known in the political or commercial history of the world, any such arrange- ment as the proposed bi-metallic arrangement ? — Well, I think that, perhaps, an analogy might be found in the history of this country, because in early times you find different parts of the country having mints for themselves, and different coins, and certainly you get England and Scotland, for instance, with different coinages, then you find a gradual uniformity introduced. In every nation, with the advance of civilisation, the necessity of uniformity of coinage has been felt. 4110. But what I meant was, whether any agree- ment of this sort was ever made before ? — I suppose the agreement of the Latin Union was to some extent of that nature, but not altogether. 4111. {Sir T. Farrer.) I should like to ask you one question further about the efi'ect of the apprecia- tion of gold upon the Eastern trade. You have told us what would be the effect of the depreciation of silver, that is to say, that there would be a flow of silver to the East, and exports from the East would be stimulated. That is, on the hypothesis of a depre- ciation of silver. But supposing that what has hap- pened now, the divergence between gold and silver, has arisen from appreciation of gold, and not from depreciation of silver, what would be the effect on the trade ? — Western prices fall, and, if silver falls in the s:>me proportion, there is no change in the trade, but if silver falls to a less degree Ee 2 Mr. J. S. Nicholson. 29 April 1887 210 ROYAL COMMISSION ON GOLD AND SILVER: Mr. J. S. Nicholson. 29 April 1887. 4112. But I am taking that hypothesis, that the fall in prices is in gold, then you do not think that in that case, there is any stimulus to the trade from the east? — Not if gold prices fall in exactly the same proportion as silver, hut it is very difficult to speak of the Western prices falling in a certain proportion. It is very difficult to get any average of the fall, and of course what is true of the average wiU not be true of each particular commodity taken. 4113. That is always the difficulty, but T am now taking the hypothesis that the fall that has taken place is in the gold, that is to say, that the gold has become scarce, and that consequently prices have fallen. You do not think that that would have any effisct in stimulating the trade from the East ? — Certainly not A fall in prices on this side, unless silver had fallen even more, could not stimulate exports from the Bast. 4114. And it does seem probable, if the result is du^ to something inherent either in gold or in silver, that the change is due to something that has happened to gold, rather than to something that has happened to silver. This seems probable from the facts that prices in India have been tolerably steady, that prices in this country have fallen, and that there has not been any abnormal flow of silver to India ? — I do not quite follow the question. 4115. The question is, what is the cause of the divergence between gold and silver ? — Yes. 4116. That may be due to something that happens to gold or something that happens to silver ? — Yes, or both. 4117. On the hypothesis that it is something which happens to silver, that silver becomes more abundant, silver would flow from the East, silver prices would eventually rise, and exports to the East would be stimulated for a time ? — Yes, that is if silver flows to the East, and silver prices rise, and silver is not proportionately depreciated. 4118. But on the hypothesis that it is something which happens to gold, then there woiild be no such stimulus ?— Not if it affects silver in the same proportion. But if silver prices remained steady, and gold prices fell, and silver did not fall proportionately, there would be a stimulus. The way the stimulus operates, depends upon the level of silver prices, com- pared with the level of gold prices, and the ratio of gold to silver. You must consider these three elements. 4119. (Chairman.) Under the fixed ratio, your anticipations would be that any discovery of silver would, by adding to the volume of the currency, improve trade ? — Yes. 4120. "Whereas at present you say that a discovery of silver, by depreciating silver, disturbs trade ? — Yes, it dislocates the trade between gold and silver countries at any rate ; it makes a great disturbance in the conti-acts that are made between those countries. 4121. If all countries were gold-using countries, the end to be effiicted by bi-metallism would not be nearly so important., I gather ? — No. If they were all gold-using, so far that would neutralize one of the evils, viz., the variation in the relative value of the standards of the different countries. 4122. And I gather from what you have said that in your view that is the more serious evil ? — The other evil, the appreciation, so long as it is gradual, as was the case before this monetary disturbance, I think can be met, and is met, except in a very few cases. Most contracts are after all only made for a comparatively short time, so that this secular ap- preciation really does not aifect trade so much ; it is the constant oscillation between the standards of different countries that is a constant disturbance. At the same time I think that a sudden appreciation may be productive of very serious evil ; and I think that if an attempt were made to establish general gold mono-metallism, the consequent appreciation would be most disastrous. 4123. Now as regards the ethical propriety of making such a change as the introduction of bi- metallism, what have you to say ? — Eirst of all, J should say that those who have gained by the fall in silver have gained by accident, so that if their accidental gains are taken away or neutralized, I do nut see that there is very great injustice done to them. No one anticipated in 1873, and made bargains according to the expectation of this fall in silver, If they have happened to gain by it in any way, and if they would lose by the rise in silver, the loss they would now sustain would only neutralize the accidental gain that they made before, so far. 4124. But so far as bi-metallism affected prices, it would affect the relation of debtor and creditor in the discharge of obligations, would it not ? — Yes, so far as it affected prices, I think it would really do so. 4125. Put aside for a moment the depreciation of silver and the relation of silver to gold ; assume gold to have become appreciated by natural causes, you would interfere, by means of a conventional or arti- ficial arrangement, and that interference would affect the relation of the parties, who hitherto had only been affected by natui'al causes ? — It would certainly do so, but the general results, I maintain, would be much greater stability in the standard. At present what we have to expect is a constant appreciation, which is a constant disturbance of the relations of debtor and creditor. 4126. Still your proposal, if carried out, would not only stop that, it would to a certain extent reverse it ? — To a certain extent it would reverse it, and neutralize it ; so far, I should think, it would be beneficial. For instance, I should say that for the next five-and-twenty years, if this plan were adopted, there would be a less disturbance of the relation of debtors and creditors than if the present appreciation of gold were allowed to go on. 4127. Still, for the moment I understand your expectation to be that prices would rise ? — To a certain extent. 4128. And, therefore, that it would not merely stop the change, prevent the change going on, that had been going on, but it would reverse the process and make a. change in the opposite direction? — But I should not anticipate any very great rise in prices. 4129. {Mr. Barbour.) Up to 1873 there was a fixed ratio between gold and silver at 15i to 1 ? — Yes. 4130. And all contracts up to 1873 were made at a time when that fixed ratio prevailed ? — Yes. 4131. So that if now we went back to the old ratio, we should simply be going back to the con- ditions that prevailed when those contracts were made ? — Yes, certainly. 4132. And the special disturbance would only be in regard to contracts entered into since 1873 ? — Yes. 4133. {Mr. Fremantle?) That ratio did not prevail ill this country, did it? — Of course, this country was not bi-metallic. 4134. {Mr. Chaplin.) With regard to arrangements entered into before 1873, I understand that the parties hitherto have not been affected by natural causes only. Were they not afiected by the legisla- tion which demonetized silver in Germany and elsewhere ? — After 1873, yes. 4135. {Sir T. Farrer.) But not by our legislation ? — Not by our legislation but from our want of legislation. 4136. {Mr. Chaplin.) And if your proposition was adopted you would be simply restoring the old state of things existing before 1873, which was disturbed by subsequent legislation ? — Yes, practically. 41 37. ( Chairman.) That is by the legislation of a foreign state? — That is quite true, but then these foreign states offered, as far as I can gather, to enter into an agreement with this country before and this country refused. 4138. {Mr. Fremantle.) But it was a system that had been originally esta,blished by legislation ?— Yes, but then I should maintain that all the coinage of MINUTES OF EVIDENCE. 211 the world depends upon legislation ; it is altogether artiflcial. 4139. ( Chairman^) You would, I suppose, confine yourView to the currency ; you would not say as a general proposition that we had a right to interfere by legislation to change a condition of things in all cases in which people had been affected by the legislation of foreign countries? ^Supposing that in any way the real meaning of contracts was disturbed, and supposing by legislation we could bring back the old meaning, the meaning which was the real inten- tion of the parties at the time the contracts were made,, then I should approve of it, but I do not sup- pose generally you could do it. Your legislation would probably disturb other interests. It is only in cases like these, where you get serious evils on the one side and considerable benefit on the other, that it is worth while attempting to get a legislative remedy, but I would certainly theoretically approve of the legis- lative remedy, though I should doubt practically if it could be carried out in most cases. As an example, I may say that every commercial treaty takes account of foreign legislation. 4140. {Mr. Chaplin^ You do not propose any- thing which would directly interfere with contracts themselves ? — No, nothing at all. All that we propose to do, is to deal with certain circumstances by which possibly those contracts might be affected. 4141. {Chairman.) But I understand you to pro- pose that a person now entitled to receive so much gold, should be bound to receive so much silver, that was part of your proposition, was it not ? — But the bargains that are made, I presume, are for so many pounds, they are not definitely for so much gold, they are for so many pounds sterling. 4142. But as the law stands now, he is entitled to demand one pound sterling in gold ? — Supposing a man wanted to get the gold to make a gold watch of, and you gave him so much silver, and told him to make a silver watch, that would be a disturbance of contracts really ; but so far as it concerned merely the money, he would have no difficulty in exchanging the silver for the gold, he could get it exchanged at any money-changer's. T cannot see that there would be any iniury inflicted. 4143. That would depend on the convention em- bracing all nations ; otherwise, if you give him gold he may tise it to bring goods from abroad under a conventional arrangement, which holds good in his own country, but does not hold good elsewhere ? — I think it would be necessary to have the principal nations agreeing on this convention, but then there would be no difficulty in anyone getting gold in this country to send abroad if it were required, or in any of the other countries. 4144. {Sir T. Farrer.) But he would get less com- modities for his gold ? — It depends on what the rise in prices was. 4145. You do not think it would effect any great rise in prices ? — I cannot say what the momentary effect would be, because it is impossible to anticipate what the effect would be of speculation. 4146. You do not think with Mr. Mannibg in his' message to Congress, that it would raise the_ price of wheat 25 per cent, in this country ? — It is difficult tn say about the price of wheat, because of the Indian supply ; but as regards general prices, I cannot think tliat there would be a rise in general prices on this account of 25 per cent., that is, apart from speculative influences. . 4147. Indian wheat is the very wheat which is complained of by Mr. Secretary Manning as having lowered the price of European and American wheat, and he attributes it all to the divergence of gold from silver. You do not think tying gold and silver again would raise the price of English and American wheat by 25 per cent. ?— The price of wheat in the London market at any time and also over a term pf years depends upon a number of causes affecting the demand and the Supply, and I have not sufficient statistical data to say accurately how far this particular cause of the depreciation of silver acts. Perhaps, how- ever, it may be useful to the Commission, as suggesting lines of inquiry, if I state the principles on which, according to the theory generally accepted, by English economists, the price of . wheat is determined over a term of years sufficiently long to allow the supply to be adjusted to the effective demand. The point is, that wheat, though 'produced in different places at different costs, sells (allowance being, made for quality) at the same price in the same market, I?ut no portion of the supply will be forthcpming over a' term of years unless it yields tp the ..producer his expenses and minimum profit. Accordingly, if the price falls, the producer least favourably situated will withdraw his supply, and this withdrawal vifjll last so long as prices remain low. This is the reason why the area under *heat in England h!aa ', declined. Farmers will not year after year grow wheat ^t a loss. But so long as cessation of supply from the , more expensive areas is met by supplies from the less expensive areas, there will be no rise in price, and if the new supplies exceed the old, the price will continue to fall, and more of the old supplies will be withdrawn. This substitution of new for old supplies will go on until the former are no longer able to meet the effective demand, and then the fall in price wiU cease, and the contraction of the old wheat area will cease also. Thus the conclusion is arrived at that the normal or stable price of wheat will be such that the part of the supply (necessary to meet the effective demand) which is produced under most unfavourable circumstances will determine the price, and the producers in a better position gain, or are able to pay " economic " rent. Thus the cheapest supply determines how much of the more costly supply will be needed, and this again determines the price, and thus it is only indirectly (through limitation) that the cheapest supply determines the price. Now, to apply these, principles to the pi-esent case, it is quite clear that India can only supply a small part of the total required in the West. But so long as the additional Indian supply exceeds the deficiency of the West, through the contraction of cultivation, the price of wheat will for the time be too low to be profitable to the least favoured western producer. That seems to be the case at present. Owing to the fall in silver, Indian wheat can be thrown on the market so much more cheaply than it could bo other- wise, and until the other supplies are diminished, the price will remain low. Now, it seems to me probable, if the price of silver rose to its old level, wheat could not be profitably exported from India until prices rose in a corresponding degree. For India, being a silver country, the price of wheat there is independent of the relative value of gold and silver, An exporter to England, at present, will give the Indian price in silver, and he can buy his silver for less gold, and thus competition will lower the price. If the price of silver- rose, the exporter from India must get more gold. Thus, a rise in silver would, on this view, raise the price of wheat to a corresponding degree. But in this case the same quantity of Indian wheat would be sent as before, and India would not sufl'er. The rise also would only facilitate and hasten a necessary adjustment. If the Contraction in the West, and the expansion in India continues, then eventually silver must be sent to India and prices will rise there. Besides, eventually the price must be such as to be profitable to the great mass of western producers. Suppose, however, that the fall in wheat is really due to causes affecting the nominal or real cost in gold-using countries, and that, owing to a fall in wages, freights, &c., America and other countries can profitably send wheat to Europe at the present price; then although, a rise in the price of silver might check exports from India, the deficiency might be met without any rise in price, or only a momentary rise. In this case the restora- tion of silver would make a difference to India, but so far not to the West. That, however, is only con- sidering the effects of the recovery from depreciation. So far as the restoration of silver met the apprecia- Mr. J. S. Nicholson. 29 April 1887. 212 ROYAL COMMISSION ON GOLD AND SILVER : Mr. J. S. Nicholson. 29 April 1887, tion of gold, it would raise the price of wheat as it did other things, and if it is mainly in the undeveloped countries that the pressure has been felt, the rise in wheat might be greater. Thus, on the whole, I should expect some rise in the price as the result of the adoption of bi-metallie, and if it is the Indian supply which is the chief cause of the fall, then Mr. Manning's reasoning seems correct. 4148. ( Chairman.) There is a very large quantity of Chilian wheat imported, is there not ? In Chili there is a silver basis, but they have a depreciated currency ? — Tes, I believe so. 4149. Well, even if you had your bi-metallic cur- rency, that country would still be left with its depreciated paper currency, would it not ? — Yes. 4150. And having that depreciated paper currency, would be likely to export wheat at a cheaper rate ? — Yes. That would happen, I presume, if the currency were depreciated as regards gold and silver, and if the wages, and so on, had not risen in the country in pro- portion to the depreciation, then there would be that stimulus ; but it is possible that the depreciation might have affected the wages, and I am not able to say. 4151. Of course, if that stimulus existed, that would tend to keep down, not only the price of Chilian wheat, but the price of all wheat. The extent to which it succeeded in so doing would depend on the relation which its volume bore to the total volume of the imported wheat ? — I think the answer I have just given about India would apply essentially to Chili. 4152. (Sir T. Farrer.) But any depreciation of that sort would have been only a temporary one. You do not mean to say that any country can, by depre- ciating its currency, throw all its commodities upon foreign markets ? — It would depend upon how long a time it took before the wages and the general elements in the cost of production responded to this depreciation, but I presume, until they did respond, that it would do so. 4153. Yes, it would be during the period during which wholesale prices had risen, and wages had not risen in the same proportion ? — Yes, precisely, but I suppose that could only be temporary. 4154. (Chairman.) Then you have said that you see no ethical objection to the change, because those who have gained by the fall have gained by accident, and that the injury would be temporary and the benefit permanent. What further have you to say ? — Then I say. Government has as much right to adopt this system in the public interest as to convert the national debt (if possible), or to repeal existing tariffs (as in the case of the corn laws), or to refuse for the future to enforce contracts discovered to be against the public interest. It is universally acknowledged that every Government has the right of changing its coinage as it finds expedient, and all contracts must be assumed to have been made subject to this risk, just as property is bought and sold, subject to the risk of future taxation. Then again, the real meaning of a pound sterling is its exchange value. No one wants the gold itself (except as a commodity). But the exchange value is subject to constant fluctuation, and the adoption of bi-metallism would on the whole neutralise the effect of recent changes, and prevent future disturbances ; that is, it would lead to greater stability of value, and that is really what every one requires in the pound sterling. It is in one sense a certain definite amount of gold, but when you come to look into it, the only reason for its being a certain amount of gold is, that you suppose that it would give you greater stability of value than any other substance. 4155. You are regarding the pound sterling as a measure for commodities ? — As a measure of value and as a standard for d^erred payments, especially as a standard for deferred payments, as distinct, that is, from a circulating medium. 4156. (Sir T. Farrer.) The effect of a depreciation of silver is, I think you say, to give the Indian producer an advantage, because the prices rise, and he only pays the same wages to his servants ; wages do not rise as fast as prices rise ? — The Indian producer, if he can obtain through the depreciation of silver, more silver, and if at the same time the wages he pays in silver remain the same, will so far gain. 4157. In the same way the English producer, whether of wheat or of cotton, suffers in the case of the appreciation of gold, because prices fall more quickly than wages do ? — Yes, that might happen. 4158. Consequently in the case of the appreciation of gold the sufferer has been the producer, the capitalist, the employer until wages fell ? — Yes. 4159. There is an intermediate time during which the workman or the labourer has the advantage of the old wages, and in which he has also the advantage of the cheap commodities? — Yes, that is a general principle, admissible under certain conditions. 4160. And the producer, therefore, suffers by his prices and his profits falling, while his expenses and wages do not decrease ? — Yes. 4161. Then the immediate result of an alteration by which you raise the prices again would be to raise the prices to the producer, without raising the wages of the labourer for some time ? — Yes, but I should say that when I stated that that was a general principle I should only admit it with certain very important qualifications. It is one element that has to be considered. 4162. I am only speaking of it in the broadest way, but that is the way in which the English producer is placed at a disadvantage as compared with the Indian producer, is it not ? — Yes, it is through that, no doubt. 4163. Very well, then, if you reverse the process, you raise the prices before you raise wages ? — Just so. 4164. And supposing the commodities which the labourer purchases before his wages rise are affected, he suffers ? — Yes, so far. 4165. The capitalist suffers by the appreciation of gold ; by the depreciation of gold the labourer suffors ? ■ — Yes, that is so far as the general principle goes. You understand, I only admit that with very great qualifications. In the first place, there is the constant tendency on the part of the capitalist who has lost his profit to reduce wages. He tries to reduce wages, and as a consequence there is greater irregularity of employment than would otherwise be the case. There is not anything like the amount of enterprize, em- barking in new undertakings, and so on, so that on the whole I think it is very possible, although wages are quoted on the same level, that, taking the real income of tlie labouring classes, they have not gained. Then another qualification, which I think of the very greatest importance, is that we assume that retail prices follow wholesale prices, but I should think, as matter of fact, the middleman takes good care that they do not follow wholesale prices. That is certainly the case as regards the middle classes, I know from my own experience, and with the working classes I should think with the exception of one or two articles it is probably still more the case. 4166. Has not there been an immense improvement in that reppact so far as the working classes are con- cerned in many districts in England since the establish- ment of co-operative stores ? — I have no doubt that must have operated ; but then that seems to me to point also to the fact that the middleman must have been doing extremely good business to give such encouragement to these co-operative stores. 4167. (Mr. Chaplin.) In reference to the question that Sir T. Farrer put to you about wages, and also to your statement of the evils which the present system has inflicted on agriculture, is it within your knowledge that the wages of labour, especially in the agricultural districts, have already fallen enormously in some instances as much as one-third ? — I was not aware, as regards agriculture, that wages had already fallen so much. I was rather under the impression that they had not fallen so much as one would have expected. MINUTES OF EVIDENCB, 213 4168. {Sir T. Farrer.) To whatever extent wages liave fallen in propoi liou to wholesale prices, to that extent the producer is not injured by the appreciation of gold ? — Supposing wages have fallen in equal proportion, then so far he would not bo injured. 4169. May I not sum up your opinion on the whole in this way : that in the case of an appreciation of gold the labourer benefits, to a certain extent, by retaining his wages at the old rate after prices, have fallen, and the manufacturer suffers to the same extent because his profits are reduced, but that that is neutralised very much by the fact that this fall in profits prevents the manufacturer from carrying on as much business as he otherwise would have done ? — Yes. 4170. But, on the other hand, if you reverse the process, the labourer suffers in a converse way and the manufacturer gains, but that that gain is neutra- lised because the high prices induce the manufacturer to go on with greater spirit and do more work ; is that a fair representation? — Yes, I think so, taking the cause which you have isolated. The witness withdrew. Adjourned till Friday. Eighteenth Day. Friday, 6th May 1887. Mr. J. S. Nicholson. 29 April 188 PRESENT : The Right Hon. LORD HERSCHELL, the Chaieman, presiding. Mr. D. M. Baeboue, C.S.I. Mr. J. W. Birch. Mr. H. Chaplin, M.P. Sir John Lubbock, Bart., M.P. Mr. W. H. Houldsworth, M.P. Mr. C. W. Premantle, C.B. Sir T. H. Faeeee, Baet. Mr. L. Courtney, M.P.,and Me. Geo. H. Mtteeat, Secretary. Mr. FT. R. Geenfell was called and examined. 4171. {The Chairman.) Ton are a director of the Bank of England ? — Yes, 1 am. 4172. And you were Governor in the year of the last Monetary Conference in 1881 in Paris? — Yes, and I conducted so much of the negotiations as took place between the Bank of England and the Govern- ment at that time. 4173. I believe you reprinted Lord Liverpool's work on the coins of the realm ? — In the previous year 1880, when I was Deputy Governor, Mr. Birch being Governor, we reprinted and republished that liook, which was then out of print ; and in the course of that work, I was led to the study of the question of the standard of value. 4174. Now with reference to the standard of value in relation to Lord Liverpool's work, what observation have you to make ? — Lord Liverpool's work was on the coins of the realm. All works on the coins of the realm would necessarily involve a discussion of the standard. Lord Liverpool wrote before the French Mint prices were settled. The double standard existed in England up to the suspension of cash payments, in the sense that the word " standard " is used in the present controversy, but as the unlimited coinage of silver had ceased before the suspension, it is asserted by many writers that the double standard did not exist in England up to that date. The Act of Parliament of 1797, limiting- the coinage of silver, expressly recites and re-enacts the previous statutes giving silver unlimited legal tender by weight at a fixed ratio. 4175. {Mr. Courtney.) What do you mean exactly by your statement that Lord Liverpool wrote before the French Mint prices were settled ? — The date of the French Mint Law is 1803. It is true that Lord iverpool published in 1805, but lie wrote in 1797. He was ill for a long time, as you find in the preface to the work. 4176. But what do you mean by Mint prices ? — " Mint prices " is the expression used by most of the old economical writers and is to be found in the Bullion Report of 1810. It means the price or prices which the mints are bound to give for one, either, or both of the precious metals according to the standard of the place where the mint is. 4177. ( The Chairman.) You say the double standard existed in Eiigland up to the suspension of cash payments in the sense that the word " standard " is used in the present controversy ; in what sense are you using " standard " there ? — Well, practically, the unlimited legal tender, irrespective of whether it is coin or bullion of either, or of both metals, at a fixed ratio. 4178. Was there a fixed ratio in England at the suspension of cash payments ? — Yes, I think you will find it is so. It is advisable to lay down the meaning of the words " standard of value," that is, to define whether the double standard would mean the existence of a circulation of the two metals in coin at the same moment or the legal tender of either metal at a fixed ratio whatever the circulation. Those in favour of the double standard assert that it existed in the latter sense in England up to 1797, and in Prance from 1803 to 1873. I understand Mr. Giffen to dispute both of these facts ; in the case of France, on the ground that the two metals did not circulate side by side until after the gold discoveries say in 1850. 4179. {Mr. Birch.) I have never understood Mr. Giffen to deny that a 20 franc piece in gold would buy in France exactly the same as four silver pieces of 5 francs each ; that they circulated side by side ; but what happened was this, that at certain periods there was a great scarcity of gold, and at other periods there was a great scarcity of silver, and that at times the one commanded an agio upon the other ; he never said that they did not circulate perfectly in France, Mr. H. R. Grenfell. 6 May 1887. 214 ROYAL COMMISSION ON GOLD AND SILVEE : r ^fu' ^'^'^ were not equally recognised there as a standard '^^^'^ ■ in purchasing power ? — If I understand your ques- 6 May 1887. *^<"^ correctly you make Mr. GifFen say that gold and : silver circulated side by side, and that at certain periods there was a great scarcity of gold, and at cer- tain other periods a great scarcity of silver, that is, that they did not circulate side by side. Mr. G-iffen could hardly have made such an assertion. At any rate if he did I was quoting from something else that he said. 4180. {Mr. Courtney.) Is not that simply a question of historical fact ? — His statement is that before 1847 France was a silver-using country, and there was no introduction of gold there displacing silver or of silver displacing gold, so that it could not operate as a para- chute. He says it could not, he does not say it did not. As matter of fact, the price would show that for some reason or other the agio scarcely altered. 4181. In point of fact, there is no difference of opinion as to its having been a silver-using country ? — The difference of opinion is that Mr. Giffen states that the double standard could not have served as a parachute to prevent a fall of silver, whereas in 1860 it did so serve to diminish the fall of gold. My point is that in the one case he states an historical fact, and in the other he only states a hypothetical one, or rather as matter of opinion that it could not have done, but here the list of the relative prices of gold and silver shows that although there was a slight variation, as a matter of fact during the whole 70 years they scarcely changed. 4181a. His argument, as I understand it, would be this, the law of Trance operated as a parachute after the gold discoveries in California and Australia, because it permitted the substitution of gold for silver in the currency of France ? — Yes. 4182. It did not operate, though it might under certain circumstances have operated, in the same way, because the circulation was exclusively silver, and there was no substitution of gold for silver, or of silver for gold ; it remained continuously a circulation of one metal • only ? — In one case it is a statement of historical fact and in the other it is Mr. Giffen's opinion that it could not have done certain things. He does not say it did not ; he says it could not. 4183. {Mr. Barbour.) Assuming that the coin in actual daily use as currency was silver, is there evidence, conclusive or presumptive, to show that there was no gold in France ? — I have every reason to believe that there was gold at all times in France. I am not an authority on that subject. I would rather not be considered to be. 4183fl!. {Mr. Birch.) Have you read Baron Eoths- child's evidence before the Committee of 1832, with reference to gold in France, in which he says ( Q. 4835) " gold is merchandise in France " ; and, in reply to various questions, dwells upon the importance of gold in time of war, and the premium he had paid on the purchase of gold for diflf'erent Governments ? — No, I have not read it. 4184. {Mr. Courtney.) There is no doubt there was gold, but whether it was practically circulating, or a commodity or merchandise, as Baron Rothschild says, of course is a question of fact ? — It is admitted that before 1850, there was little gold, and that it generally bore a slight agio. The agio, however, iu no way betokened a cessation of the double standard, because those determined to have gold and asking for it must have been creditors, not debtoi's, and the debtor under the double standard has the right to choose the metal in which he pays. 4185. 1 would only say those determined to have gold, and asking for it, might have been as determined as they liked, but they could not have got it unless the other side chose ? — No, but they could get it if they paid for it. 1 now go back to the " Standard." Lord Liverpool's doctrine with regard to it was founded on the assertions of Petty, Locke, and Harris, that the chief coin in use, and measure of property, could be only of one metal. Having adopted that principle he had to choose his metal. The chief coin in use in England was gold, he attributed that fact to the affluence and great commercial position of England, whereas the truth was that it was owing to gold having been over-valued in England from 1717 to 1797. 4186. {The Chairman.) Is tli it last your view ? — That last is generally acknowledged now. It was the first Lord Ashburton's view too. It is not my view alone. I do not think anybody disputes it now. 4187. {Sir T. Farrer.) The question arises, does it not, how it first came to be over- valued ? — I date from Sir Isaac Newton's time ; that is an historical fact. 4188. But previous to Sir Isaac Newton, Lord .Liverppol says it distinctly became over-valued by the action of the people, and not by the action of the Government ? — I do not know what " the action of the people" means. To return to Lord Liveipool, with the views above cited he naturally chose gold. There is not a word in his treatise showing the equilibratory action of the double standard which was perceived by Sismondi iu 1819, and which is described by many of the leading economists, both monometallic and bimetallic, of the present day. I do not think there is a word about it in the reasons for the original Act in 1803. The first place I found it in is in Sisrnondi. 4189. One question with regard to the law of 1803. I think the proposer of that law always contemplated future changes in the ratio according to the market value of the two metals ? — It is possible. Lord Liver- pool's idea of a " standard " was almost synonymous with " chief coin in use." The Bullion Committee of 1810 seems to have adopted that idea, as did Sir Eobert Peel, when he brought in his Gold Standard Bill in 1816, and appealed to Parliament to return to the '' ancient standard of the realm," which was only done in the sense of returning to the standard as shown by the " chief coin in use,'' namely, gold. 4190. {Sir John Lubbock.) You say that before 1850 in France those determined to have gold and asking for it must have been creditors and not debtors. I do not quite follow your argument there .'' — I should have said, perhaps, those who have a right to have " money and were determined to have it in gold. 4191. Creditors had no right as such to have gold? — No, they had not ; those who had a right to have money of some kind, and wished to have gold, could get it if they chose to pay for it. 4192. They could not get it because they were creditors, since the debtor had a right to pay them in silver if he chose ? — Yes. 4193. No doubt they could get gold by paying for it, but it was not because they were creditors. That gave them no right to gold ? — No, quite so. Those who had a right to have money and wished to have gold must have been creditors, not debtors. 4194. A debtor, it is true, would have no right to receive one or the other, but a creditor of course would prefer to have the more valuable metal, but he would have no right to obtain it ? — I can only repeat that the creditor who had some money to be paid to him, and was determined to have gold, of course under a double standard law could not have any right to it, and therefore he would have to pay an agio. 4195. {Mr. Fremantle.) It is only the same thing as saying that he might get the commodity in the market by paying for it ? — Yes, quite so. 4196. {Sir T. Farrer.) And he would have to pay for it ? — He would have to pay for it. 4197. Is not your meaning that Lord Liverpool and Sir Eobert Peel had not in view when they settled our present law, the double ratio, bimetallism in its present sense ? — What they had in view was the regu- lation of the coinage founded upon what they believed to have been the Standard " de facto," omitting all reference to what was the Standard « de jure." 4198. And that therefore then- authority is not to be . . , . • moden to the assertion tlaat nir js-ooeri i-eei never discussed it because in 1844 he distinctly mentioned the bimetallic MINUTES OF EVIDENCE. 215 system as being in accordance with the metallic standard. I must guard myself from saying that he never considered it at all, because he did, but not, I think, as far back as 1819. 4199. (The Chairman^ Will you now proceed to your next point ? — The next point is an extract from Mr. Fremantle's report dated 2nd December, 1881, on the Monetary Conference of that year at Paris : — " It has been the policy of this country to emancipate " commercial transactions as far as possible from " legal control, and to impose no unnecessary restric- '' tions upon the interchange of commodities. To fix " the relative value of gold and silver by law would " be to enter into a course directly at variance with " this principle, and would be regarded as an arbitrary " interference with a natural law." The words con- tained in the above paragraph are deliberately adopted by Her Majesty's Treasury, in their letter to the India Office, dated 31st of May 1886. Tlie paragraph seems to me to contain two jiropositions : — I. That the fixing the value of silver told in gold, and vice versa, is contrary to the doctrines of free trade. II. That it is against nature. I venture to submit that it has nothing to do with free trade or protection. Very little silver is produced in England : no powerful interest in England would gain, in the sense of pro- tection to silver, by the change. In America, where alone the silver mining interest is of positive import- ance, it is of no consequence relatively to that of other producing interests. If it be said that the object is so far similar to that of protection in that it would raise prices, I can only point out that it could only raise prices on the hypothesis that they have fallen in consequence of a resort to the general gold standard by the greater nations in the world. If prices (as I understand is now contended) have not fallen from that cause, then it is to be presumed by parity of reasoning that they would not rise. The effect of these changes of standard on the general range of prices, cannot be to raise and depress them, and not to raise and depress them. 4200. I understand your point there to be that if it could be proved that prices are not generally affected by the present state of things, that is, depressed by the appreciation of gold, the result of the adoption of the double standard would not be to raise prices ? — Yes, that if they reduce in tlie one case they would raise in the other. 4201. {Mr. Chaplin.) Do I understand that in your opinion the effect of the adoption of bimetallism would be not to raise prices at all ? — No ; all I say is if the changes in the standard in the one direction have not depressed prices, that the changes in the contrary direction would not raise them. 4202. {The Chairman.) On the point whether it has depressed prices you have made no assertion ? — I have elsewhere, but at this point I make no such assertion. 4203. (^Mr. Courtney.) What is the meaning of your statement that " In America, where alone the " silver mining interest is of positive importance, it " is of no consequence relatively to that of other " producing interests " ? — The mining interest is of no consequence in proportion to that of other producing interests. 4204. Tou mean it is relatively insignificant ? — Yes. 4205. (Sir T. Farrer.) You mean that it has no power ?— I should not be stating the truth in saying that it has no power whatever, but I maintain that the power of the general producing interest is infinitely greater, and that the parties who are mostly interested in these propositions for change are the general agricultural and producing interests. 4206. {Mr. Courtney) You attribute the action taken by the Legislature in the United States, not to the importance of the silver producing interests, and the political power exercised by them, but to some wider causes ?— I have had a great deal of evidence tending to justify my assertion. o 243S8. 4207. But do you consider that the action taken by Mr. H. R. the United States Congress was or was not due to the Grenfell. political influence of the silver-mining interest ? — 'Yes, ^ n^TTss? 1 coidd safely say that I believe it was due to the ^ agitation in favour of what was called " the dollai: of our fathers," throughout the country among all the producers. 4208. Producers of silver ? — No, producers of corn, and cattle, and everything, all the producers. 4209. {Sir T. Farrer.) The west and south against the east ? — Yes. 4210. {Mr. Fremantle.y Was that so, do you think, at the time that the Bland Bill was passed? — No question about it. 4211. You do not think that is simply a development of later years ? — No. 4212. But surely in the discussions on the Bland Bill the senators and representatives who took the most prominent part were those who represented silver- producing States ? — I have been given the names of some of the principal supporters of what was called the Bland Bill. Messrs. Hill and Jones represented Colorado and Nevada, the only states then producing silver. Mr. AUson came from Iowa, an agricultural state. Mr. Warner from Ohio, which produces a little coal. Mr. Bland from Missouri, where there is little silver, and Mr. Regan from Texas, which is agricultural. 4213. You stated, in calling attention to the extract from the report on the Monetary Conference at Paris in 1881, that the statement made inferred, that to fix the value of gold in relation to silver, and vicp versa, is contrary to the doctrines of free trade ; but the doctrines of free trade are not specifically mentioned, are they, in the report ? — No. 4214. And the only statement made in the report is that to fix a relative value would be to enter upon a course at variance with the principle which had guided this country of late years, by fixing arbitrary values upon commodities. That is the contention. These are the words. "It has been the policy of " this country to emancipate commercial transactions " as far as possible from legal control, and to impose " no unnecessary restrictions upon the interchange of " commodities " ? — I understand that that means free trade. If it does not, of course the whole argument falls to the ground. 4215. Free trade is a very wide expression, and may signify a great many things. The Report says, and that I think you will allow, that it is contrary to the policy of late years to impose unnecessary re- strictions upon the interchange of commodities. That is all ? — I understand that to be free trade. 4216. I hardly know what " free trade " means in that sense? — I thought free trade meant that there would be no protective duties levied. If you meant something else, namely, the doctrine of "laisser faire," you may have been quite right in saying that it had been, up to 1881, when that paragraph was written, " the policy of the country ;" but I am not now talking of your report, I am speak- ing of the Treasury letter which adopted your words. It is impossible that in 1886 the Treasury could have meant that " laisser faire " was then the policy of the country. 4217. {Sir T. Farrer) Does it not mean the avoid- ing of fixing values by law ? — But nobody ever did fix values by law. 4218. {Mr. Fremantle.) Surely the proposal is to fix the relative values of gold and silver by law ? — That would be the effect of the proposal, but that is not what the bimetallic proposal would express. 4219. The actual effect would be, would it not, that the relative values of gold and silver would be fixed by law ? — We assert that it did so, but that is the point in dispute. We assert that the ratio was constant till the law was changed, but that is the point disputed by some. 4220. (Jfr. Chaplin.) I understand the statement to be this, that the policy of this country up till now has been to impose no unnecessary restrictions upon Ff 216 EOYAL COMMISSION ON GOLD AND SILVER: Mr. H. R. GrenfeU. 6 May 1S87. the interchange of commodities, and that to fix the relative value of gold and silver by law would be to enter into a course directly at variance with this principle ; but what I want to ask you is this, do I understand you to admit that even supposing this bi- metallic principle was adopted, would that in your opinion be an unnecessary restriction upon the inter- change of commodities ? — The answer to that question seems to me to be that it would be a relief from an unnecessary restriction on the interchange of commo- dities. 4221. {Mr. Barbour.) Under a bimetallic system is a man allowed to sell his silver for as much gold as he can get for it, or his gold for as much silver as he can get ? — Certainly. 4222. {Mr. Fremantle.) Then you would contend that the selection of gold as a standard of value is in itself an interference with free trade ? — It is an inter- ference with free trade in the same way as bimetallism. If one is the other is. 4223. What other course would be possible in a country if it did not fix a standard of value ? — Then you get barter. 4224. And therefore it is necessary to fix a standard of value ? — Yes. 4225. Does law in the country do more than say that if a bargain is made between two persons for a pound, the debtor is to pay to the creditor gold of a certain weight and fineness ?— That is all. 4286. {The Chairman.') It does not do more than the Weights and Measures Act does with regard to other things ? —Precisely. 4227. {Mr. Fremantle.) Therefore that is as little interference as possible with the right of people to make bargains between themselves? — It is a very great interference ; I do not know whether it is as Uttle as possible. 4228. Can you suggest any less interference ? — I am in favour of a standard of value, of course. Many people have wished for aU sorts of standards. Some people have wished for corn. 4229. Bat is it not your opinion that that is a less interference than any other ? — ^It is neither more nor less than conferring the same thing as on silver ; I do not see the slightest difierence. 4230. Then you see no difiference between such an enactment as we were speaking of just now and an enactment which obliges the debtor to take either a certain weight of gold or a certain weight of silver, whether he likes it or not ? — What I say is that we must begin with some point. In this case silver and gold are both of them used as money in different parts of the world, and that is the starting point, and as they are both used as money, silver in one set of places, and gold in another, we have to start with that fact. The whole question is whether it is wiser to enact these laws in one place for silver and another for gold, or whether to offer each place the alternative of taking whichever people will bring to them of either metal. 4231. {The Chairman.) Would you allow, under the bimetallic system, a debtor and creditor to contract that the payments should be made in one or other of the precious metals ? — Of course, you might contract to pay in sugar or anything else if you like to make the contract. 4282. You would not forbid that ? — You could not forbid it. 4233. {Mr. Fremantle.) Could this bimetallic arrangement be set aside whenever individuals chose ? — In the same way as you may now set aside your monometallic law by making a contract to pay in pig iron, cotton, or anything else. 4234; What would be the meaning of the bi- metallic arrangement unless you were compelled to take 15^ ounces of silver for one of gold ? It depends upon whether you have written in a contract that you owe 500Z. or so much sugar, cotton, or pig iron. If you have 500/. against you, you may get rid of that debt under the bi-metallic law, unless you have contracted for something else, by the payment of gold or silver. 4235. Then there is to be no obligation to take 15| ounces of silver when there has been an agreement to pay so many pounds ? — Certainly there would be, if you had contracted in pounds, but if you had contracted in gold it would be another thing ; it depends on whether your contract is in gold, or pounds sterling, or francs, or rupees. 4235a. ( The Chairman.) If a bill were drawn for 500/. in gold and accepted, the obligation would be to pay in gold. If it were 500Z., without mentioning gold, the debtor might pay in gold or silver ? — Yes, and it is known that there are places where bills are drawn in that form, where a debtor is obliged to pay metal in some places, and something else, according to the currency of the place, in another. 4236. Might not that interfere very much with the operation of the bimetallic system in a country where you have long had a gold standard only, and where at the time of your promulgating your law silver bore a different ratio to that which you have fixed by law ? Would there not be a danger of the system being to some extent, or a considerable extent, interfered with by contracts of that description ? — I understand that at this moment in New York people may pay their biUs of exchange if they like, in silver coins, but there is a sort of understanding among the bankers, that they should pay in gold; but practically, I suppose they pay in neither, they pay by cheques, or by a clearing house. Anybody might, if they liked it, pay a bill of exchange with a wheelbarrow or cart load ,of silver coins, but of course they never do it. But there is a sort of understanding in the clearing house in New York that silver certificates, which are practically silver, are not admitted. 4237. {Mr. Chaplin.) As a matter of fact, what I undei'stand you to say is this, that payments now are hardly ever made in the metals themselves, and that whether you had a single or double standard, the pay- ments would be made in the same way in the future ? — I think so. 4238. {The Chairman?) You gave an illustration of what was done in New York. I gather your meaning to be, that you do not think that it would be likely to interfere with the working of the system in the results you anticipate from it ? — No, I do not think it would at all. 4239. {Sir T. Farrer.) Do I not understand you to say, that the very essence of your system is that nobody would have any interest in making any con- tract of that kind ? — I cannot conceive that they could have any. If in the great banking centres of New York, and Hamburg, and Berlin, and Paris, and London, they were all accustomed to have the clear ances made in silver or gold, very little silver or gold would pass. 4240. It would not be a question of value, it would be some aesthetic consideration ? — ^It seems to me so. 4241. {Mr. Fremantle.) Might there not be circum- stances, in which gold may be much more convenient than silver ? — No doubt. 4242. {Sir T. Farrer.) Do you know the history of the Califoruian currency ? — During the time of the war, in California they said they would not have bad currency, and they would go on with the gold cur- rency, although the United States Congress made greenbacks legal tender throughout the Union. They made greenbacks legal tender throughout the Union, and what happened was this, that if you had your bill given you for your hotel in San Francisco, during the war, they presented it to you reckoned in gold currency, and if you had your bill for an hotel in New York presented to you, they presented it to you reckoned in greenback currency. In both cases the amount was paid in greenbacks. In New York you paid the exact sum in your greenbacks, and you paid in San Francisco a greater sum than the bill was given you for, according to the premium of the day. You paid in greenbacks in both places, but in New York you paid the exact sum in dollars that was presented to you, and you paid MINUTES OP EVIDENCE. 217 in San Francisco so many more. They gave you a bill for your hotel, we will say at four dollars a day in San Francisco, instead of five dollars a day as in New York, and you paid just the same sum, five dollars in greenbacks, according to the exchange, which was more or less the exchange of the moment. 4243. {Sir T. Farrer.) Did not the Californian people distinctly refuse to take the greenbacks ? — They refused to make them the unit of account ; but Ihey used greenbacks ; nobody had anything else. 4244. But they refused to use the greenback as the unit of account ?-^Yes, that is it. 4245. And they made their contracts to pay in gold, or the equivalent of gold ? — Yes. 4246. And they passed an Act, I think, in the State of California, legalising those contracts ? — I have no doubt the spoken or written dollar there meant the gold dollar, whereas in New York it meant the greenback dollar. 4247. {The Chairman.) In the Act which created the gold standard in this country, the recital states that heretofore coins of gold and silver were equally a legal tender in payments to any amount, and great inconvenience has aiisen irom both these metals being concurrently the standard measure of value. Can you teU me what are the great inconveniences to which reference is there made ? — During 1796 and the two years following, there was immense inconvenience from the bad state of the silver coinage, and all those Acts in the latter part of the last century related to the silver coinage, and not to paying debts by silver in bars. As far as I understand the inconvenience, it was solely from the state of the silver coinage, but I could look up that for you. 4248. The silver coinage being depreciated more than the gold ? — Yes. 4249. But might not that come about again ? Might not the same inconvenience arise under your bimetallic system? — It might, but need not. If the silver coinage was made standard the inconvenience might recur, as it now arises with the gold coinage. 4250. No, but I am saying that under your system it would become standard silver? — I do not admit that it must become standard silver. That would necessitate difEerent laws for the Mint. Of course, if it was very much knocked about, the silver coinage might come to a similar state of inconvenience. It is a question of coins not of " standard." 4251. Was not the inconvenience from the operation of the Gresham law, that it took the less valued metal out of the country ? — That was an inconvenience. 4252. And you propose to meet that by saying that if there are other nations who join us, there will be no longer a temptation to send the less valued metal out of the country ? — Of course, that would always happen if there was one over-valued. 4253. {The Chairman.) Not if it was over-valued everywhere ? — Well, during the time there was suffi- cient difierence to make it profitable to send it 4254. {Mr. Birch.) In 1799 you might pay bills vrith silver bars? — You might pay your bills with silver bars even then to any extent, an unlimited extent. 4255. {Mr. Fremantle.) When silver was sent in to be coined, on more than one occasion, I think, it was refused ? — Yes, no doubt it would be so ; under the Act of 1798 coinage was stopped altogether. 4256-7. {Mr. Birch.) You said something just now with regard to there being no particular utility in gold over silver. I suppose you will allow that in time of war gold is a much more easy thing to move than silver ? — I admitted that gold in some cases might be more convenient than silver. I never transported either, but I understand they are transported, not at all according to their weight, but according to their value. 4258. {Mr. Fremantle.) Would there not also be the natural result, that the banks would keep their reserves in gold and that the current money would be gjlyer ? — I suppose that they would keep their reserves in the metal that people used, and in the metal which people demanded. 4259. They would prefer to keep in gold the reserves against which notes were issued, would they not. because they would take up less room, for one thing? — I should think they would take whichever was the cheapest. 4260. Would one metal be cheaper than the other under the bimetaUic system ? — We know that there would be slight variations going on ; there were slight variations always. 4261. I understood that the contention was that there would be no cheaper metal ? — You will not find that in anything that I have said. To go back to Mr. Fremantle's report. The other proposition to which I take exception is, that the fixing of the relative value of gold and silver is an interference with natural law. On this it appears to me that it is neither more nor less natural to enact that a pound sterling shall be l,751f grains of silver, than it is to enact that it shall be ] 13J grains of gold. To enact . nothing about either is to leave the two precious metals as commodities, and to return to a state of barter. If it be against nature to enact anything with regard to silver, then you must cease your enactments in India, where a rupee is by law declared to be 180 grains of silver. I venture to think that the bi- metallic proposition is unconnected with protection, and neither more nor less against nature than the two separate enactments of the standard in England and India. 4262. Surely that is hardly a full statement of the case. The point is, that it is proposed to enact that 175 If grains of silver shall be equal to 1 1 8^ grains of gold ? — I have never said that. No- body has ever said that they are equal in any way. What we say is, that a pound sterling shall be either the one or the other ; the effect of that may be to make them equal, but that is not the enactment. 4263. ( The Chairman.) Equal in this sense, that any person who has to receive one pound will be compelled to receive either ? — ^Yes, but not equal in the sense that a man may choose which he has. 4264. {Mr. Courtney.) Equal in the power of paying debts ? — Equal in the power of paying debts, before payment, that is all. 4265. That is a very important equality ? — Oh, very. 4265. {Mr. Fremantle.) The pound sterh'ng is to be so many grains of silver, or so many grains of gold, and that you consider is to be the same as saying that it is so many grains of gold. Is not thati the point ? — The point is concerning a state of nature surely, and the assertion is that it is against nature. Well, my idea is that it is neither more nor less against nature ; if the one is against nature the other is. 4267. At present gold is worth about 20 times as much as silver, and you propose by law to give it 15J times the value of silver. Is not that going against the natural law ? — Before you can say what the relative value of gold and silver is you must demonetize gold, and when you have done that, you will have some other thing than the money standard to tell you what the relative value is. At the present time, the privilege of the law having being conferred on gold and taken away from silver, the ratio is 20 or 21 to 1, but you cannot say what the natural ratio would be unless you demonetized gold first. 4268. Then you consider that having gold as the sole standard here, puts a fictitious value upon it? — I would call it an artificial value. 4269. {The Chairman) All that you do in fixing the weight of your pound sterling is to fix what a pound shall mean when people are dealing with one another, in pounds sterling of gold, at present ? — Yes. 4270. You do not touch any law at all, you simply fix when people contract in sovereigns what that shall mean, whether it shall mean sovereigns of such and such a weight ? — Tes. Ff2 Mr. H. n. Grenfell. 6 May 1887. 218 KOYAL COMMISSION ON GOLD AND SILVEK I Mr. H. R. Grenfell. 6 May 1887. 4271. If you now enact that a person who had contracted to receive so many sovereigns (which had meant, at least since 1816, only so many pieces of such and such a weight of gold), may be compelled to receive such and such a weight of silver, do you not proceed somewhat beyond the step you have taken in saying that the pound sterling shall mean such and such a weight of gold ? — It is of course an alteration. Every enactment made would be so, and has been, whether by suspending cash payments, or by resuming them, or by making the Act of 1844, or by any other one in regard to currency. Numerous alterations of that nature have been made, and I do not see how any alterations in currency can be made without some such effect. 4272. (Sir T. Farrer.) When you have either monometallic system, the gold system, or the silver system, you do not fix the relation of value between either gold and silver, or any other commodity, do you ? — No, certainly not. 4273. But when you adopt your bimetallic systeni, you do practically fix the relation of value between gold and silver, do you not ? — So you do when you make silver legal tender up to forty shillings, and copper up to twelve pence. 4274. That is token coinage, but it is a perfectly different thing when you say that for the purpose of paying debts a certain quantity of gold shall be equal to a certain quantity of silver. That is a further step. I am not saying it is not a right step ? — You do not say anything about the relative value of gold or silver. 4275. But when you say a person may pay his debts at a fixed ratio, in one or other, you do practically fix the relative value of gold or silver. I am not saying that is wrong at all, but I am only saying it is a step beyond what you do in the monometallic system ? — It seems to me to be exactly the same. By experience we know that it does, with certain small variations, fix the relative value of gold and silver. If that is an objection, it must be shown what the objection is. As far as I can see, given that a large portion of the world use gold and another silver, it is a very great benefit to aU classes of the community. 4276. ( The Chairman.) I was only criticising your argument that you were doing precisely the same thing, and no more, when you were creating the double standard with a fixed relation of one metal to the other, as you were doing when you simply defined how much a pound sterling should mean ? — It does not appear to me to do more. 4277. A man who is down to this time entitled to receive gold shall be bound to receive a certain weight of silver as an equivalent for that gold which he had a right to demand. That is a further step, surely ? — If it is a further step it is in the right direction. It is admitted, I believe, that the less the variations of the standard metal or metals the better, and that with this double standard the variations would be some- what less. This is Jevons's admission. 4278. (Mr. Courttiey.) Is not this your argument : supposing neither gold nor silver was adopted as the standard of value, gold and silver would be produced and would be exchangeable as commodities, at some ratio continually varying. There is at any moment, let us say, a ratio of 18 to 1. It is then determined that gold shall be made the particular metal by which debts can be discharged to any amount, and the only metal through which debts can be discharged. That gives a new and peculiar importance to gold, and making it demanded for the purposes of currency, would send up the ratio from 18 to 1 to something different, perhaps to 20 to 1. The mere fact of con- ferring upon gold that power of solving payments, that is your argument ? — Yes . 4279. So that in selecting gold and saying that gold shall be coined in pieces of a particular weight, you do something which by that very act does disturb the relation of gold to silver ; that is your argument ? —Yes. '^ ^ 4280. Then you say nothing more is involved if we adopt the same thing with respect to silver, and say that silver as well as gold shall be the means of pay- ment of debt, at particular weights of silver and par- ticular weights of gold ? — Yes. 4281. Although that may bring back the relation between gold and silver to a practically permanent relation of 15 to 1 ? — ^Yes. 4282. ( The Chairman.) That would be so, no doubt, so far as regards all contracts made after you so alter the law ; everybody would contract with regard to the new state of the law, knowing it, understanding it ; but where you have fixed a pound sterling as meaning so much gold, and that anybody having contracted for so many pounds sterling has contracted for so much gold, and you pass a law providing that every person that has so contracted shall nevertheless be bound to take silver, you do affect all contracts which have been entered into prior to your bimetallic law, and subse- quent, at all events, to the law of 1816 ? — I repeat that every single Act of that nature does the same thing. Nobody said, when the suspension of cash pay- ments took place, that the contracts begun should be started afresh ; nobody said, when the Act of 1816 and the Act of 1844 were passed, that they should do so. A case of this kind seems to me to carry that with it. 4283. The Act of 1816 did not alter the gold standard, (did it. It made gold the standard, but it did not alter the meaning of the pound sterling of gold, did it ? — The Act of 1816 brought gold in as the sole standard for the first time. A pound sterling originally meant a pound weight of silver. The various enactments of English mint prices assigned a given proportion of gold to the old silver standard. 4284. The amount of gold that should be contained in the sovereign, fixed then, was not fixed then for the first time ? — No. The amount of gold in the sovereign is a Mint question, not one of standard. 4285. The law made it the sole standard, but it did not alter the meaning of the pound sterling in gold ? — No, but all the debts at that time had been contracted in paper ; the greater part of the national debt had been contracted in paper. 4286. (Mr. Courtney.) The question of the chair- man rather refers to the effect which the adoption of one or the other metai, or both, might have upon the meaning of contracts, but we are here considering the question of the adoption of one or the other upon what is called the natural law. We have allowed that the adoption of gold exclusively does alter what would be the relative value according to natural law by enhancing gold ? — Yes. 4287. Well, suppose that step and that only taken, we know that there still remains a considerable fluc- tuation in the market price of silver and gold. That is what we are suffering under or rejoicing under now ; silver relatively to gold goes up and down a good deal ? — You assert that. 4288. Will you allow me to assume it ? —You may assume it. 4289. If the united nations went on to declare that silver should pay debts as freely as gold in the ratio of 15^ to 1, would not the effect of that be in the future to prevent, except within very narrow limits, the variations of price which we have known, or which you E^ccept from me as a fact, within the last 20 years ? — Very likely that will be so. 4290. So that there is a little greater interference with natural law, because at present there are fluctua- tions which you would prevent ? — I say, taking the general principle, the general principle seems to be the same, but I vrill admit everything you ..say to be true. 4291. (Mr. Chaplin.) But is it not your contention that whatever fluctuations there are at the present moment which the adoption of the bimetallic standard would obviate for the future, are owing to the fact that gold has had this fictitious value given to it already by law ?— Certainly. 4292. (Mr. Courtney.) But I think you would allow that there would be considerable fiuctuations if MINUTES OF EVIDENCE. 219 neither gold nor silver had been adopted as the cur- rency ? — 1 presume so. 4293. And therefore the fluctuations cannot be as- cribed solely to the fact that gold has been adopted as the standard and not silver ? — I ascribe the fluctua- tions since 1873 principally to that fact. 4294. (The Chairman?) It is true that one standard has been adopted here and in some other countries, but the other standard has been adopted elsewhere, the proportion being something like half and half; so that at the present time we may say, if you take the whole world over, the gold and the silver have about equally had this fictitious value given to thom ? — If that were so there would be no variation. 4295. {Mr. Chaplin.) But as regards Europe is it not the case that the fluctuations in the relative value of gold and silver have mainly arisen, or have at all events largely increased since one metal has become the standard ? — I think so, yes. 4296. {Mr. Fremantle.) One metal has become the standard, no doubt, in many parts of the \^orld, and that metal gold, but in the United States, on the other hand, the Bland Bill has made it imperative that the Government of the United States should coin about 5,000,000/. sterling of dollars every year ? — Yes, but you must recollect that the. Act making gold the standard of the United States had only been passed two or three years before, and never was in force. Up to that time there had been the double standard there. 4297. There was this arbitrary interference with coinage, that whether the silver dollars were wanted or not, the Bland Act made it obligatory upon the United States Government to coin nearly 5,000,000Z. sterling worth every year ? — Yes. 4298. Well, then, since that time it is a fact, is it not, that the gold price of silver has gone down in the market ? — Yes. 4299. If that is so, how would you account for the fall in the price of silver ? — Because the demand for gold has been much greater. 4300. But is not this demand for silver a very large one? — The demand for gold is unlimited. By the Bland Act that of silver is limited. 4301. {Mr. Barbour.) We have had some talk about the ratio which would be established, by what I believe has been called the natural law between gold and silver, that is supposing neither gold nor silver was coined or made a legal tender ; I believe silver at any rate and perhaps gold has been coined in Europe for more than 1,000 years ? — Yes. 4302. And I believe there is every probability that in future both will be coined ? — I believe so. 4303. Do you think there is any profit to be got from speculating what the ratio would be under circumstances which have not existed for a thousand years, and are not likely to exist in the future ? — I do not think there is the least profit in it. 4304. (7%e Chairman.) Then the third point that you wish to make some observations upon is the position of London as the monetary centre of the world in relation to commercial transactions ? — It has been for years the practice to open credits in London for shipments to and from various places when each actual transaction was in no way connected with London, e.g., cargoes of coffee from Brazil to New York, or tea from Shanghai to San Francisco, would be paid for by drafts upon London. It has been asserted that this banking monopoly arises from the speciality of the gold standard of England, and supposing this to be correct, it is manifest that the trade or craft of foreign banking in London to the extent of the advantage of the gold standard, is being protected by that institution. I entirely deny that the two things are connected in any way. I believe that the monetary supremacy of London is due to far different causes, but conceding for the sake of argu- ment that the gold standard is the cause of it, I venture to submit that it connects protection with the controversy in a way not contemplated by the Treasury. It may be said that the date of the gold standard is 1816, and it can scarcely be asserted that the monetary supremacy of London was in existence at no earlier ^^^ jj^ ji period. In my opinion it is due, — I. To our enormous Grenfell. capital and commercial practice ; II. To our insular position, and immunity from war within our borders ; 6 May 1887. III. To the character and capacity of our merchants and bankers. I may also say that Lord Ashburton gave evidence before the Committee for Coin, on the 26th of April 1828, much to the same effect, and besides that he thought it was rather an incon- venience than not, the not having silver as well as gold in our vaults in London. 4305. {Mr. Birch.) That was principally with re- ference to India, I think, and the facility silver offered for drawing gold from the .Continent? — It had no reference to India. 4306. Lord Liverpool, in his treatise that we had the honour of publishing, I think particularly refers to gold as being best adapted to England, so dis- tinguished for its affluence and its commercial con- nexions ? — He proposed that gold should be the standard because, on account of our commercial supre- macy, we could afford to have a gold circulation. 4307. {The Chairman.) That closes the special points to which you wish to call attention. With regard to the general question of the expediency and possibility of introducing the bimetallic system into this country, I understand that you agree with the evidence that has been put before this Commission by Mr. Gibbs ? — Almost entirely ; I think you may take it that that is my evidence as well as his. 4308. {Mr. Barbour.) Have you formed any opinion as to what would happen, what the effect would be on the ratio between gold and silver, if the Americans ceased to coin silver as they are now doing ? — I think there would be a very great further fall in silver; but I have received an immense amount of information on the subject of the probability of that cessation, and I think you may almost assert now that they wiU not do so. 4309. And not merely would more silver be thrown on the market, but there would be an additional demand for gold, because the silver that is coined now occupies a place in the currency which would to a greater or less extent have to be filled by gold ; there would be the double effect ? — I should think so. 4310. It would probably have a serious effect upon the ratio between gold and silver ? — Yes. 4311. And you know, of course, that the Secretary of State for India draws a very large sum on India every year, from 13,000,000/. to 16,000,000/. sterling? —Yes. 4312. Which to some extent takes the place of remittances of silver ? — Yes. 4313. If the Secretary of State ceased for any reason for a year or two years or three years to draw that amount on India, would not that have a very disturbing effect on the ratio between gold and silver ? — I should think very great indeed. 4314. You would have a very great temporary fluctuation in exchange ? — Yes, certainly. 4315. Would that have a very disturbing effect on all business transactions either one way or the other ? — With India, certainly. 4316. {Mr. Chaplin.) I should like to ask your views upon the statement that there has been an universal fall in prices. Are you aware that the recent Commission on the Depression of Trade reported to the effect that since 1873 there had been a fall in prices in this country, and especially in the value of the exports and the imports between 1873 and 1883. Would that agree with your experience ? — Certainly. 4317. Have you formed any general idea as to the extent of this fall ? — I wish to say that I am not a statistician, and I lean entirely upon those statisticians whose figures I have generally found to be correct. But with regard to the fall it seems to me that in ihe first place the general law would indicate that there was bound to be a fall ; in the second place it is a fact that there has been a fall, and in the third place, if I am to choose between the figures of Mr. Giffen, Mr. Jeypns, The E!conomist, and Mr Goschen on 220 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. R. the one side, and those of Mr. Forsell and Mr. Mulhall Grenfell. on the other, I can only say that I rely on those of the former. I believe the index number statement of 6 May 1887 . ;;^%g Economist. None of the authorities I have mentioned are, to my knowledge, bimetallists. 4318. Has this fall, in your opinion, resulted either wholly or partly from the changes in the standard of value? — It is my opinion, that it has to a very considerable extent arisen from the alterations in the standard of value. 4319. How much of this fall in prices would you say -ean be fairly referred to this change in the standard of value ? Can you form any opinion upon that ? — It -would be very difficult to pledge myself upon how much it is, but I think the general fall in prices is about equal to that of the fall of silver in gold. 4320. What is the fall in the price of silver ? — T think it is about 25 to 30 per cent. 4321. Then your opinion is this, that there has been a genei-al fall in prices to the extent of between 25 and 30 per cent. ? — I think so, yes. 4322. {Mr. Courtney^ Silver prices are steady ? — Silver prices have fallen too, slightly. 4323. {Mr. Chaplin.) Now could you give us an instance of any particular production which would illustrate this ? — I could give you one that I am interested in myself, which is copper, but I am very sorry I am unable to produ'ce statistics, which I hoped to have done, to show what the exact increase in production in that commodity was 'during the time of the effects of the gold discoveries, but strangely enough there are no such returns to be found anywhere, therefore I have been unable to put them in. I should say that, the fall in the price of that commodity is about 50 per cent, from 1870, and I think that about 25 per cent, is due to in- creased production and about 25 per cent, to the change in the standard. I may say that it is a very singular fact with regard to that commodity, that between the years 1847 and 1858 or so, about that decade, the production of copper increased most enormously, and yet the price kept continually rising, whereas between 1880 and 1884, although there was some increased production, the visible stock rather de- creased, and yet the price kept falling. Since 1884 the production has increased in America most enor- mously, and prices have therefore naturally fallen also. I may also say that the shipments of that commodity to India are in precisely the same condition as the shipments of manufactured goods from Lancashire to India in regard to exchanges and so on, and therefore I need not go into that again, because it has been suffi- ciently explained by Manchester manufacturers. But I may repeat, with regard to the bonus which is supposed to have been given to producers of wheat, &c. in India, and of which we have heard so much, that pre- cisely the same thing occurs in Chili in regard to the production of copper. I think I may assert that with the present fall in that commodity, a very large portion of the mines in Chili would have been shut up if they had not been on the basis of the depreciated currency which is now the law in that country. A great many mines quite as good as those in Chili have been closed in Australia and other places in consequence of the great fall, ajid the same thing would have happened in Chili if they had not been on the basis of the paper currency, and if they should resume cash payments the effect would certainly he that the mines in that country would have to shut up. 4324. I may take it, then, that you consider beyond doubt that prices are influenced by an expansion or contraction of the volume of legal tender money, and that they would rise and fall with that volume ? — Yes, tnat is my opinion. 4325. In other words, I suppose you would say that money is dear because money is , scarce ? — I consider that money is dear and scarce in the economic sense ; but not in the sense that the word dear and cheap money is used every day in the money articles of the papers, because money is excessively cheap in that sense. 4326. You said, I think, that you agreed with Mr. Gibbs, generally speaking, in his evidence, therefore perhaps I need hardly ask you whether you trace the disturbance in values to the legislation of G-ermany and subsequent legislation abroad in demonetizing silver since 1873 ? — I consider the action of the closing of the Mints to silver in France following pn the demonetization in Germany was the main cause. 4327. Then, as matter of fact, in your opinion the entire scale of prices has been suddenly aiTected, since 1873 by the fact of that foreign legislation ? — Yes. 4328. While you say that we, as we have always been gold monometallists for so many years in this country, did not feel the scarcity of money and recognise the effects of this before 1873 ? — The effects on prices in a similar or analogous manner were felt after the enactment of the gold standard and the resumption of cash payments in 1816 and 1819, but the real reason, I think, why this particular phenomenon was not to be observed was that all the silver in the world that was mined could find its way to some of the open Mints of the countries of the Latin Union, and could be coined in those Mints into legal tender money, therefore when so coined it increased the volume of the general currency of the world to that extent, in the same manner as when gold was dis- covered. 4329. I think you have told us this afternoon that the coinage demand for either gold or silver is a chief factor in determining their price and their value ? — I think so. 4330. I want to ask you "a question about the ratio between gold and silver, the ratio of 15^ to 1. What was it in the first instance that fixed that ratio ? Was it arbitrarily settled by law, or was it caused by any differ- ence in the cost of production of either of those metals ? — The ratio has been fixed by law, but for a great many years in this country it was the opinion of the leading economists that the statement of Eicardo was correct, namely, that the reason gold was \5^ times as dear as silver was that it cost exactly so much less to produce silver than gold ; and that opinion was adopted by most of the economists up to the time of John Stuart MiU. He stated that the differ- ence between the precious metals and all other com- modities was, that the value of the former depended not upon the cost of production directly, but upon the quantity produced, which quantity produced ultimately would be settled in long periods by the cost of production. In my opinion this turns out again to be doubtful, for we find according to tables before us that between 1803 and 1873, the quantities produced of gold and silver varied enor- mously, and at the same time the relative prices changed very little. I think, therefore, it is conclusively demonstrated that the reason why the ratio was 15^ to 1 was purely owing to the Mint laws of the various countries, and not to the relative cost of production. 4331. Is it not the fact that all the silver produced by any mines in the world could, before 1873, be taken and actually was taken by the free Mints of the Latin Union, and in this way all the silver that was produced was added to the legal tender money of the world ? — I believe so, to the volume of the currency. 4332. Then, as long as that position was maintained, without any effort whatever on the part of England, there was no necessity for this country to entertain any proposals directed to secure an international monetary pohcy ? — No, there was no occasion what- ever; it was perfectly satisfactory, apparently, on all sides. 4333. Well, then, is it not the case that since 1873 the position has been entirely changed, and that no legal tender silver at this moment is now being added to the money stock of Europe ? — I do not say none is because the Latin Union may coin some. They are however, limited in the amount. 4334. {Mr. Fremantle.) That is to say, standard money ; large amounts are .idded, are they not, as token coin ?--Yes, MINUTES OF EVIDENCE. 221 4335. I think you said you had uo fear whatever that the operation of the Bland Bill was likely to be suspended? — From what I hear I think it is almost impossible that it should be suspended. 4336. But supposing it was suspended, do I gather from you that the effect of that suspension in your opinion would be to cause a still greater fall in the value of silver ? — Certainly, and in the exchange with India. ' 4337. And that all the evils which arise from the present system, in your opinion, would be propor- tionately increased ? — Certainly. 4338. {Mr. Courtney.) You said that Mr. Mill was wrong in thinking that the relative values of the precious metals were due to the cost of production, but that in fact they were due to the establishment of Mint prices ? — What I said was, that Ricardo was wrong in asserting that it was only due to cost of production, and that MiU qualified Ricardo's assertion by saying that it depended not absolutely upon the cost of production, but upon the quantities produced. 4339. Both, in your opinion, had imperfect if not erroneous views, because you think that the relation between th,e two metals was really determined by the Mint prices ? — ^By law, yes. 4340. Might we perhaps say that in truth the establishment of Mint prices practically regulated the cost of production of the metals produced, in the least profitable form, whether gold or silver ? — That is a very difficult question to answer, because many people will tell you, that the whole mass of gold and silver is produced at a loss altogether. ■ 4341. True, but there is always a degree beyond which people wiU not go ? — Yes, quite so. 4342. And the limit line that is fixed, of least re- numeration, or of the limit of loss that they can suflTer is determined, in the case of the two metals, by the Mint price ? — I think so. . ^ 4343. So that if we established again a relation of 151 to 1 between silver and gold, the effect might not improbably be that certain gold mines which are now perhaps working at a loss would come to be worked at a greater loss and would be abandoned ? — I should be sorry to assert that. It might be so. 4344. That is conceivable, if it had any effect upon the production of the two metals, it would be to go to the least profitable gold mines ? — Yes. 4345. Because you are establishing a relation of silver to gold which is greater than that which now prevails? — Yes, that is conceivable. 4346. {Sir T. Farrer.) I rather gathered from your answers to Mr. Chaplin, that you think prices have fallen somewhat like 25 per cent, in consequence of the appreciation of gold ? — Yes. 4347. That arises from the fact that the demand upon gold has increased in proportion faster than the supply ? — Yes. 4348. When we talk of the supply of gold, there is this great distinction, is there not, between the precious metals and other things, that the precious metals are not consumed, so that we have to- deal with comparatively permanent quantities ? — That is so. 4349. And you must look to the stock of these melals, and not only to what is produced every year ? — Certainly. 4350. (Mr. Barbour.) Do you think that the stocks of the precious metals which are hoarded, buried in the earth, or in ornaments, watches and chains, and so forth, have any effect upon prices ? — I cannnot answer that question. 4351. (Sir T. Farrer.) I find that, according to Dr. Soetbeer, the production of gold, during the 358 years from 1493 to 1850, was about 660,000,000^., and I find that the production of gold between 1851 and 1885, 35 years, was 890 millions, that is to say, that in these last 35 years, the quantity produced was one and a thkd more than all that had been produced in the previous 350 years. Now I suppose you would agree that of the stock produced before 1850, a very large quantity would be lost, sunk, hoarded, and not available for the purposes of commerce ? — I ■^- -^ ^' do not think I can answer that. '^^"•^^ 4352. You would not think that the whole of the g jj^y jggT. gold that was produced between 1493 and 1850 would be in use in 1850 ? — No. < 4353. And in the same way there would be a certain contraction between 1851 and 1885 ? — Yes. 4354. But more during that longer period than during the shorter period. Then we have an extra- ordinary demand during the last 15 or 20 years, which is estimated by the statisticians . at something like 200,000,000Z. for the coinage of the different coun- tries ?— Fully that ; 250,000,000Z. I should call it. 4355. Well, say 250,000,000/. Then you have, as produced during the last 35 years, 890,000,000/.? —Yes. 4356. Suppose you assume that the 250,000,000/. of extraordinary demand is a new demand altogether, then deducting 250,000,000/. from 890,000,000/. you have 640,000,000/. left as produced within the 35 years which are appKcable to current demands for coinage for manufacture, and so on. Is not that so ? — Yes. 4357. Therefore since L850 a considerably larger sum of gold has been added to the whole stock of gold in the world than would have been in existence in 1850, if the whole of the gold produced before that time had been available ? — Unquestionably. 4358. Well, then do you think that the demand for current purposes, since that time, is so great as to cause a : greater scarcity than we had experienced before ?'^^Certainly, very much greater. 4359. Enough after all that addition to the stock of gold in the world to make gold scarcer than it ever was before ? — ^Yes, scarcer than it was before the demonetization of silver in 1873. 4360. Even though there have been in all the great trading nations very great economies in the use of gold ? — What do you mean by economies in the use of gold ? 4361. Let me illustrate what I mean in this way. You will admit that in backward countries much more currency is used for the purposes of trade than is used in countries which are more advanced ? — I dp not agree with that at aU. 4362. You do not think that in England and the United States the quantity of gold in proportion to the transactions is much less than it is in less advanced countries ? — At this moment I ■ believe there are various economies, which are called economies in banking, and one especial branch is the use of credit, such as bills of exchange. I believe the bills of ex- change in the internal trade of this coimtry, in pro- portion to its amount, are much less than they were 40 years ago. 4363. But are they not replaced by bank cheques ? — That may be so. All those economies you suggest may have had a very great effect on the one side, but on the other side I believe, in the internal trade of the CQuntry, there are fewer bills used than there used to be. 4364. (The Chairman^ Do you mean that they pay more in cash ? — In cash a great deal. 4365. (Sir T. Farrer^ Have you any proof of that? — I believe it is very difficult to get proof. Mr. Pal- grave, I think, was for years endeavouring to make up some return on the subject of the number of bills of exchange. , I can only say, in regard to any trade I am connected with, that the use of bills of exchange is much less than it was, and the payments in cash much more frequent. 4366. But when you say payments in cash, are tbey payments in gold or notes, or payments by cheque ? — Payments by cheque. 4367. Do you call payments by cheque payments in cash ^ — I only say by cheques on the one side, and as a substitution for bills of exchange on the other. That being the case, it has no effect on the one side or the other. 4368. {The Chairman) A cheque is a bill of exchange you know, and therefore whether it takes the form of a bill drawn on the person to whom goods 222 ftOYAL COMMISSION ON GOLD AND SILVER: Mr. ff. jR. Grenfell. 6 May 1887. have been sold, or on the banker, it is done by bill of exchange; but do you mean that in place of either bills of exchange or cheques, money, gold and sUver, Bank of England notes are paid ? — I mean that in place of bills of exchange, cheques are now used. 4369. {Sir T. Farrer.) But in the wholesale trans- actions of this country, does any gold or do any bank notes pass ? — Very little ; but as much as before 1873, with the exception of payments for cotton in Liverpool. 4370. Is not the business done entirely at the clear- ing houses ? — Yes, entirely. 4371. Therefore no cash passes? — No. 4372. Therefore when Mr. Chaplin asked you as to the demand on the quantity of money it is not the quantity of money simply that is in question, but the quantity of money in proportion to the demand for it r --Yes. 4373. Therefore if the demand for it is decreased by all these expedients, the same quantity of money will go a great deal further, will it not ? — That would explain a rise in prices, but we have got to explain a fall in prices. Every addition to credit that is made would naturally increase the volume of that which was current in the country, and if prices had gone up immensely, you might say one of the reasons was the economies in banking. 4374. You are stating that there has been an extra demand upon the gold of the world, that the demand has grown faster than the supply ; I am asking you whether the demand is not diminished by all these expedients for saving gold and saving notes ? — Yes, but prices would not have fallen, they would have gone up. 4374a. {The Chairman.) That is reasoning in a circle surely. You assume that the two things are con- nected, you say there cannot be these economies, there must be more demand for precious metal, be- cause prices have gone down. One wants to know whether there is any connexion between the two things such as you suggest ; you must surely investigate each of the two facts independently ? — The two facts you wish examined independently are (1) the fall in prices, (2) banking economies. I have already answered as to the first, and as to the second my answer is, banking economies have been in full pro- gress both during the rise in prices and during the fall. I have no doobt they intensified the rise, and have relieved the fall. 4375. {Sir T. Farrer.) I should like to ask you this further question in regard to the economies in the use of gold. Mr. Gibbs has said that this country was fuUy banked before 1873, when prices began to fall, but assuming that we had a complete system of banking and clearing, is not that a system which expands of itself with the wants of commerce ; it is not simply that you have a clearing system which in 1870 clears all the then transactions, and will not clear any more, but it is a system which as the number of transactions increases clears the larger number just as it did the smaller number of transactions at the earlier date ? — It is very difficult to verify all the facts as to what some people call banking economies. -Some are known and some are unknown. The precise amount of gold in people's pockets cannot be known, the diminution of bills of exchange, in proportion to the business done, is asserted, but precise information is not attain- able. There are, however, some particulars which can be had, and one is the amount of notes in circulation. I made a comparison of the fiduciary circulation in 1845 and 1886, by which it appears that the amount of fiduciary circulation was legally, in 1845, 32,000,000^., whereas it was in 1886 only 30,250,000/., or a diminution of 1,750,000/., but the diminution in the actual fiduciary circulation was, in round numbers, 6,500,000/. The gross circulation of notes, whether on gold or securities, increased duringthe same period about 3,500,000/. If you add the diminution of the actual fiduciary issue to the increase of the gross circulation you arrive at a figure of 10,000,000/. This amount would indicate the extent to which contraction of that form of credit instruments rather than expansion had taken place. What you say of the clearing house may be true. 4376. {Mr. Courtney^ Would not a clearing system clear with the same facility an exchange of 500,000,000/. as an exchange of 300,000,000/. in the course of a week? — You must ask those who have studied, that. I believe of course an increased number of banks require so many more reserves of cash. 4377. {Sir T. Farrer.) I would ask you now, after looking at the figures that I have given you, to con- sider how you think it is that the scarcity of gold or the increased demand for gold, in proportion to the supply, has arisen ? — I would answer that I believe the scarcity of gold, and the fall of prices to be abso- lutely convertible terms, and that there is no other meaning in the appreciation of gold and the fall in prices, they appear to me to be absolutely synonymous. 4378. Then I would ask you another question, whether prices do not depend on the quantity of the commodities as well as upon the quantity of gold .? — That is quite compatible with the other ; all I mean to say is that the two things are absolutely the same. The appreciation of gold and fall of prices are abso- lutely synonymous to me. 4379. The appreciation of gold, and the fall of prices are synonymous, but though they are one and the same thing, that one thing may arise from very difierent causes ?— They may arise either from increase of commodities, or increase of gold, or vice versa. 4380. Taking those two causes, it may arise from a scarcity of gold on the one hand, or an abundance of commodities on the other ? — ^Yes, and I have already said that in one particular commodity I consider it is about half and half. 4381. {Mr. Fremantle.) You said just now that you thought the disturbance in the relative value of gold and silver was due mainly to the changes made in foreign mint regulations ? — ^Yes, or laws relating to " the standard." 4382. But are there not also natural causes for such a disturbance in the amount of silver and gold which has been produced of late years ? — What do you mean by natural causes ? 4383. The amount of gold and silver which has been dug out of the earth ? — As long as the mints were ready to coin either metal it did not matter how the production varied. 4384. Then you think that it would have made no difierence, if the foreign mint regulations had remained as they were, that the production of silver in the world has increased from the date of the great gold discoveries from 8,000,000/. to 25,000,000/. a year, while the production of gold has fallen from 30,000,000/. a year to about 20,000,000/. ? — Upon the figures you give me prices ought to have risen under the old arrangements. The variations of the supply in quantity of gold and silver between 1873 and 1884 have varied much less than they did during the time that prices did not change at all. 4385. There was some disturbance, was there not, in the French arrangement, at the time of the great gold discoveries in 1851 ; that is to say, that silver was in great demand for the East, and went in large quantities to India, and that if it had not been for other causes intervening at that time silver would have probably gone to a premium ? — I cannot say what it would have gone to, but all I can say is that the variation was extremely small. 4386. But there were such things as variations in prices ? — If you mean in the relation of silver to gold, there was a variation in 1832 which was much greater than anything that took place from the gold discoveries in 1851, rather from political reasons I think. 4387. Then you would not be disposed to attach any importance to the amounts of gold and silver which were produced, relatively, so Jong as the old European mint system had been maintained ? — I should not say none, but I think the importance of it is less when you depend on two metals, than as now, when you depend on one. MINUTES Ol*' EVIDKNOK. 223 4388. {^Mr. Courtney.) I think you allowed in answer to my question that if those relative mint prices were retained the productiou of gold and silver would be regulated so as to correspond to them ? — I think I said it would have something to do with it. 4389. {Mr. Fremantle.) Did I understand you to say just now, in answer to Mr. Chaplin, that the vvholo of the silver produced in the world was coined under the system of 1873 ? — No, was open to coinage. 4390. What would be the effect on production, if the coinage of silver were restricted ? — I believe a great deal more silver and gold is produced than pays for the production, therefore I do nol suppose a rise in the value and a mint here and there would increase the total volume of it very largely. 4391. Would not the production of gold be very likely to be diminished ? — I have heard people say so. 1 do not myself think so for the same reason that I think people look on gold and silver without any great reference to its cost. 4392. Would not there be a probability that the mints would be flooded with silver sent in for coinage ? — I do not know that the Fiench mints were flooded, but if the bimetallic system ruled over the whole world that would give of course a great dea) more opportunity for coining silver. I am afraid we must go back to the old question. If the mints were flooded with silver the question would be, where would the gold go to, and I have never found any body who can tell me that. A great deal has been said npon the island of Jersey, and I should like to ask whether the monometallists really think that if the inhabitants of the island of Jersey had a fancy for a gold coinage, they could suddenly draw all the gold out of England and America and Germany and France. 4393. But a large amount of gold is already hoarded in India^ is it not ? — Yes, I believe so. 4394. In your opinion would not a change to the bimetallic system increase the amount likely to be hoarded in gold? — I believe the increase of the hoarding of gold in India arises from a suspicion in the minds of those who hoard it, that the gold standard may be enacted in India, and they wish to get the profit on the change.. If there was a bime- tallic system in the five greatest nations in the world, and the Indian Empire, I do not suppose any Indian would care to hoard gold any more than silver, unless for ornaments and such class of things. 4395. Apart from such circumstances, is there not a demand for the arts and manufactxires which would be likely to lead to a premium on gold ? — If everybody grew so rich as to have a fancy to have gold orna- ments of course there might be. 4396. There might be a different proportional value between gold and silver for other purposes than coinage ?— The stock of gold is 800,000,000^. If we had 800,000,000^. of ornaments, of course that would be so. 4397. Without our having the whole 800,000,OOOZ. as ornaments, there might still be some change in the relative value ? — There might be some change. 4398. I see that in the pi-eface to the volume you have published ^vith Mr. Gibbs you say that " it may " be useful to recur to the arguments of two of the " guardians of Englisl) currency " on this question. By the "guardians of the English currency" you mean directors of the -Bank of England ? — ^Yes, ex- governors. 4399. I presume we may take it that your views are not the expression of the opinion of the court of directors of the Bank of England ?~I have never said they were, and I iiave always said they were our own individual opinion. 4400. {Mr. Houldsworth.) You hold that there was a great steadiness in the relative prices of silver and gold before 1873 for a very long period ?— Yes. 4401. And do you hold that that was in consequence of the bimetallic law being in operation ?— Well as far as this century, and I think the last, was concerned, I do certainly. o 24358. 4402. Do you hold that the bimetallic law in its Mr. H. if. existence over a partial area will have the full Grenfell. operation in steadying the relative prices of silver -, ~ and gold in countries which do not adopt it? — If ^_ ' countries of suffioieuL importance, of course not the island of Jersey, but if we had the United States and the Latin Union agreeing together, without any reference to us or Germany, t think it would have that effect at; once. 4403. If England adopted the bimetallic law, and no other country did, would that be sufficient to steady tlie relative price ? — I have not the slightest doubt if the British Empire did it would be quite sufficient without asking the other nations to join. 4404. And you would recommend the British Empire to adopt that ; believing that the results would be satisfactory to England and also would have a good effect over the world ? — No, I have always said that it would be unjust to ask England to do it at laast unless Germany, the United States, and France did it. I do not see why we should change oui- standard unless that was the case. 4405. Then you think there would be some ill effects to England under those circumstances ? — Merely the ill effects of the cbange which was not absolutely necessary.. I think that other nations should ask it of us rather than that we should change our standard without reference to other countries. 4406. Still you have a very definite opinion that the bimetallic law would have the practical effect ol steadying the relative prices of silver and gold on the Continent, and in the United States, if the British Empire adopted it ? — I have not the slightest doubt about it. , 4407. Suppose now that there is a consensus of opinion amongst the large nations of the world, and that they are disposed to join together in adopting the bimetallic law, have you any opinion as to what ratio should be adopted ? — The United States legal ratio at this moment is 16 ; they are willing to go to the 15^. The Latin Union legal ratio is 15|, and so far as thalers are a legal tender in Germany the ratio there is 15^ ; and therefore I think that notwithstanding the apparent injustice in altering the ratio which exists now to 1 5^ to 1, the objections to that would be less than attempting to bind the two metals together at any other ratio, in fact, I doubt whether it would be possible. 4408. Would you expect any very sudden effect on prices if it were adopted ? — No, I think it would take some time to affect prices. 4409. Have you any opinion as to what effect the appreciation of gold has had upon wages?— Wages must be considered in two categories. 4. the amount given for particular work done, and II. the number of workmen employed. The two together would make the wage fund. I agree perfectly in the assertion that the rise or the fall in wages takes place some time after any great change, so far as particular work is concerned, but on the numbers of people employed I think the effect is much more immediate. 4410. Do you think we have had the full effect of the .appreciation of gold yet upon the wage fund ? — No, I do not think we have or anything like it, in fact I should not wonder before many months are over that we found a very great increase of that effect in the shape of the diminution of masses of workmen employed. 4411. And also upon the rate of wages ? — And then necessarily the rate of wages will go stiU more slowly. 4412. {Sir T. Farrer.) Are you aware that in America, where there was also" a fall of wages and cessation of employment, that both are said to have recovered, so that both are as great as before the fall, if not greater i* — You must be quite aware that there are great fluctuations in trade of this kind which take place, over short spaces, in all countries, which are quite different to those which are spread over very long periods. And it is extremely difficult for any body to assert positively that a breakdown in this 224 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. S. Grenfell. 6 May 1887. trade or that is due to long or short causes, and I should be very sorry to assert anything about it. 4413. {The Chairman.) Do you mean to represent that in all employments there is a diminution in the number employed ? — I am talking of the larger trades you know, such as agriculture as a whole, and coal as a whole. 4414. Well, now, take collieries, I should like to ask jou whether there are not as many men employed in the collieries now as there were 10 years ago. ? — Not in any district that I know anything of. I only speak of the districts I know of. lam quite certain numbers of collieries are shut up. 4415. Yes, but there are new ones too ; there are collieries that have come into work lately ? — An enormous number came into operation after the high prices of 1873, and a portion of them have been .shut up since. 4416. {Mr. Houldsworth.) Are you in a position to tell us whether the employment has increased in proportion to the population 1^—1 have not got my wage statistics with me. 4417. Becau.se, though the volume of trade might be increasing and the volume of trade is greater, if it was not in full proportion to the increase of the population, then there would be the state of things that you have represented that there would be ? — More people out of employment. 4418. {Mr. Courtney.) Upon the last question that was raised you said it was anticipated in the course of the next few months in all probability that there would be a great diminution of employment. I do not follow you how you think that wouM operate ; I mean I do not follow the theoretical causes which you conceive would come into operation so that in the course of the next few months there would be an advantage ? — I do not think I said there would be an advantage. ' What I said was, that in many trades I had reason to believe there would be a diminution of men employed in the next few months, which would be a disad- vantage. I must repeat that I have not my wage statistics with me as to the past; and as to the future, I refer to my answer to the previous question. 4419. {Mr. Houldsworth^ Are you aware of any evidence that the lowering of wages is taking place at the present moment ?— -No, I do not _ think I have anything vnth me to show it. 4420. You do not know perhaps for instance that strikes which take place now are very much more easily settled than was the case in the inflated times ? — I think there is no doubt that is so, and I think that is an indication of the men knowing very well that the trade is not profitable, and that wages are falling. 4421. Would ^e bimetallic law, do you think, if it were introduced as we are proposing, would it have the effect of steadying that fall of wages ? — I think it would create a greater demand for labour in the manu- facturing districts, and I think it would stay the fall n the agricultural districts. 4422. Then do you think it would raise wages ? — No, I do not think it would at first. 4423. {Sir T. Farrer.) Are you speaking there of money wages or real wages, that is the quantity of things which the labourer wants which he can buy with his wages ? — That is a different question alto- gether ; we were speaking of money wages. 4424. {Mr. Houldsworth.) I presume you would hold that if the appreciation of gold had caused the fall in prices in commodities, and that as you told us the wage fund had not yet felt the effect of the appreciation, that when it did feel it then you would have the wage fund and price of commodities in the old relation that they occupied' before both those changes took place ? — I do not know that you quite understood the distinction I drew between two parts of the wage fund. I think that the wage fund has already, in the diminution of numbers of workmen, felt the effect, and that the amount of wages given to particular work perhaps in some cases has not, but that it is bound to be felt in time, and that if on the other hand the range of prices increased very much again, the number of workmen employed would increase very soo^, and the amount given to each particular work would rise at a slower rate. 4425. Do you hold that the legislation in 1816 affected contracts that were made before that? — Certainly, an immense amount of ruin of all kinds arose from it, which was the subject of innumerable writings and pamphlets at the time. 4426. Then you hold another distinct effect was produced on contracts by the resolution of Germany in 1873 ?— Yes. 4427. And you hold that any new legislation would not produce any more effect on contracts than these previous Acts of legislation ? — No, they would be of the same character. 4428. {Sir John Lubbock.) The effect of adopting the ratio of 15| to 1 would be, would it not, to raise the rupee to about Is. \\d. ? — I presume so. 1 1 4429. Would you not in effect be enacting that every debtor who had made contracts with the rupee at the present price should have his debt raised about 20 per cent. ? — Yes, just in the same way as in 1816 or of 1797, or on any other legislative changes of that kind which might occur, some people would have their debts increased to the extent of the alteration in the prices. 4430. But was there any legislation in 1816 or at any other time such as to make a difference in a few hours of 20 per cent, in the amount of the indebtedness ? - — I think the battle of Waterloo must have made a great deal more. 4431. But that was not a matter of legislation ? . — Well, it was not a matter of ratio, it was one of " ultima ratio." 4432. The silver debt of India amounts to one hundred millions sterling, would it not be rather a serious thing to have a legislative enactment that would raise the value of that debt to a hundred and twenty millions sterling ? — The alterations made, not by ourselves, but by the G-erman and French Govern- ments, reduced the debt to that extent. 4433. But we are not responsible for the legislation of foreign governments '' — I may say we are respon- sible to a certain extent. The whole of this monetary revolution springs from a monetary conference at Paris which had to do with coins in 1868, and the greatest possible encouragement was afterwards given by the English Chancellor of the Exchequer of the day to the idea that all nations had much better come to a gold standard, and that conference at Paris in 1869 came to the conclusion that a single gold standard should be adopted by all nations, the object being that they might have a similar coin. The German Govern- ment, when they had conquered France and taken all the gold out of the country, determined 1o act upon that solemn resolution adopted at the Paris conference. Therefore I venture to assert that there is some re- sponsibility attaching to England ; certainly attaching to English economists, and, in my opinion, to the advice of the English Chancellor of the Exchequer in 1869 in producing that resolution which reduces the rupee debt of India. 4434. At any rate you think it is so important to adopt the bimetallic theory that you would be pre- pared to face that ? — Yes, I should be very glad to do it. 4435. Still you approve, do you not, of the present system of gold being used for the large payments, silver for the medium, and copper for the smaller payments of the country; you regard that as a convenient system, do you not ? — Yes, I think so. 4436. And it is very important, is it not, that all these classes of coins should be easily obtainable ? — Yes. 4437. At present, apart from the inconvenience of the hght sovereigns, it is _ always easy to get either gold, silver, or copper coin, but in France under the old system you had a difficulty. There was an agio, sometimes on gold, sometimes on silver ; and do you ut.t think that is rather an inconvenient arrange- MINUTES 01^ EVIDENCE. 225 merit? — No, I do not think there was any incon- venience about it practically ; there was an incon- venience in carrying about barrowfuls of silver to pay your bills with, but that is now put an end to by the use of cheques and bank notes in fact. 4438. Under the bimetallic theory which you ad- vocate you consider, do you not, that the moment either gold or silver fell in value as compared with the other the demand for it would increase, and vice versa, so that there would always be a compensatory arrange- ment that would keep both metals in ratio ?^-Yes. 4439. You have expressed your concurrence in Mr. Gibb's opinion, that the relative change in the value of gold and silver is partly due to depreciation of silver and partly to the appreciation of gold ? — If you mean the change in value of gold and silver told in each other, I agree with Mr. Gibbs that is partly due to one and partly to the other. If you mean the rela- tions of the two metals to commodities, it appears that silver has scarcely altered while gold has risen 30 per cent., and therefore I should say that the fall in prices is the same as the appreciation in gold. 4440. We are to inquire whether the change in value is due to the depreciation of silver, the apprecia- tion of gold, or to both, and Mr. Gibbs expressed his opinion very strongly that it was due to both causes ; do I understand that you differ from him in that respect ? — There is a depreciation of silver told in gold from causes connected with the former, I do not dispute that. 4441. You think in the main it is due to the appreciation of gold, and not to the depreciation of silver ? — I think so. 4442. You know it has been argued by several authorities, and particularly by Mr. ChUders of late, that the effect of war ty diverting labour from produc- tion, is to raise prices ; and vice versa, that the tendency of peace is to produce a gradual fall of prices ; do you think that the fall of prices of late is to any consider- able extent due to the lengthened peace ; have you considered that question ? — Yes, I have studied that question, I think there is a great deal in it. I always believe that war has a very considerable eft'ect on prices, therefore it is not a question of principle that I should dispute with Mr. Childers, I merely dispute the degree and the amount to which that has been the case. 4443. Then you consider that the present fall in prices is to an important extent, though not entirely, due to the lengthened peace ? — I think it. has some- thing to do with it. It is important, I have never disputed that. 4444. Then I gather your opinion to be that the action of Germany and other countries which have adopted the gold standard has affected the relative values of gold and silver by increasing the demand for gold and decreasing that for silver ? — Yes, for the purpose of coinage. 4445. And in your opinion the adoption of bi- metallism would raise the value of silver by the opposite process ? — Yes. 4446. But you will remember no doubt Mr. Seyd's table of the population using different currencies, 85,720,000 using gold, 139,000,000 using mixed gold and silver, and 841 ,000,000 using silver. Now to those 85,000,000 we have to addl think Germany 41,000,000, Holland 3,700,000, Norway and Sweden 6,000,000, who have taken to gold, so that we should have |;o transfer about 50,000,000 from the silver-using countries to the gold-using countries, but that would stijll leave a very large number using silver. I should like to ask if you have considered whether since those who, have changed from silver to gold form ^o small a proportion of the tota,! number using silver currency the alteration can be due so very much to that change ? — I think the mere act of demonetization bv Ger- inany — they sold 28,000,000^. of silver, which is more than two years of the average production of the whole world, and they cojned 87,000,000/. of gold, or three years' production of the whole world, those acts would, I think, produce that effect. 6 May 1887. 4447. I am simply asking your opinion. If the Mr. H. R. total population using silver is roughly 841,000,000, . Grenfeli. do you really think that 40,000,000 or 50,000,000 changing would make such a great effect ? — Yes, I think it would. 4448. As I understand, you propose that not only England should enter into this, but India should also enter into the arrangement ? — Certainly. 4449. Well, would not the effect be that 36,000,000 of people who now use gold would use gold and silver, and that 200,000,000 of people who now use silver would begin to use gold, so that in reality there would be a much larger number of people who now use silver taking to gold, than there would be of those who now use gold taking to silver ? — My opinion of India is that they do not make those changes in their habits so quickly as one would suppose. I do not think my opinion is worth having upon it. 4450. Then you do not think the introduction of bimetallism into India would have any material effect ? — I do not think so. ^ 4451. In England, do you think that our having a bimetallic system here would cause us to use much more silver in the ordinary affairs of life ? — No, I think we should do everything in cheques as we do now. 4452. Then it would not make much difference either in England or in India ? — I do not think so. 4453. If this would make no difference either in England or India, what would be the difference ? — We should hold silver in the Bank of England as against notes, and I suppose in Scotland too. 4454. Then the main difference in your opinion would be, as far as England is concerned, that the Bank of England would hold a certain amount of silver instead of a corresponding amount of gold ? — Yes. 4455. Then I understood you to say that the adop- tion of this system would tend to raise prices 20 or 30 per cent, not at once, but gradually ? — My opinion is that if it is true that it has been the cause of the fall in prices it is equally true that it would raioe prices. 4456. But apart from any hypothesis, do you think it would raise prices ? — I think it would, yes. 4457. But you would not'by the process you suggest in any way increase the volume of the currency, would you ? You have at the present moment certain countries which use gold and certain countries which use silver. You propose that instead of one half the countries, we will say, using gold, and the other half using silver, that all the countries should use both gold and silver. You would not therefore increase the volume of the currency ? — The volume of the currency within the privileged legal tender area for that parti- cular purpose would be increased. 4458. Suppose you have say 100,000,000 of people of whom 50,000,000 ore now using gold, and another 50,000,000 using silver. You propose that the whole 100,000,000 should use both gold and silver, but you do not by that process increase the volume of the gold and silver or the curi:ency ; therefore I do not quite follow your argument why it should raise prices ? — It has only reduced prices in gold-using countries, and I presume it would only raise them in those countries. 4459. Then you do not express the opinion to the Commission that the adoption of bimetallism would have any effect upon prices ? — I think it would cer- tainly. I did not say it would increase the volume of the currency all over the world ; I said it would increase the amount of silver which would come within the, privilege of being legal tender. I think it would increase the volume of currency in gold-using coun- tries. I am of opinion that tl^e. existing state of thingshas been the cause of the general fall of prices, and if you restore the old state of things, that it would by parity of reasoning raise prices to the same extent. 4460. , {The Chairman.) jThj would it ? Of course if a certain state of things produced a fall and you reverse it, that would produce a rise, but "has it produced a fall, and why should it produce a rise ? — Of course I believe it has produced a fall, and if Gg2 22(5 ROYA.L COMMISSION ON GOLD AND SILVER ; Mr. H. R. Grenfetl. 6 May 1887. it has produced a fall it is quite certain to produce a rise. I have never had this question put in this shape. I had only seen it in the shape in which I started, believing as I did that according to all the laws the state of things was bound to raise prices if it had reduced prices. All the statisticians in whom I put my faith said that was the case, that it had reduced prices. I said if that was the cause of the reduction of prices, it appeared to me that the restoration of the old state of things would cause them to rise. But now you put it in another shape, and ray answer is that the fall has been in the gold-using countries, to whom the diminished produc- tion of gold is important, and where the increased demand has arisen. It is in evidence that the fall in prices in silver-using countries has been immaterial. The rise would consequently be in the gold-using countries, and not all over the world. The effect of silver coming into the c'rculatioii in countries now using gold would be precisely the same as a fresh batch of gold discoveries. 4461. {Sir John Lubbock.) I rather thought from the answer yougaVe me that you based your argument on the statement that that there had been an increase in the use of gold for curren(iy purposes and a dimi- nution of silver, that there had been no countries which had abandoned gold and taken silver, but that there had been several countries which had abandoned silver and taken to gold. I understand you to argue that this would produce a greater demand for gold, and consequently it had diminished gold prices. Then I was going to put it to you how you thought you would reverse that by proposing that an empire which consisted of 200,000,000 of people using silver and 36,000,000 using gold, should use both gold and silver. It seemed to me that you would be going still further in the same direction, because you are proposing that 200,000,000 of people that now use silver should use both gold and silver, and 36,000,000 of people who use gold should use gold and silver, though I admit that the .36,000,000useraore in proportion than the 200,000,000.' — The proportion of the circulation to the population is a prevalent element in the discussion of the currency question in America. I have never myself considered it of importance. But the gist of your question appears to me to be that in establishing bimetallism and including India we should- create a fresh demand for gold over that vast population. If a single gold standard were enacted in India the price of silver and of all commodities told in gold would fall enor- mously, and the divergence between the two metals increase. But under bimetallism I fail to see how the fresh demand for gold need arise. Mr. Clarmont Daniel would seem to assert it ; but, in order to do so, he was obliged to attribute it to the insati- able desire for gold which exists in India. There is, it is true, an unaccountable movement of gold to India now, it is believed for hoarding. But it is not conceivable that the population of India would insist on having gold in order at once to pay it away. If a man has^ so many rupees to pay away for rent, wages, &c., it is not possible to imagine that he will buy his gold for 2s., in order at once to pay it away for a debt of Is. Gd., and yet, if we are to accept Mr. Clarmont Daniel's doctrine, that is what would happen. To suppose that the operation would be other- wise would be to admit that the rupee would rise to, and remain at 2s., and that bimetallism would be success- ful. I attribute the hoarding of gold in India to the fear that further tricks with silver may be played, and 1 believe that wth the double standard much of that hoarded gold may come into circulation. The fact is that with regard to India it is difficult to draw any conclusion, because everybody would have supposed that the effect of this currency revolution would have been to raise the rupee price in India, and it has not done so. I am much puzzled to account for the fact that it has not. 4462. If commodities generally have fallen 25 per nent. and silver has fallen 20 per cent, then you would not ('.s])ect silver prices in India to have altered ? — That is what has occurred, but T should not have expected it. 4463. And is not that the explanation of the fact tha,t they have not so materially altered? — It may be, but still it has always astonished me that silver did not go more freely into India. 4464. You have not considered what the effect would be of introducing a gold currency into an immense population like that of India which at present has only a silver currency .' — I have considered very often what would be the effect of making a single gold standard in India, and a gold currency there with that single standard. But if you ask me whether making India part of a general bimetallic system would entail the probability of "their taking a good deal more gold, I repeat that I dd not think it would. 4465. ( Mr. Barbour.) I think you said in reply to Sir John Lubbock that if silver was raised 25 per cent, in value with reference to gold, that would increase the burden of the Indian debt by 26 per cent. ? — The silver debt. 4466. Well now, if silver and gold were brought together in that way, would not the influence be exerted as much on the side of gold as silver, would not you bring down gold just as much as you brought up silver ; you would increase the demand for silver by what you propose ; you would reduce the demand for gold in exactly the same proportion in the two cases? — Yes. 4467. Therefore the increased demand for silver would bring up its value in commodities so much, the reduced demand for gold would bring down gold so much ? — ^Yes. 4468. So that really the increase in the burden of the Indian debt looked at from a theoretical point of view would be only one half of the 25 per cent. ? — • Possibly. '4469. Has not India also got a large gold debt, and would not the burden of that debt, still treating the matter as one of pure theory, be reduced in the same proportion in which the burden of the silver debt was increased ? — Yes. 4470. England has also a large gold debt ? — Yes, and many corporations and individuals. , 4471. And would not the burden of that debt on the English people be reduced in the same proportion ? — Yes. 4472 And when all these losses and gains had been made in connexion with the gold and silver debts, should we not have merely got back to the conditions which prevailed at the time when the bulk of these debts was contracted ? — I think so. 4473. {The Chairman.) 1 do not quite understand your answer to the question that the increased demand for the silver would be exactly equal to the decrease of the demand for gold. I understand your view to be in relation to India, as everywhere else, that there would be increased demand for silver and decreased demand for gold, and that the one would balance the other? — Given that the demand for circulation was the same, that is what I presume. 4474. If the two things are equal, if owing to your monetizing silver in certain countries there is an increased demand for silver and there is an exactly corresponding decreased demand for gold, would you not have the volume of the currency much as it was before ? — If a rise in prices created a fresh demand for currency I do not think it would. 4475. Then you do not think that the two would necessarily correspond, the decreased demand for gold and the increased demand for silver ? — When I gave the answers to which you allude I was under the impression that Mr. Barbour was speaking of India alone, he was speaking of the Indian debt. 4476. I should like to ask you with reference to the fall of prices a question or two. You are aware that The Economist index numbers which have been put forward as showing the fall of prices have been somewhat impeached ? — I understand they have. 4477. You are aware that they certainly show (luring some years a very materially different result MINUTES OF EVIDENCE. 227 from that which is obtained by taking a few other commodities and having other index numbers ? — 1 am aware that it has been so contended, because I began by saying that I have taken The Economist index numbers and Mr. G4fFen's figures as correct. 4478. You have not investigated that point? — I am not a statistician. It requires to be a trained sta- tistician to understand them at all, therefore I start from the point that those numbers are correct. 4479. The monetary change took place in the year 1873?— Yes. 4480. Now would you not have expected theo- retically, if these great results have flowed from that change, to have found decided symptoms of it in the five years following 1873 as compared with the five years t^hich preceded 1873 ? — Yes. 4481. I find that if you take the figures of The Economist in the four years immediately following 1873, the total index number was higher in each one of these years than it was in the four years preceding 1873, and that it is not till the fifth year following 1873 that you get anything lower than the preceding years. How do you account for that ? — I do not think you would get anything reliable out of me about it. I am quite unable to discuss the reliability of those index numbers; but I think that the prices in 1872 and 1873 reached in a great many of the principal articles almost to what was called the famine point, and that the effect of this currency revolution would naturally not occur at once in all these articles. It occurred almost at once in silver, but I think it could be shown from Mr. Giffen that in order to arrive at any proper conclusion on that subject you must take a much longer period than one or two years. I think he said the 10 firevious years is the proper period upon which to base the calculations. With reference, however, to Dr. Soetbeer's criticism on The Econo- mist's index numbei-s, I should wish to remind the Commission that though he fitids fault with the method pursued therein, his final conclusion is not so very different. Dr. Soetbeer is so fair a man, not only in this special particular, but in others in which I have known him to be consulted, that I cannot help quoting what he says as to index numbers based upon different calculations to those of the London Economist : " If we compare the above surveys ' with one another, it must be allowed that the total " index- numbers calculated upon different methods " do not show any such wide discrepancies as might " have been expected. The extraordinary lowering '' of the level of prices in the last decadfe is shown " equally by them all. Still, I am of opinion that my " criticism of the method is not invalidated, and that " even the attempt by making full allowance for the " relative value of the articles to win confidence in " the accuracy of the index number leaves important " objections to be met." 4482. Have you considered at all the question how this monetary change affected prices, in what way it touched them ? You would admit, I suppose, that it does not enter into the daily transactions which go to fix the price of any commodity on any given day ? — I admit that the daily transaetioijs do not show the Mr. H. R. fluctuations of wholesale prices, but I think daily Grenfell. transactions are affected by the plenty or scarcity of - the precious metals because those transactions are made ^^ ' in coin. In talking of prices I follow Mr. Mill's doctrine that it is impossible to generalise except 'in wholesale prices of commodities in general use as settled by competition. Something must affect prices. If it is not the demand and supply of the precious metals, it can only be the supply and demand of. commodities ; and when fluctuations occur in the prices of commodities arising from their supply and demand, it is probable that they will not all occur at the same moment. That is to say, that a glut or deficiency of tobacco will not occur the same year it occurs in wheat, and so on. If then it is observed that tobacco is going up and wheat going down, no one would attribute these facts to the precious metals. But if, as T now believe to be the case, the general range of commodities in general use, and open to competition, have sustained a great fall, and it cannot be asserted that there is any cause special to each of those commodities, then I can only attribute that fall to the monetary changes. If it be true that the precious metals, like other commodities, are liable to rise and fall at all, that rise and fall can only be shown by a general rise and fall of other commodities reckoned in them. To suppose otherwise is either to assert that while supply and demand affect all other commo- dities, they do nof affect the precious metals, or that there is some other measure of a rise and fall in the precious metals than the general fall and rise of com- modities. Now let us apply another test, if it be true that a general fall in prices has taken place and dates from 1873 or thereabouts, we might expect to find that the cause of that fall would also date from the same year. What are the other causes assigned ? Some say banking expedients or economies. I have ah^eady endeavoured to show that these would account for a rise in prices, but could only neutralise a fall. But even supposing "they could cause a fall they did tfot begin in 1873. Other persons point to facilities of communication. There has been no particular in- crease dating from 1873. The opening of the Suez Canal is the only change of that kind in the decade before 1873. The construction of ocean steamers and railways has been progressing steadily and uninter- ruptedly since 1 845-50. There remains then but one other cause, namely, that suggested by Mr. Childers, the long peace between the greater producing and manufacturing countries. I have already admitted that this cause has had something to do with the fall. Prices are, however, still the record of the • relations between commodities and the standard in which they are reckoned, namely, one or other of the precious metals. So much of the fall of prices as is due to increased production or peace must be in the long run an universal benefit. So much as is due to the arbitrary interference of German and French legislation founded on English economical teaching is, to my mind, disastrous, and calls for the application of the remedial measui-es which we suggest. The witness withdrew. Adjourned till Monday. 2:28 ROYAL COMMISSION jON GOLD AND SILVER: Nineteenth Day. Monday, 9th May 1887. PEESENX : The Right Hon. LORD HERSOHELL, the Chairman, presiding. Mr. D. M. Baeboite, C.S.I. Me. J. W. BiECH. Me. Hbnet Chaplin, M.P. Me. L. Couetnet, M.P. SiE T. H. Faeeee, Babx. Me. C. W. Feemantle, C.B. Me. W. H. Hotjldswoeth, M.P. Sm John Lubbock, Baet, M.P. Mb. Geo. H. Mueeay, Secretary. Mr. H. H. Gibhs. 9 May 1887. Mr. Henry Hucks Gibbs recalled and examined. 4483. {Sir T. Farrer.') Mr. Barbour asked you a good mahy questions concerning exchange, illustrating the difficulties which arise from two varying cur- rencies, and those questions bore particularly on the trade with India ? — ^Yea. 4484. Are not all these difficulties as great' or greater in the case of exchange between two countries one of which uses depreciated paper ? — Yes. I will not venture to make it an exact comparison, because, as I have said before, I am not at all familiar with the trade with India, but my illustration of the whole matter has been derived from a paper-using country, ChiU. 4485. And the number of such countries is large, and is likely to be very large is it not ? — I will not prophesy. But it is now large. 4486. Well, one difficulty which Mr. Barbour men- tioned was the difficulty of procuring the proper metSl for remittance from one country to another where the metals and the currency were different in different countries ? — Yes. 4487. That difficulty would only exist, would it, when the metal which is needed for remittance, that is the metal forming the currency of the country to which the remittance has to be made, is not to be found ? — It would only exist for instance when you want to remit gold to a gold-using country, and gold was not to be found in sufficient quantity to use it as remittance freely. 4488. As regards India, silver can always or almost always be found or procured in London for remit- tance to India, can it not ? — I cannot answer that question. I rather think I have heard of times when silver was not easy to procure ; but ultimately it can be procured. With delay of course it could be pro- cured. 4489. London is the great silver market of the world, is it not ? — Yes. As to silver being procured, I remember at one time when there was a great demand for silver for the making of railways ' in India, silver had to be procured at very considerable difficulty. People had to send to Prance to get what silver could be gotten there, and had to collect five- franc pieces, suffering the loss that might occur by waste of the metal and the brokerage for collection, or whatever other expenses there might be. 4490. That was a case of extraordinary demand ? — Yes, of extraordinary demand. 4491. Again, if gold is not remitted from India to England it is not for want of gold, but because there is a constant demand in India for the precioiis metals ; is it not ? — I do not think that is quite a sufficient statement. It is not only that there is a demand in India for the precious metals, but that the balance of indebtedness runs practically the other way, that is to say, the balance of indebtedness runs from India to England, not the balance of trade, as regards commodities between the two countries, but taking into account the debt due by India the balance is the other way, and, it would be unlikely that gold or silver should be sent hither. 4492. But the flow of specie is from England to India, is it not ? — ^Yes, the flow of specie is from England to India. 4493. If gold is not remitted from India to Eng- land, it is not for want of gold,, but because there is a constant demand in India for the precious metals ? What I meant to say was that it is not a question of the demand for precious metals that regulates the thing, it is a question of how a debtor is to pay his creditor. If India is the debtor it has got to pay in what it can ; if it has got gold to remit and could advantageously remit gold, it would remit gold. 4494. But as a matter of fact the precious metals flow from England to India do they not ? — ^Yes, I think they do. 4495. The reason for that is that there is a greater demand for these metals in India, they are sent there because it is profitable to send them ? — I am not quite sure what you mean by a demand for them there. There is a demand, but there is not a demand for them, I take it, except for the purpose of hoarding, in which I include ornament, as there is a demand for other commodities. Silver is sent, not because there is a love for silver, but because silver is Indian money, and it is sometimes better to send money than bills. 4496. But what I wanted to get at is whether there is any real practical inconvenience in India not having a gold currency out of which to make remittance to England ? — Certainly there is, because the regulation of the balance of indebtedness would be obviously much easier if the two countries were on the same basis, whatever it were. 4497. I am only speaking now of the actual remit- tance of the precious metals. Do you suppose that if India had a gold currency we should have gold remitted from India to England ? — Surely we should, how else cotrld they discharge the balance of their debt. 4498. How do they discharge it now ? — They dis- charge it now in this way, that they in effect sell their silver at a disadvantage, that is to say, that there are India Council drafts which bring the money to this side. 4499. And why do they not buy gold and send it ; there is plenty of gold in India ?— The people of India pay their taxes in silver, which is their legal tender. The gold mohur is worth, say 20 rupees, and, therefore, no man will pay a gold mohur to discharge a debt of 15 rupees. The Government receives the taxes in silver, and has to pay 15,000,000/. here in gold. They might, as you say, buy gold mohurs or ingots (as they might buy any other commodity) and remit MINUTES. OF EVIDENCE. 239 them. They do not do so, because it costs them less, and is more convenient, to buy the gold here by means of Council drafts. If it were"not for the 15,000,000/., there would be no question of making remittances of treasure from India, because the balance of commercial indebtedness would be the other way. 4500. And why does it cost them less F — It costs them less because there is always a necessity for com- mercial remittance to India, and so long as balances can be settled by bill the expense of specie remit- tance is saved. 4501. It is because people prize gold in India, is it not? — I do not know; they hoard silver as well as gold in India. 4502. And is not that one reason why silver is always going to India from England ? — As I said before, there is a demand for hoarding and for orna- ment, as well as for money, which constitutes a kind of demand, no doubt. 4503. Precisely, and that is the reason why the precious metals flow to India and not back from India, is it not ? — 4504. {Mr. Birch.) It is the balance of trade that takes it ? — That is what it is ; the balance of trader 4505. {Sir T. Farrer^ But this is part of the balance of trade ? — Of course it is. All remittances "from one country to another form part of the balance of trade or indebtedness. The only difference between exports of specie to France and those to India is, that those to France are merely payments,, while a portion of those to India are for hoarding or ornament. 4506. {Mr. Barbour.) Have you ever heard of.gold being exported from India to this country ? — I do not know. 4507. Have you ever heard of silver being exported from India to this country P^Well in 1883-84 there were 9,815,000 rupees exported from Indiaj, in 1884-85, 18,873,000; and. in 1885-86, 10,878,000, and so on. I do not think any came to this country. In one week of this year for instance 200,000 rupee's, chiefly in coin, went to Persia; Aden, Arabia, Kutch and Guzerat, Kurrachee, British Concan and Mar- magoa. Marseilles tbok about 7,000 rupees, probably old French coin. Ceylon also frequently , takes some. The amount of Indian exports of merchandise, 1888-^ 86, was 2,571,295,698 rupees; imports 1,576,608,284. Treasure sent thither 422,238,919, and Council bills 523,500,000, producing 41,846,000/. ; average ex- change about Is. l\d. 4508. {Mr. Fremantle.) In what shape was the specie exported from India ? — I cannot certainly say in what shape, whether gold or silver coin, or bullion. 4509. {Mr. BiroA.)' They hgd to pay their indebted- ness. If they owed any money to this country they had to pay it. They paid it with gold, and if they could not get gold they sent silver. In exactly the same way if we owe to India we have to send silver, or gold if they prefer it. It is the balance of in- debtedness which is thus settled ? — Certainly ; that is what I tried to say in my first answer. 4610. {Sir T. Farrer.) What I want to know is, why having both gold and silver tbey do not send gold and silver, or very rarely ?--I .may say, practically they do pay with silver ; that is to say, that when the Council has got a certain numbef of silver rupees at its command, what it does is to draw for them. That is what drafts are, what bills of exchange are. They are movements of metal from one country to another. 4511. Gold and silver are only sent to pay debts, because they are the easiest and most profitable mode of paying debt. Is that not so ?— I do not think your word' profitable is good. They are only in a small degree an article of merchandise. For your words I should substitute " when they are the easiest and least expensive mode . ." I do not think that you can come to that point exactly between two countries, that one country can say to the other :— " I owe you so many " thousand pounds, I pay it in gold or silver, because « it is the most convenient to me." What happens is, that the country goes on with its merchandise, (and that in very large quantities from^ India,) and thatithe exchange, as I have said before, is the index of how Mr. I-l. H. the balance is going; gold is sent, or silver is sent Gibbs. when it is convenient to send silver, but they send that which is ready to their hand. 9 May'1887. 4512. That is, which is the cheapest for them to send ? — The best for them to send ; not always the cheapest of necessity. You look upon it as if they turned over in their minds, " How am I best to pay that debt ? " It is not so. 4513. If a man has got to pay for a cargo in Cal- cutta, he sends over a bill, or he sends silver, according as . he can get the one or the other cheapest, does he not? — Or he sends another cargo of goods. If the rate cf exchange is more onerous to him than would be the purchase and transmission of silver, he sends the specie. The rate can never rise beyond the specie point, but where there is unity of money between two countries there is no question of purchase, and its variable cost; it is the course of commerce which leads him to send that which is best for him to send. 4514. That which he makes most by or least loss by ?^-It may be so, but he may have to send goods ; he may have the stocks which he wants to get rid of. It always comes to that. He sends that which suits him best. 4515. If he happens to find that he can do it cheapest by sending silver he sends silver ?^-Yes, he would certainly if he could get it. He would have to buy it, as he would any other commodity. The difference is that silver is money in India. 4516. {Mr. Bdrbdur.) He does wha;t is cheapest for him under the circumstances that exist at the time, but it does not follow that under different con- ditions there might not be some other course which would be still better for him to adopt ? — No doubt. 4517. {Sir T. Farrer.) The principal evil of which we have heard, arising from the fluctuations of ex- change, is its effect on producers in the two countries, giving' as is alleged a bounty to the one or imposing a burden on the other ? — Yes ; that is one of the prin- cipal .evils. .Another is the additional uncertainty imposed on dealings- between gold and silver using countries. 4518. On the assumption that gold has appreciated, this bounty or burden consists in the fact that the Indian producers' permanent expenses have remained the same whilst the real burden of the expenses of the English producer have increased ? — The English pro- ducer's nominal wages remained the same, but the gold having. appreciated, his real wages have increased. As regards theforeign producer what I have explained, I think clearly, is not that his wages remained the same ; they remained the same in nominal amount, that< is, in rupees or dollars ; but as counted in sterling they are halved or diminished by a large per- centage. They are diminished, that is the real point ; we. are speaking of commodities produced there and imported hither. The advantage that the producer gets there is that he spends less, counted in English money in wages in the country where he is, in the production of wheat, &c. to be sold here. 4519. He spends the same quantity of Indian silver ? — The same quantity of Indian silver, but a less quantity of English money. 4520. Aid that silver for the present, according to the best evidence we have, purchases as much as it did before ? — Yes. 4521. On the contrary, the English producer pays the same gold rent and the same gold wages that he did before ? — Yes, the same gold rent certainly. 4522. And for a time the same gold wages'? — And for a time the same gold wages. 4523. And there is his loss as compared with the Indian producer ? — Yes, I am not quite sure whether that bounds his loss. 4524. The gold price that he gets is less, but rent and for a time 'wage's in gold remain the same as before ? — That; is quite true, but I am not quite sure that that bounds his loss. 4525. 1 do not want you to say that that bounds his lossy, but that is a part of his loss ? — Yes. 230 KOYAL COMMISSION ON GOLD AND SILVER : Mr. H. H. Gibbs. 9 May 1887. 4626. The change you propose would do away with this so-called bounty, and its immediate effect would therefore be to diminish the advantage which the owner of rent and the wage earner now get from the present state of things ?-The immediate effect would be to do away with the bounty ; the effect on the rent-owner and wage-earner is wholly different and very much smaller. 4527. You wish to do away with this difference ? — You have just said that the hypothesis is that it is a disadvantage to the owner in England. 4528. That is an advantage to the owner of rent and to the receiver of wages, and a disadvantage to the payer of rent and of wages ? — So far as gold is appreciated, it must be an advantage to the rent-owner, and for a time to the wage-earner. 4529. I am speaking on that assumption ? — So far, I say ; but I would say more than that, because gold may be appreciated in respect of commodities generally, yet tlie rent-owner and the owner of the 3/. that ho gets from Consols may be able to buy very little more of any of the necessaries of life with his 3Z. for the very reason that you spoke of as to wages, which also affects necessaries of life; they are the last to fall ; the consol-owner gets his 31., and the wage- earner gets his yet undiminished wage, but it is a doubtful assumption to say that he can buy very much more with it. 4530. Quite ao, and meanwhile the wage-earner tem- porarily benefits because his wages remain the same while prices fall ? — No ; there again, the necessaries of life are the last to fall, they fall with the wages. I think that the producer is the first to feel a fall, the wholesale dealer the next, the retail dealer the next, and there- fore the necessaries of life do not very much change ; they do change, no doubt. In bread, for instance, the change there comes more rapidly than it does in other commodities, in clothes and so forth. Why it does I do not know, but I think it does so. I think the evidence is that it does. 4531. Then do you think that retail prices would be slower in falling than wages ? — I think that retail prices and wages fall about in the same Way. Retail articles are substances, are things ; the labour that the wage-earner has to dispose of is not so tangible a thing as they are, and cannot be appraised quite in the same way. It does not so soon occur to the labourer to say, " Everybody is getting more for their commodity, I also must get more for my commodity," or must take, if they do, less, as the cass may be. Mill explains the whole case and its causes, inB. III., c. 1., s. 5, "Before " commencing the inquiry into the laws of value and " price, I have one further observation to make. I " must give warning, once for all, that the cases I con- " template are those in which values and prices are de- " termined by competition alone. In so far only as they " are thus determined can they be reduced to any as- " signable law. The buyers must be supposed as " studious to buy cheap as the sellers to sell dear. " The values and prices, therefore, to which our " conclusions apply, are mercantile values and prices ; " such prices as are quoted in price currents ; prices " in the wholesale markets, in which the buyers take " pains to know, and generally do know, the lowest " price at which an article of given quality can be " obtained, and in which, therefore, the axiom is true " that there cannot be for the same article of the " same quality two prices iu the same market. Our " propositions wiU be true in a much more qualified " sense, of retail prices ; the prices paid in shops for " articles of personal consumption. For such things " there are often, not merely two, but many prices " in different shops, or even in the same shop ; habit " and accident having as much to do in the matter " as general causes. Purchases for private use, even " by people in business, are not always made on " business principles ; the feelings which come into " play in the operation of getting and in that of " spending their income are often extremely different. " Either from indolence or insouciance, or because " people think it fine to pay and ask no questions, " three-fourths of those who can affur.l it give much " higher prices than necessary for the things they " consume, while the poor often do the same from " ignorance and defect of judgment, want of time " for searching and making inquiry, and not un- " frequently from coercion, open or disguised. For '' these reasons retail prices do not follow with all " the regularity that might be expected, the action of " the causes which determine wholesale prices. The " infiuence of those causes is ultimately felt iu the " retail markets, and is the real source of such '' variations of retail prices as are of a general and " permanent character. But there is no regular or " exact correspondence. Shoes of equally good quality " are sold in different shops at prices which differ " considerably ; and the price of leather may fall " without causing the richer class of buyers to pay *' less for shoes. Nevertheless, shoes do sometimes " fall in price, and when they do (he cause is always " some such general circumstance ; and when leather " is cheapened, even if no difference shows itself in " shops frequented by rich people, the artisan and " the labourer generally get their shoes cheaper, and " there is a visible diminution in the contract prices " at which shoes are delivered for the supply of a " workhouse or of a regiment. In all reasoning about " prices the proviso must be understood, supposing " ail parties to take care of their own interest." 4532. Then you think that the whole benefit of this goes to the retail dealer ? — For a time the retail dealer benefits. It should be clearly understood what the benefit is. It is this. He buys chiefly in the wholesale market, but the fall of prices does not at once reach him, and he sells at his former prices. I think we came to the conclusion in the Commission on the Depression of Trade that that accounted in great measure for Schedule D not having fallen off, that the retail dealer was making very con- siderable profits and doing very well, whereas the wholesale dealer was not. 4533. But do you not think that in such an article as bread or sugar, the wholesale price finds its way into the retail price very quickly ? — No, I do not think it does very quickly, neither can it, because a drop of such and such an amount in the wholesale price cannot be so easily divisible into the small portions that your working man asks for. If he wants a couple of ounces of sugar he cannot get a corresponding reduction of price. 4634. Then you think that the whole benefit of this difference goes to the retail dealer, and that the effect of the change that you will make will be simply to take so much out of the pocket of the retail dealer and put it into the pocket of the producer ? — I cannot say that, because he also will suffer. I only say it is a question of time. The wholesale dealer and the pro- ducer feel first that which the retail dealer feels later on. If by natural causes or any other the state of things is reversed, and prices rise, the retail dealer will be the last to feel the benefit of the reverse. It comes to the same thing to both retail and wholesale dealer ; it is a question of time. It is not one man against another, but one tim^ against another. 4535. The whole thing is a question of time, but I am talking of the interval between the period at which the fall begins and the period at which things are ad- justed, and the question is which class gains and which class loses during that interval of time ? — There is no question as it seems to me of an interval of time during which one class loses and another gains ; at the beginning the retail dealer is gaining as com2)ared to his neighbours ; the time will come when the thing will alter, when the pendulum will swing the other way, then his prices having fallen will for a time remain low, and those of the greater dealers will rise. It is a question of time, as I said before, not a question of man against man. 4536. Then you thiuk that during this interval the whole difference lies between the wholesale producer and the retailer, and that the wage earner is neither the better nor the worse, in fact that he is MINUTES OF EVIDENCE. 231 not affected at all ? — No ; I do not say that at all. I say the etfect, whatever it is, reaches the wage earner, but reaches him last in point of time, and the effect of a subsequent rise in prices will nlso reach him last in point of time, consequently he will be suffering while others are gaining, he is now gaining while others are suffering, 4537. But he is gaining ? I will explain more fullj what 1 mean. We have heard much of the effect of exchange ; we are told that a bounty is given to the Indian producer ; and that that bounty consists in this, that the relation of silver to commodities is much the same in India as it ever was, that the producer in India pays the same wages that he did and the wage earner in India gets the same quantity of commodities for his wages ; whilst on the contrary in England the pro- ducer gets a smaller gold return than he did for his products whilst his expenses, which consist partly of rent and partly of wages and possibly of other things, remain for a time the same as they did before ?- — It , is better not to use the ambiguous term " effect of ex- change." It is the " effect of the depreciation of silver in terms of gold " that is meant. Otherwise I agree that, the facts are as you state them. 4538. Consequently the wage earner will continue to receive the same nominal wages for a time till things are adjusted? — "Has continued" I should say rather than " will contiaue." From the begin- ning of the alteration, whatever it is, the wage earner, as I said, I cannot put it in simpler language, is the last to feel any change. 4539. The moment that the alteration has reached wages the disadvantage to the English producer will cease ? — Certainly if it is sufficient, that disadvantage will cease ; there are other disadvantages. 4540. (Mr. Houldsworth.) Is there not an imme- diate effect produced by the bonus enabling the creditor to send iuto this country a commodity and to compete at once ? — That is the other advantage that I spoke of. 45 U. To compete at once with the production of those labourers that are spoken of ? — Certainly. 4542. Although if you do not take that into account wages may not fall and the labourer may be equally well off, but he is affected at once by the importation of the cheaper production which at once interferes with his own production, interferes with him at cnce in his employment ? — That is the other disadvantage of which I spoke. 4543. {Sir T. Farrer.) The reason why the Indian product is cheaper is that the expenses have remained the same, and it would not have been cheaper than the English product if the Englishman's wages had fallen at the same time as prices. Is not that the real reason why the Indian product is cheaper ? — The Indian product comes cheaper to England because the producer's initial expenses have remained nominally the same, but, being less in English money, they take less out of the gross proceeds ; and this advantage may last till a fall of English prices lessens the gross pro- ceeds. If wages fell here proportionately to the fall in prices, the English producers' position might be betttered ; but there is no analogy between the fall in sterling wages of the Indian producer and the fall of wao-es here. The former is deflnite and immediate, the^latter distant and indefinite. I rather wanted to answer another thing which grows out of your ques- tion, because it seemed to me to be a misapprehension of something that I had said ; you spoke, I think, of the advantage to India. I have never said any- thing about any advantage to the country, what I have spoken of was the stimulus to production and the advantage to particular persons, and I instanced that which alone I knew, the case of Chili, where I myself was a producer. I am far from saying that it is for the advantage of India, far from saying that it is. for the advantage of Chili. 4544. That is another question altogether, the advantage to the country as a whole ; I am speaking now only of the Indian producer in competition with o 24358. the English producer ? — Then we will keep to that ji.>. h. H. point ; but I should like to have that other question Gibbs. brought out, because it is a very important one ; one of the Commissioners asked me that question about ^ ^^^ ■^^^^' the advantage to the country, or rather intimated that he thought it would be a bad thing that a change in the status of silver should be made, because we should be arbitrarily taking away from India an ad- vantage that it has ; and I should like someone to ask me that question that I may say what I have to say about it. 4545. Let us confine ourselves at present to the ques- tion of wages. The advantage to the Indian producer over the English producer is, that he hafl to pay only the same wages as before, while the Englishman has to pay the same nominal wages, but larger real wages ? — I doubt if that quite meets the case, because that would seem to apply generally to the Indian producer and to the English producer compared one with the other, whereas it is the Indian producer of produce for export to England, that is the only thing in question : to gold-using countries I would say ; that is the thing it means, that is the only thing in question. It is, as I said before, that he pays a less sterling value in wages. 4546. But that is exactly the point that I want to get at. It does not matter whether it is the producer of cotton or the producer of wheat, the allegation is that the Indian producer gets an advantage becausf his wages remain the same while at the same time tht English wages and rents are high ? — That is not my allegation. 4547. Well that is what has been told us over and over again ? — I can only answer for what I said myself. That is not my allegation. My allegation is, judging by my experience of production in Chili, that inasmuch as the wages and other items of initial cost paid by the Indian producer remain the same while the produce when remitted hither. sells for gold which buys more rupees that it did formerly, his production is stimulated and his produce competes with ours. 4548. {The Chairman.) You mean that selhng at a lower price he still can make some protlt ? — He still can make sorue profit, even selling at a lower sterling price. It has of course to be considered how much lower the price can be- before his profit is destroyed, and ultimately it does get destroyed. That is why I have always said that it is only a temporary advantage. 4549. {Mr. Birch.) Will you just explain that " ultimately does get destroyed," will you explain what you mean by that ? — I mean that, by competition of foreign produce and also bythe scarcity of our measure of value, the price in sterling of the Indian produce falls to such a point that the exporter from Ind'a gets no greater advantage than he did before the fall of silver ; that is to say, that the reduced gold price will buy no more rupees than the higher price did before the demonetisation of silver. Besides this, the initial cost in rupees tends, though slowly, to rise. 4550. But Chili is a paper-using country ? — Cer- tainly. 4551. I think it is necessary to clear that up, be- cause provided that silver went up in India, then they would not get the advantage which Mr. Chaplin was referring to the other day. Supposing silver went up then that advantage would cease ? — Certainly. 4552. In the same way with Chili. Supposing it was_ rehabilitated in regard to its money position, then the money there would be more valuable, and therefore what went in wages would be more valuable, but the wages would not go up ? — Yes, I said there were two causes which would destroy the temporary profit, one the rise of wages there to meet the depreciated character of the silver, that is, the silver would be itself depreciated, and the other the appreciation of gold here. 4553. But in the last question you brought in the element of time, and you said, supposing after a time it wuiikl be so, is it not the fact that the time would Hh 232 ROYAL COMMISSION ON GOLD AND SILVER: Mr. U. H. Gibbs. 9 May 1887,. only have an influence provided that the silver went up there ? — What I said about time was this. The profit to the Indian producer could be only temporary, and the resulting stimulus could last but for a short time, because wages would rise in India on the one hand, and prices would fall here on the other. 4554. (Sir T. Farrer.) 1 think in one of your answers to Mr. Chaplin you said that the owners of all commodities would gain by the adoption of the bimetallic system. Sellers of one commodity are buyers of another are they not ? — In other words the probability is that prices would tend somewhat to rise. They would be guarded against continued con- traction of the currency, and so far as the adoption of bimetallism would, though in no great degree, expand the currency, they would rise. 4555. The rise of general prices would so far as purchase and sale are concerned injure buyers as much as it would benefit sellers ? — Of course they go together, but they do not go together in time, that is the thing. 4556. We are all buyers, and we are all sellers ? — Yes, certainly ; we are all debtors and we are all creditors. 4557. Therefore it may signify whether prices are rising or falling, but it does not signify to the com- munity whether prices are higher low? — Certainly not. 4558. And the distinction is not between the owners of commodities and the owners of gold, but between creditors and debtors, is it not ? — I admitted that it does not signify the least in the world — no, I am not sure that I can say that, because if prices remain at a very low point it may be destructive of certain industries. 4559. Not if all prices are equally or proportionately low ? — Well, but all prices never are. That is only theoretical. Theoretically you are perfectly right; practically it does not come to be so. 4560. Practically they do not go together ? — They do not go together. 4561. You think that one of the advantages of bimetallism is that it would tend to raise prices, and that that would give a stimulus to production. Do you think that it ^signifies whether you gave 21. for a thing or 11. for a thing, provided everything else rises or falls in the same proportion ? — That is the old story of halving the money in one's pocket. 4562. But I do not think you mean to distinguish between the owners of commodities and the owners of gold ?— Not at all. 4563. Because that was rather the efiect of the question? — But let me in limine jirotest against your last statement of what I desire. Voti said that the thing to be desired by bimetallism in my view was that we should have a continuous rise of prices. I have all along said that a tendency to a rise rather than to a fall in price is a subsidiary result, a probable subsidiary result of that which I desire. 4564. I was rather referring to your answers to Mr. Chaplin than to your general evidence. He asked you whether you did not think it would be an advantage to the owners of commodities, and you said you thought that on the whole it would stimulate production and trade ? — Yes. 4565. Over and above the question of a stable ratio ? — Yes. 4566. {The Chairman.) Would not there be a danger from that very thing ; might not one efiect of rising prices be, and has it not been, so to stimulate people going into trade as to bring down these prices very rapidly ? — Certainly, over speculation, over industry if one may use the phrase, may be induced. 4567. {Sir T. Farrer-) You will bear me out in this, will you not, that if you look back to our old political economists, Adam Smith and Eicardo, you will find that the great thing they were afraid of was de- preciation of the standard and a rise of prices iu consequence of depreciation ? — Yes, since their time too, and within our own memory that apprehension has been entertained. 4568. {Mr. Chaplin.) And those views were of course expressed, were they not, long before the pre- sent state of things existed?— Oh yes; it is Adam Smith and Ricardo. 4569. {Mr. Barbour.) Do you see any danger of the depreciation of the standard at present ? — I do not, 4570. {Mr. Birch.) But I think Eicardo rather referred to the paper currency ? — Yes. 4571. And they had in view always the rise and fall of the circulation of paper had they not ?— I think they had, but still what impressed them was the fear of over much depreciation, whether it is iu one sort or another. 4572. {Sir T. Farrer.) Well then it is not the owners of commodities versus the owners of gold that we have lo consider, it is debtor versus creditor. If bimetaUism were to raise prices it would or it might slightly benefit debtors at the expense of creditors, would it not ? — I think it might, just as creditors have been hitherto benefited, or since 1873 benefited, at the expense of debtors. Just so far. 4573. And you would alter this by recurring to what was the state of things before 1873 ? — I should be most pleased to do that, but we cannot be quite sure that it is attainable. We can without the least difficulty recur to the state of things before 1816 if England is willing, but to return to that before 1873 is quite another thing. 4574. But you would bring back the silver and gold to a ratio of 15^ to 1 ? — I think that would be the best. I have given reasons why I think that. 4575. That ratio was maintained pretty well up to 1873, was it not ? — It was. 4576. Now to return for a moment to the modus operandi of the bimetallic ratio, your view that when a bimetallic country is denuded of one metal it will still keep the ratio steady, is not necessary to the bimetallic theory ? — That rather depends on what you mean, by " keeping the ratio steady," and what by " the bimetallic theory." The ratio is fixed by law. Everyone can pay his debts in either metal coined thereat. Nothing can make it unsteady but the repeal of the law. If you mean " keeps the price of gold and silver steady in silver and gold using countries respec- tively," then I answer that my view as to that is not necessary to the bimetallic theory, by which I under- stand the theory that it is possible and desirable so to link gold and silver together by law that both shall play their part as heretofore in the money work of the world. 4577. The argument of bimetalhsts generally is, that if the chief commercial nations join, it is tolerably certain that all of them will not be denuded of one of the metals ? — Y"es, I may say that none of them would be denuded of either of the metals. 4578. {Mr. Courtney^ Do you lay that down absolutely whatever the ratio ? — Certainly, if they all agree on one ratio. 4579. And whatever that ratio ? — Whatever that ratio, if they all agree. 4580. So that if the ratio were let down to two lo one ? — Yes, certainly, if all agreed. 4581. There would be no denudation? — I have always asked the question, whither would the one metal go, and nobody has ventured to answer it. 4582. Would there in that case be continued production of the other metal ? — That is quite another thing. One of the metals would very probably tend to assimilate the production to the ratio. That is possible. I will not answer for what might be because I am not a miner. 4583. But you know the motive of miners ? — And I know that for that reason it is difiicult to predict what will happen. I hardly know that any miner will ever stop working, while he has or can borrow capital to work with. 4584.. Theoretically at all events it might have con- siderable effect upon the production ? — In such a case as you mention I think it might. The measure of MINUTES OP EVIDENCE. 233 value -woiikl be enormoiisly increased and the price of labour would at last rise in proportion. 1585. And it might also have an effect in getting that one metal discharged from its use as coin and converted simply into use for ornament? — I doubt about ornament considerably. If you mean the dearer metal, the one least produced, I do not believe it. 4586. You do not think that if such a ratio were established gold might almost cease to be produced. There would then be a consequent withdrawal of gold from currency in order to make up for that ? — Gold would rather be brought out from hoards or withdrawn from the arts before it would be with- drawn from currency. There are at least 800,000,000/. sterling of gold in existence as money, and it is computed that there are some 400,000,000/. of gold besides. There is .ilso a nearly equal quantity of silver (reckoning at 15| to 1). It has taken 1,000 or 2,000 years to bring the stocks to these amounts ; I do not think we need trouble ourselves with what will happen afterwards to either metal. 4587. {Sir T. Farrer.) But you admit that much in- convenience might be suffered by a single nation who should adopt the bimetallic standard, and that it was in fact suffered by France ? — Whatever- inconvenience there may have been France suffered it ; but I have never seen an intelligible account of the inconvenience. M. Pierson, late Professor of Political Economy, and now G-overnor of the Bank of the Netherlands, puts succinctly what can be said as to the change of metals in France. He writes on pp. 67-9 of his book on PoUtical Economy : " Only in the first quarter of this " century was there a mixed circulation. In the " second, gold was driven out by silver, in the third, " silver was driven out by gold. In the fourth, after " the new monetary measure of Germany, silver came " back. Is it no evil for a country when its " monetary system is wholly revolutionised every " twenty or twenty-five years ? " He answers, and I answer, that whatever might be the inconvenience. in a small and single state like Holland no practical evil would result to a group of states such as he had men- tioned — Holland, England, Germany, the Latin Union, and the United States. Any depreciation of either metal and consequent demand for it for coinage would speedily cause it to rise again to the level. " There are," he says, " 210,000,000 men in those countries using some 670,000,000/. sterling of gold. How long, think you, would the relative value of the two metals show a depreciation of silver if they should really set to work to part with this mass of gold and get silver for it ? " 4588. Will you tell the Commission how you under- stand the Gresham law to operate in practice ? — If two kinds of money circulate in a country the cheapest will drive out the dearest. That is the " Gresham law." But what is meant by cheapest and what by dearest is not always clearly understood nor how the driving out is to be accomplished, nor what is the effect on the country so situated. The driving out of one metal by another is caused in two ways, according to the relation of the bimetallic country either with another bimetallic country or with a monometallic country or both. I will take the case as between two bimetallic countries with different ratios. One ounce of gold and 15^ ounces of silver had the same purchasing power in France in the year 1834. One ounce of gold and 16 ounces of silver had the same purchasing power given them by law in the United States in the same year. Gold then was under-valued in France as compared with the United States, for the Frenchman could pay his New York creditor a debt of 16 ounces of pure silver (^20-696) with the one ounce of pure gold with which he could only pay his French creditor a debt of 15 1 ounces (Fr. 107-1342). Silver was under- valued in the United States, for ihe New Yorker could pay his French creditor a debt of one ounce of pure gold (Fr. 107-1342) with 15| ounces of silver, while he would need 16 ounces to pay his neighbour in New York. Gold therefore began to flow out of France, and silver to flow out of the United States. They could not, both ofthemhave been thedearest metaL in the sense of either having cost more to produce than the other. Again, if France had by law altered the ratio from 15 "5 to 16 • 25, while the double current was setting, as just now described, it is certain that it would have been reversed, that gold would have flowed back to France, and silver to the United States. No one could suppose that such a movement had any relation to the respective cost of production of the two metals. The " dearer " metal, then in the sense of the Gresham law, is that to which a higher value is attached in another country than that which is attached to the other metal, its monetary mate ; and the above process is that which takes place between two bimetallic countries, the change from one to the other metal being accomplished by transactions which seem to the actors in them profitable rather than injurious to themselves. 4589. Do you think the process between a bime- tallic country and a mono-metallic country to be such as you have just described ? — Not altogether, although in that case also the change would be for the most part automatic rather than the consequence of choice or of deliberate acts. The current from the bi-metallic country would flow outward as described in my last answer, but there would not necessarily be any inward current from the other side. If we take the case of France and England, the course will be this : When the exchange is against France, gold will be exported to redress the balance. The circulation in France will be contracted, and such silver as is produced or can be attracted from other states will be sent in and will fill the void. Meanwhile the process, whether as described in my last answer or in this, is a very slow one, both because of the fluctuations of the balance of indebtedness and because the holder of the under-valued metal (gold in this instance) asks an agio for the waiving of his right to pay in whicli he will, and this affects the exchange and delays the exoduS of the gold. The debtor who sends the gold makes a loss, but the provider of the gold makes a gain ; so France is none the worse. In short, whichever be the active cause which carries away the '' dearer metal " from a bimetallic country, I fail to discover the " misery " which the country is supposed to suffer ; and as to the "inconvenience," we in England are very ready with our pity for the sufl^rers, but I wait for an intelligible description of the mode of suffering. I do not remember to have seen it pointed out by any English monometallist, and the groans of the suflisring French bimetallist have not yet reached my ears. 4590. {Mr. Courtney.) When you draw the dis- tinction between automatic and deliberate action in that question, do you mean anything more than this, that the merchant or trader is not at all times conscious of the exact laws under which he works ? — That is so. He is not conscious of the laws under which he works. He finds the one a more convenient, a ready way of exporting specie to redress the balance of trade, and so ultimately and by slow degrees, ^and very slow degrees, the change takes place. I mean to say that the nation does not set to itself this problem, " It will be better for us to get rid of our silver," and send it away, nor does the other nation say, " It would be better for us to get rid of our gold, and send it away : How shall we set about it ?" 4591. Though not conscious of that, it is none the less a fact, that to their action is due the bringing about of those results ? — Certainly, the individual senders act in that way, because of the reasons which are present to their minds. The nation gets rid of one or the other metal without having any national wish for its expulsion. 4592. {The Chairman.) Bxit I gather that you would say that because it is not the deliberate act of the nation, but simply automatic, arising from business transactions with individuals, it would be likely to be more slow in its progress ? — I would say autoihatic, as arising from the natural course of com- merce, and because the two countries have so arranged matters that it would necessarily be so, one having Hh2 Mr. a. H. Gibbs. 9 May 1887. 284 ROYAL COMMISSION ON GOLD AND SILVER! Mr. H. H. chosen to have a ratio of 16^ to 1 and the other 15^ Gihhs. to 1, the 16 being an under- valuation of silver of ~ necessity, and the \b\ to 1 being thus an under- ' ^ ■ valuation of gold of necessity. It is clear that neither nation perceived the significance of establishing difierent ratios. 4593. {Sir T. Farrer.) That makes it to the interest of the particular dealer to send the metal in the way in which you have described ? — It is the readiest way. He does not calculate on the expulsion of one metal; I do not think he calculates that, but it does happen so. 4594. {Mr. Birch) As we are talking of a business transaction, I do not exactly understand you to say that they do not know what they are doing ; that they do not select the metal which pays best ? — I did not say that : They, the individual merchants, do make the selection ; but they.do not sot themselves to get silver out of their land on the one hand or gold on the other. It is not the preference for one currency or the other on the part of France or the United States, but it is that the particular trader or bullion merchant, or whoever it is, who has to remit specie from the one country to the other, finds it to his advantage to remit silver from the United States ; gold from France. But it does not matter whether it is a dealer or a merchant. 4595. Every merchant now-a-days has his eyes open when he has to balance transactions. He looks of course to the metal which suits best in the country that he is sending it to ? — That is what I say, he cau pay a debt with a smaller quantity of silver in I'rance than in New York ; he can pay a debt with a smaller quantity of gold in America than in France. It is his interest that teaches him. The merchant, the banker, the bullion dealer have nothing else to con- sider but their own interest, but I mean to say that it is not the love of one metal as currency rather than the other, but it is the particular interest of the par- ticular individual in each transaction ; the result of a multitude of transactions being that the silver left the United States, and at the same time gold left France. 4596. {Mr. ITouldsworth.) "What you mean to say is, that if there was no indebtedness between the two countries, then there would be no driving out ? — Mr. Birch has, I think, correctly understood what I mean. I want to point out that it is not a question of preference for gold rather than a preference for silver, but the fact of another country having made such and such a law, which maltes it better for you to send gold to that country, and the country from which you have sent gold has made a law which makes it b.otter for them to send silver to your country. 4597. {Sir T. Farrer) It is not even a question of indebtedness ; it is that the man who has gold in France finds that he can make more by sending it to America, and that the man who has silver in America finds he can make more by sending it to France ? — That 1 do not exclude. That may be so also. 4598. The indebtedness of one country to another makes that operate more strongly at particular periods, but it would be the interest of the bullion dealers of one country to exchange with the bullion dealers of the other ? — Certainly, but all I mean to point out is that Mr. Birch is quite right in saying that it is the indebtedness which is governing the whole thing ; the action of the bullion dealers would not be worth while doing if the course of trade and the wants of merchants did not give them the opportunity. 4599. If it were not for a certain premium that they get from the state of trade ? — If it were not for the sort of current which is setting, which makes some people demand remittances which they provide. 4600. And give something for that remittance ? — And give something for it; of course they get a profit. 4601. And it would depend on the different laws made, whether it would be worth the bullion dealer's while to do it without that state of trade ?— Yes, that is so. 4602. Do you think it no inconvenience .that a community which has been accustomed to gold as its standard should have to adopt the more cumbersome metal silver ? — Do we now pay in gold from hand to hand ? Why should anyone suppose that we should then pay in silver ? The Gresham law relates to the " dearest metal " and not especially to gold. How would it be with a nation who lost silver for gold ; the United States for instance between 1834 and 1873.? They were not eager for the change, which was by many viewed with apprehension ; but I suspect that the people at large were quite unaware of the change while it was in progress. They woke up to it after- wards, and then you had those discussions in Congress about the fact of small-change silver having departed. 4603. Then referring back to what you said about the cost of production. I do not understand you to deny that the value of the precious metals is affected to some extent by the cost of production ? — Certainly not. There is, indeed, an obvious difference between the effect of the cost of production on the value of the precious metals and its effect on the value of other commodities ; which is, that the latter are produced to be consumed, and the former are produced to be pre- served, and that consequently the cost of production affects the latter rapidly, and the former almost imper- ceptibly ; but the tendency is the same in both. The cost of production of the stock of tobacco existing in the world, including the year's crop, can be readily estimated ; but who shall estimate the cost of produc- tion of the 1,500,000,000/. of gold and silver money now in use in the world, the result of the accumula- tion of a thousand years. The cost, however, will be found to affect the value in this way: as the amount of money-metal increases in proportion to commodities, all commodities, including labour, will tend to rise, and when the cost of the labour reaches and surpasses the value of the metal extracted, the mines where that happens wiU be, sooner or later, closed ; the quantity of precious metals will tend to approach its former level as compared to commodities, prices falling accord- ingly. {See Mill III. y.] But this is a process of very exceedingly slow worldng ; and my object is to show, that it is not that which in practice causes a )netal to be dear or cheap in the sense of the Gresham law. I may mention that I was talking yesterday to a mining engineer who had charge of one of the sections of the Comstock mine. He said it was ab- solutely impossible for anybody to malte the least 'com- putation as to the cost of production of an ounce of silver. It was quite easy to say, if you had got your shaft made, and if the shaft had come upon a silver mine, that the amount of silver that you had gotten out of that particular mine cost you so much, but then you would have to cut off arbitrarily your capital account at the time when you began to find the vein. For every vein that was found in the Comstock mine shafts without number were driven in unproductive land. If you take the country at large, all that expense should form the capital account of the under- taking; and he said he did not beUeve there was any silver raised very much under 10s. an ounce, putting the loss of capital to enterprisers in that way. This was of course a hyperbolical estimate, not an accurate computation, but it showed his view. 4604. {Mr. Courtney.) But you would allow that the production of the metals does vary very much with the price realised and the cost of its production, and that in spite of the element of chance, which is such a strong motive on the part of mmers. The pro- duction of metals, for instance, copper in a particular part of the world goes out because it is produced at much less cost in another part of the world ? — Most certainly ; but I think copper stands on a very dif- ferent footing. Copper is made to be consumed, not so fast as wheat indeed, but the case is very different with copper from the case of that which is meant to be preserved. The cost of production, as I have said here, must affect the precious metals like everything else, but the time that it takes to effect it is enormous. MINUTES OF EVIDENCE, 233 4605. {Mr. Birch,) Surely the inference would be the same, because you only get copper out of mines, and change it for commodities, and you only get gold and silver out of mines for the same purpose ? — Cop- per is that which is for destruction, the other is for preservation. What is the amount of copper in the world ? A good deal, probably ; but how much of the present stock was produced 50 years back ? Very little indeed ; but gold dates for thousands of years back. One is a mountain, a heap that has been continually added to, the other is a heap that has been added to and continually brought low. 4606. {Mr. Courtney.) Did not the discoveries of gold in California and Australia dry up sources in other parts ? — I have heard people say that they did, but I do not know it. 460V. Some — not a very large amount — but some amount came from the Rhine countries before that ? — So there was gold in England, but I doubt that it was not the cheapness or any depreciation of gold that would have prevented the working of gold mines in England, but because the gold mines, such as they were, were exhausted. There is such a thing as exhaustion of mines. When you want wheat you plant it; you cannot plant silver or gold ; you have to look for it. 4608. The copper mines of England have ceased to be worked, not because they were exhausted, but because copper is produced much more cheaply else- where ? — I do not know how that is. I suppose it is so. But there is a great difference between copper and the precious metals. 1'hose copper mines you say are not exhausted, but the demand at a commensurate price is exhausted. The copper costs perhaps 50/., and nets 40/. a ton. At the end of a year you make up your accounts and know your loss. If a 'gold or silver mine is exhausted the result is the same, and is as soon known. But the demand for gold and silver cannot slacken. Extraordinary production has no other effect thi-m a rise of prices over the whole mass of commodities, and that efEect is necessarily exceed- ingly slow, and not obviously and at any moment clearly traceable to its true cause. 4609. {Sir T. Farrer.) In fact, the real difference between this and commodities that are consumed is, that here you have a large reservoir, and the flow depends on the height of the water in the reservoir rather than the amount that is trickling into it at the moment ? — That is true. 4610. It is sometimes the case, as it was with the gold of Austraha and California, that the discoveries have a very rapid effect ? — Certainly ; both the abun- dance and the facility, the abundance that exists and the facility of bringing it into use. 4611. {Mr. Birch.) But your experience in South America must have shown you that gold was produced there ; the washings of the rivers and so on, and then the cost of production was so great that they stopped washing the sands ? — I think the small quantity of gold that was produced there, except what was pro- duced in the silver, was rapidly exhausted. There was no great quantity ; no great deposits of gold in South America. With the exhaustion of the deposit, the cost of production increases. 4612. {Sir T. Farrer) We^hear and see constantly arguments about bi-metallism, founded on a sup- position such as the discovery of a mountain of silver ; do you think that extreme cases are fair tests of the theory ? Certainly not ; else I should retort the argument which sets forth this island's commercial supremacy, as caused by her having a gold standard, by asking if the sole possession of a gold standard of value would make the island of Jersey the commercial mistress of the world. Such things are absolutely valueless, except as a sort of thesis for discussion. 4613. Is not the real answer to an extreme case of that sort, that it would cause as great difficulties under a mono-metallic system as under a bi-metallic systern ? Yes. The fear is chimerical, and the difficulties unimportant ; but whatever they might be, they would be doubled in its effect on a country which has silver only, as I showed at the last examination. 4613a. You think the adoption of the bi-metallic system would not make it necessary to make any change in our token coinage ? — Certainly not. No standard silver money would be coined except double florins, which would bear a similar relation to the token coinage to that (vhich the 5-franc piece does to the French tokens, the 5-franc piece being 900 milliemes fine, and the tokens 835. A shilling would still stand for the 20th of a pound sterling, whether that pound was 113'0016 grains of pure gold or 1751-5247 grains of pure silver. If, indeed, silver should still further fall, it may be necessary to call in and re-coin the silver tokens, because the nominal value would be so far in excess of the real that the temptation to the illicit coiner would be irresistible. This illicit trafBc has already begun. The rehabili- tation of silver, by the adoption of a bi-metallic standard, or otherwise, would make such illii'it coinage impossible. 4614. Referring to your answer to question No. 3607, in which you state your views concerning the operation of a bi-metallic law in the case of a country denuded of one of its metals, e.g.. France, and in which you state, if I understand you, that the restoration of the operation of the bi-metallic law in France would at once restore the price of silver ; will you direct your attention to a mono-rnetallic silver country such as India, and say whether the establishment of a bi-metallic law there would have the same effect ? — I do not think it would. To answer you properly I should first state how far the exchange between bi-metallic and mono-metallic countries seems to be essentially difiererrt from that between mono-metallic countries using difierent metals. I. The exchange between two mono-metallic countries using the same metal is limited by the cost of transmission of the specie (including interest), and varies with the greater or less demand for bills. II, The exchange between a bi-metallic country and a mono-metallic country will follow the same line. It will be counted in that metal which is the monetary standard common to both, and will vary precisely as it would between two mono-metallic countries using the same metal. In both cases the exchange is based on money. III. The exchange between two mono-metallic countries, one using gold and the other silver, is, on the contrary, based on the ever-varying equivalence of the two several commodities, besides the fluctua- tions consequent, as in the other cases, on the cost of transmission and on the balance of indebtedness. Thus France, being bi-metallic, and the exchange being counted in the gold money metal common to her and England, the price of silver in London oscillated about the point of GQd. per ounce, which corresponded approximately to the French ratio of 15^ to 1. Silver, again, being the standard common to France and Germany (before 1873), and the exchange being counted in silver, the price of gold in Germany must have oscillated about a point corresponding to the same ratio. These two are examples of the second category. India is, in its relation to England, an example of the third. There is no true par of exchange between the two oout^tries, and no point of stability in the daily exchange. What would happen if India became bi-metallic ? Would the rule hold good that the exchange would be based on the money metal common to both countries, and should I be able to draw on India as I could on France for the money coined from a bar of silver sent thither at an exchange which would give me QOd. per ounce, and if not, why not. Let me assume that the ratio adopted in India would be lb\ to 1. The effect on bi-metallic countries, whether their bi-metallism was pure or limping, would be, of course, nil. The efEect on India herself would be, at at least at the outset, nil. The measure would be wholly inoperative there. No one would pay a debt in a gold mohur which would bring him 20 silver rupees, when he could pay it with 15J rupees in silver. If it were operative, it would not have any present effect in steadying the price of silver here, Mr. a. H. Gibbs. 9 May 1887, 236 ROTAL COMMISSION ON GOLD AND SILVER: Mr. H. n. because the exchange ou which that price would Gibbs. depend, is, as everyone knows, based at present on the equivalence of money and a commodity, and not 9 May 1887. q^ ^n identity of money metal. But if the l-esump- tion of pure bi-metallism in Europe, or any other cause, should re-establish the silver exchange, then the rule would hold good, and India would almost necessarily base its exchange on the money metal common to it and England. So, also, if the ratio adopted in India were that shown by the silver price of the day, say 20 to 1 (which, however, would bring with it much difficulty if loj to 1 existed anywhere else) then it ■ would be indifferent to the Indian whether he paid his taxes in a gold mohur, or in 20 silver rupees, and in course of time the position as respects England would be the same as was that of France, and the price of silver here would always oscillate about the point corresponding to a ratio of 20 to 1. 4615. Would you not contemplate if the bi-metallic system is adopted, that both England and India should be parties to it ? — Oh yes, certainly ; but what I have remarked upon there was the supposition that India was made bi-metallic alone. That was the answer to that question, because you said, taking a mono-metallic country. 4GI6. (Mr. Barbour.) May I ask why you would wish to include India in the bi-metallic union ?— Because I think the more that is included the better for the stability of the whole thing. 4617. For the greater portion of Indian trans-_ actions I suppose silver would be better than gold ? — India would continue to use silver, because it is the most suited to her commerce. 4618. {Mr. Courtney.) Is not the outcome of your answer this, that, the establishment, io a country which is at present mono-metallic, and having a cheaper metal, of a ratio giving that cheaper metal a value greater than it possesses would be of no effect what- ever ? — That which you call the cheaper metal, namely silver, would not by the estabhshment of bi-metallism in India alone be given a value greater than it possesses. It has had no material fall in value in India, and would not be raised. The outcome of my answer is that bi-metallism there only would have no present effect, either in giving it higher or lower value. 4619. You must establish bi-metallism in a counU-y with a ratio which gives the metal in use in that country a less value than it at present possesses. You must give the gold as regards silver a less value 1 to 15 instead of 1 to 20. Then if you established bi-metallism in England you would get a movement ? — A movement, yes ; but you might establish bi- metallism in France where gold and silver arc at that ratio 15| to 1. To give gold in England a value of 1 to 15^ instead of 1 to 20 as regards silver, would not of course lower its value as to other commodi- ties to a corresponding extent, it would only lower it so far as any slight addition to the mass of the ' measure of value resulted. So in India ; if India were included in a bi-metallic union, the effect would be slightly to depreciate its currency in common wiih the rest of the currency of the bi-metallic nations. 4620. ( The Chairman.) When you speak of esta- blishing bi-metallism you always assume, do you not, free mintage and legal tender ? — Certainly ; and I .say in answer to Mr. Courtney, supposing you establish bi-metalHsm in France, that is to say, free mintage and legal tender, whereas now there is only legal tender, there would be no such effect as that supposed ; one metal is not dearer or cheaper than the other in respect of commodities. 4621. (Mr. Barbour^ But if you established bi- metallism in England at the ratio of the present day, you would make no immediate change in England? — None whatever. 4622. But you would prevent future changes? — Future changes. It was suggested to me the other day that it was not impossible that the United States might .igree, not to open their mints, but to open their treasury, to all the silver that might be brought to them, at the price, of the day. The effect of that would be that the price, 20 to 1 or whatever it might be, would become the ratio and would not vary. 4623. {Mr. Courtney.) If you establish in India bi-metallism with a ratio of 1 to lb\, there would be no effect produced ? — No present effect. 4624. If with the ratio of 1 to 20 ? — Then of course there would be the effect described in my answer to Sir Thomas Farrer. 4625. If with a ratio of 1 to 30 ? — Then an effect would be produced the Other way. If you mean in India alone, the Indian would pay his tax of 30 rupees with one gold mohur instead of 30 silver rupees, and would export the remaifiing' ten, for which, on the supposition of 20 to 1 being the price in England, he would get half a sovereign ; and this would go on until the price was brought down to the ratio. If you mean as member of a bi-metallic union, the effect would be a great contraction of the currency primarily in India, France, and Germany, and ulti- mately everyvirhere. 4626. So that it depends really not upon the establishment of bi-metallism by itself considered in India, but the ratio adapted in India ? — Yes, but bi-metaUism involves the establishment of a ratio. 4627. You would say arbitrarily the introduction of bi-metallism into India would be of no effect. It depends on the ratio ? — That is quite right. 4628. {Sir T. Farrer^ 1 should like to ask you, supposing that England adopted bi-metallism and France adopted bi-metaUism at a ratio of 15^ to 1, what would be the effect on the value of the silver now in France? — The effect of that I stated in a former answer. ' The particular extent of the effect I cannot define, but the uncoined silver in France, if there be any, would of course be elevated to the same position as the coined silver. It would have no effect upon the coined silver in France, except a slight depreciation measured by the amount of the enlargement of the measure of value. 4629. Would it give no additional value to it for the pnrpose of exportation ? — It would be a means of exportation just as the silver in England was a means of exportation in 1848. It would be money in Eng- land as well as in France. 4630. Would it not raise its valuo in relation to gold ? — Yes, I should say it would raise its value in relation to gold. It would have an export value as well as an import value ; but in Franco iU value in relation to golJ would not be altered. 4631. Therefore it would tend on the whole to increase the volume of the currency in gold as well as in silver using countries ? — Yes, to the extent that I mentioned in my answer to Mr. Birch. 4632. {Mr. Fremantle.) Do you think that a uni- versal bi-metallic arrangement between the civOized countries of the world would have the effect of bringing into actual use in France, in daily transactions, the large amount of the silver five-franc pieces now lying idle in the cellars of the Bank of France ? — I suppose you mean by " actual use " passing materially from hand to hand. I am unable to judge of that ; you must ask that of a Frenchman, but I know that in Ger- many there is said to be a great lack felt of the thalers. They wish they had more thalers. That is, I think, the case with German manufacturers. I have always said that I believe the result of the establishment of a bi-metallic law would be that each country would find itself in possession of the metal, as coin, which was most suited to its trade. The five-franc pieces in the Bank of France are not, I think, more " idle " than the gold in the Bank of England. They circulate, I suppose, in the form of notes. 4633. But even at present in France and Germany there is no restriction upon the legal tender of the thaler or the five-franc piece ?— None at all. 4634. {Sir T. Farrer.) Then supposing that we had the bi-metallic system established between England and India in the same way at a rario of 15| to 1, that would raise the value of Indian silver, would it not, MINUTES OF EVIDENCE. 237 in relation to gold ? — In the same way ; that is to say, for export purposes, not for internal purposes. There is no more than is wanted in India apparently for internal purposes. It would be a very convenient remittance, exactly in the same case as it was stated before the Committee of the House of Lords in 1818, that silver was a convenient remittance for us, that is all. 4635. But would it not have the efiect of raising the value of silver in relation to gold altogether ? — Yes. 4636. Therefore it would somewhat raise the value of the Indian currency, and somewhat depreciate the value of the English currency ? — I think it would not raise the value of the Indian currency at all, because the value of the Indian currency has not fallen. It bears the same relation to commodities in India that it did before ; no difference would happen therefore, except that, as before said, that, with all other cur- rencies, would probably show a slight depreciation — ia other words there would be some rise of prices. 4637. Then would it not depreciate the value of the English currency ? — I have all along said that in so far as you bring into the mass of currency in the world any silver which is now not available for coin, not available for a measure of value and medium of exchange, in so far you will depreciate the whole mass of currency existing. 4638. You will therefore depreciate the value of currency here in England? — To that extent ; how far is quite another thing. 4639. But that would be the tendency ? — There would be no "tendency." So far as there are 5, 10, or 20,000,000 of silver that have been thi'own back into the mines, so to speak, by being put altogether out of either direct or indirect circulation, their rer introduction would absolutely increase the whole mass of currency in the world; that is all. The future d Dreciation or appreciation would depend on the increase or diminution of the joint production of silver : ud gold mines ; just as it does now in the gold- using countries and silver-using countries on the increase or diminution of the production of gold and silver respectively. 4640. A question that Sir John Lubbock put to Mr. Grrenfell on Friday v, as this : Supposing England and India both became bi-metallic, you would not increase the volume of the currency, you would have the same quantity of gold in England, and the same quantity of silver in India. And yel you expect to raise prices in England slightly. Would this rise of price happen, and if so, how ? — I think that would probably be the case, that is all I say, but as to not increasing the volume of the currency, I should agree to that, if bi-metallic India and England were excluded from commerce with the rest of the world. Obviously whatever addition was made to the volume of cutxency in any country would soon be spread equally over all. 4641. Sir John Lubbock asked the question in what way it would happen, and I think your late answer expressed an opinion that the tendency would be to raise the value of the Indian silver and depress the value of the English gold ? — To level the value of the whole volume of currency, gold and silver, every- where. It is probable that it would be slightly depressed. 4642. As regards freedom of contract to pay in gold, you do not propose that the bi-metallic law shall' prohibit contracts to pay in gold ?— Certainly not. 4643. Have you any doubt that in the absence of such prohibition, contracts to pay in gold would be legal ?--I have none. 4644. Even supposing there was iio legal remedy, the custom of traders might give force to such con- tracts, might it not ?— Yes, and I presume that even if a court of law would grant no damages yet a court of law would probably compel specific performance. 4645. But your argument is that under a bi-metalhc system "there would be no motive for making such contracts ?— Certainly. 4646. Have you considered whether if, while subject to a bi-metallic law, a great commercial community voluntarily adopted a system of contracting to pay in gold, it would affect the market price and place an agio on gold ? — If you mean that the community should secede from the bi-metallic agreement, I have shown how great would be the difficulty of doing it, and how little the inducement. But if you mean that remaining in the bi-metallic union, English traders might get into the habit of making two prices, a higher for gold, and a lower for silver, or vice versd, that is if England perversely desired to have more than she really needed of either metal, she would have to pay for it. But I do not believe in the perversity, and I do believe that under a bi-metallic law each nation would practically use that which was most convenient for its needs. It is no doubt possible that a great mono-metallic country such as China might create a great demand for silver for the making of railways. There might then be an agio on silver, by which those who parted with their silver would profit. 4647. Do you know the case of California, do you know what Lappened there? — I have heard that this was really the state of things. A colleague of mine was in IS'ew York in the days of greenbacks, and he had to send a telegram to England. It was necessary to pay the telegram in gold. He went to the telegraph office, and the tape was continually running, showing the course of exchange from minute to minute. The clerk looked, and on that he paid ; but in his inn he paid five dollars a day, in greenbacks, for his maintenance. He then went to California, and there he heard, as you said, that the money of the country was gold, so he inquired at his inn what was the price of his maintenance, and he was told 3^ dollars a day. When he came to pay it he found it was greenbacks just the same, five dollars in greenbacks, though the price was $3^ in gold. There was no gold to be had. It was only that they chose to keep up the nomen- clature, not that they used the actual coin. 4648. Is it not the case that California refused to adopt greenbacks when they were made legal tender by a law of Congress, and insisted on carrying on all dealings in gold ? Did not the State pass a law validating contracts to pay in gold, and was not this law upheld by the Supreme Court of the United States ? Can you say whether all dealings in California are in gold and notvin notes ?— I believe it was legal to pay in gold, and make contracts in gold, but practically people made them in gold and paid them in paper. 4649. Your object is to restore silver to its former position in relation to gold ? — Certainly not, in the sense of raising the gold price of silver, though that would be a result. My object is to ensure that silver shall take its share in the money work of the world, as was recommended by Mi'. Goschen, Sir Thomas Seccombe, and myself in our report on the Paris Conference of 1878 ; and if that is advisable it seems that the only way of assuring it is by a com- mon declaration of the monetary relation between the two metals. 4650. But in doing that you propose to adopt a 15^ ratio ? — That is not part of the principle. It is what I think if I were arguing the question at an inter- national conference I should argue was best. 4651. You believe that is the only practical way of doing it ? — I do not say it is the only practical way. The Americans are willing to give up their 16, the French and G-erman hold to their 15^; and the adoption of the latter would seem to me, till better is shown me, to be the most practicable way of bringinu; it about. 4652. (Mr. Barbour.) If the nations agreed to a different ratio from 15^ to 1, would you accept it ?— Certainly, because I want the principle, which is far more important than the details. 4653. You would much rather have any ratio than none ? — Certainly. 4654.i(r/ie Chairman.) Do you think there would be practical inconvenience, if the existing ratio wei'e Mr. H. H. Oibbs. 9 May 1887. 238 ROYAL COMMISSION ON GOLD AND SILVER; Mr. H. H. Gibbs. 9 May 1887. 20 to 1, infixing that, as the ratio, if all agreed ? — Not to tis ; no, not at all, excepting, as I have said before, that, judging from what one has seen of the very large production in the course of this century of the two metals, it would not be the true proportion of the two metals, the one to the other ; but I think that would be of much less consequence, for this reason, that no one knows what the true pi'oportion is, nor ever can learn. 4655. {Mr. Barbour.) Would there be this difficulty about the ratio of 20 or 21 to 1, that a great deal of coined silver is now over-valued, and if it came to be re-coined at the new ratio there would be considerable contraction of the currency ? — Of course there would be that, that is to say that in Germany and France there would be a considerable contraction, and in America not quite so much. 4656. (Mr. Fremantle.) But in Germany and France they would not be coined at the new ratio, would they ? — They would either be "coined at the new ratio, or the value of the coin would be altered, because we are assuming that we have all agreed on a ratio of 20 to 1. That is the reason why I think 15| to 1 would be so much more easy to carry out. 4657-8. {Mr. Courtney.) If they resumed at 20 to 1 in France and Germany, the 20 to 1 might be established by increasing in that proportion the weight of the five-franc piece ?- — It can be done by increasing the size of the five-franc piece, or decreasing the size of the napoleon. 4659. Whichever has to be done, it does not matter, the whole point of the observation to which I am working is this, that there need not be a con- traction of the currency ? — The contraction need not result from having greater weight in the silver coins. You may get the new system established by diminishing the weight of one coin or increasing another. If you increase the ratio to 20 to 1, you unquestionably con- tract the mass of measure of value throughout the. world. You can alter the particular coinage of this and that country, but if out of the mass of silver 20 pieces are to be equal to one piece of gold, there certainly will be less equivalents to one piece of gold ■ than if you had 1 6 J equal to one piece. The opera- tion of the measure would be as follows : — For all interna] purposes, in France, the possessor of 20 francs in silver is in as good a position now as the holder of 20 francs in gold. If the ratio were altered to 20 to 1, it would be a recognition within France of the depreciation of silver (as measured in gold) which has taken place outside it, and the holders of silver, and the country through them, would be so much the poorer. Tlie measure of the loss would be the diflfer- ence between the ratios of 1 5| to 1 and 20 to 1 on the amount of silver held as currency in the country — say nearly one iburth. The change in the ratio may be carried into effect by dealing with the silver or the gold. If silver coins were dealt -with it would need 20 ounces of silver to make pieces which are now made out of lb\ ounces. Tliis would cause a con- traction of the currency until the extra requirements were filled up from outside. If, on the other hand, gold pieces were dealt with, and so many grains were taken from the 20-franc piece, the result, as regards the holders of silver, would be really the same as if silver coins had been dealt with, though the nominal amount of the currency would be increased, for the holder of 20 silver francs would only obtain for them a smaller piece of gold than he would have obtained before the change; which new gold piece, though nominally representing 2(J francs, would only purchase as much in commodities as 15^ francs did formerly. As regards prices, it is manifest that France by either operation {i.e. whether the silver or gold were dealt with) would be poorer by the amount of that extra legal value now given to its silver currency which would be swept away, and the currency to this extent would be contracted. If the operation could be confined to France, prices would, other circum- stances being absent, fall to this extent in that country. So soon, however as the void was created, it would be filled up by importations of silver into France, and prices would only be affected there as in other countries by the withdrawal of so much silver from the currency of the world. This would, of course, be exceedingly small. But within France itself the effect on nomi- nal prices would be very different, according to the mode by which the change of ratio was carried out. Prices are now virtually measured by gold, though they are stated in francs, which are both gold and silver. If the silver pieces were enlarged, so as to bring up the silver in them to the ratio of 20 to 1, prices would not change, except to the extent of the temporary contraction above referred to. The new franc would accurately represent the gold price. But if the gold piece were reduced, prices measured still by the gold franc would rise* to the extent of the debasement of the gold coin; that is nearly a fourth. In other words, it would take 24^ silver francs, or a new gold piece of 20 francs, and 4^ francs in addition to it, to purchase as much as can now be bought for 20 silver or 20 gold francs. The debasement of the gold piece, it need scarcely be said, would greatly affect all contracts. 4660. (Sir T. Farrer.) Well, what you propose would create a greater demand for silver, no doubt? — Silver, no doubt, would be freely offered for coinage. 4661. You do not think that silver will necessarily be used in this country to a much greater extent than before ? — No, I do not think that silver would be much, if at all, more used in the internal commerce of this country, not a single piece beyond what might be "required by the public. 4662. ( The Chairman.) Why should it create a greater demand for coinage if your hypothesis is, as I rather understood it to be, that it would not alter the habits of the people as to the particular metal which they used ? — I mean this, that it would not alter the habits of the people in the particular countries as to the metal they had used. In Germany, more silver thalers, would, it is said, be welcome ; and the fact of the Mint being open would ensure their being coined. It would be in the same case with gold here; one does not say there would be a demand for more gold, but when it comes in, it comes to the Mint, that is to say to the Bank, and forms part of the reserve of the Bank. The Mint is open to the gold, and therefore it becomes money at once, and that, which is not now the case with silver would be so in the case supposed, not of necessity for circulation in this country, but as being useful for export, guaranteed, at least as to fineness, by the stamp of the Mint. 4663. {Sir T. Farrer.) Silver is not and cannot be as easily used as gold as a remittance to pay the balance of international trade ? — No, not as things are now. 4664. Silver under a bi-metallic system would be equally valuable with gold, consequently you would for that purpose create a great demand for silver ? — For silver, but not necessarily for coinage, though its coinage might add to its convenience. 4665. {The Chairman.) When you say that there would be a greater demand for coinage, what you mean really is for purposes other than coinage? — Silver would generally have more purchasing power ; I do not see therefore that it would be more sought for purposes other than the serving as money. 4666. {Mr. Fremantle.) What do you think is the reason that the thalers in Germany remain in the banks and do not go into general circulation ? — I do not know that that is the case. I suppose the bank keeps its reserve for its own convenience in gold and ajlver. Nobody has yet been able to ascertain how much it has got of either of them. In France, one knows it exactly, but in Germany one does not know. All my knowledge is got from a friend of mine in Germany, a manufacturer there, who says, " I am always endea- * This rise would be temporarily counteracted to a small extent, owing to the virtual contraction of the currency re- sulting from the sweeping away of the present over-estimate of the silver coin. MINUTES OF EVIDENCE. 239 " vouring to get myself a good store of thalers, " because the people like them." 4667. What is to prevent their coming into cir- culation now ? — I think they are in circulation, just as the gold in the Bank of England is, but the Bank must keep its reserve. It has got a reservoir of silver, and out of that reservoir people supply them- selves. 4668. In what way would a bi-metallic arrange- ment change that condition of things ? — Only that the Mint would be open to the coinage of silver ; therefore when silver was made a remittance to Germany, silver would go to the Bank or to the Mint, just as when gold is remitted gold goes to the Bank or to the Mint; 4669. {Sir T. Farrer.) You say that silver would probably not be more u.sed in currency in this country, or very little more ; but whether it is so used or not, the effect of your proposals will be to increase the quantity of the precious metals used as standards, whether gold or silver ? — ^Yes, I should say it would, certainly. My point has been, as I have said before, that less fluctuation in supply would be the thing, but there would be an increase, if I said right in my former answer to Mr. Birch, there would be some increase, but no one can absolutely say how much or how little that increase would be. 4670. If so, when, and how do you suppose that this increase will appear ? — In the general though moderate increase of the measure of value all over the world as compared with the mass of commodities measured. 4671. Will this addition to the currency appear in the amount of cash used by people in their ordinary transactions, including, of course, notes issued against the metal deposited in the Issue Department ? — I do not know that I can say how it would. It is through more spending power ; that is the way it gets increased. 4672. Yes, but in order to operate it must be some- where ; where will it be ? — All over, I think, every- where, sooner or later. 4673. Do you think it will be in the increased amount of cash reserve in the banking department of the Bank of England ? — The reserve of the Bank of England is merely a reservoir from which there is a continual flow. Various causes contribute to raise or lower the level of what remains in it. It might be low though a large import of bullion had been lately received. 4674. What I wanted to get at was in what way it would operate. I am now speaking of what you consider a subordinate object, but I want to find out in what way this increase would operate to restore prices to their former level, from which, as is assumed, they have been displaced by the depreciation of silver? — Only in the way that I have already said, by the general increase of the measure of value in comparison with the things measured ; on the principle stated by Hume. 4675. Can you explain what is the exact connexion between the supply of the standard metals and prices ? How would an increased or a diminished supply operate ? — I will suppose a great discovery of gold in Australia. The finders of the gold are so much the richer, have so much the more to spend, and spend it there and elsewhere, overbidding their neighbours, and enhancing the price of the commodities which they desire. The receivers of the higher prices profit accordingly, and are themselves able to spend more at home and abroad ; and the influence of the increased production of the measure is felt in ever widening but more faintly marked circles over the whole range of commodities measured. The holder of the gold outruns his neighbours in the chase after commodities, bidding higher prices for them, or in other words ofl^ering his gold at lower prices; just as had the increased production been in wheat or any other commodity, the holder in search of a customer would offer it at lower prices. But the production of the additional quantity of wheat cheapens wheat,_ cheapens it directly as compared with gold alone, and indirectly o 24358. as compared with all other commodities ; for gold in Mr. H. H. all gold-using countries is the measure of those other Gihbs. commodities. So then the price of wheat is lower — not necessarily than it was before — but than it would ^ ^"y l*'87. have been had the additional quantity not been pro- duced. The production of the additional quantity of gold, in like manner, cheapens gold, cheapens it as measured in commodities, so that the gold prices of all of them are, not necessarily higher than they were before, but higher than they would have been had the additional quantity of gold not been produced. The wheat is but a passing addition to the wealth of the world ; but each ounce of gold, whether it is to be had for the picking up, or costs 4/. to produce, goes to swell permanently (barring wear and tear) the mass of the measure of value in the world and tends accordingly to the rise of prices. The converse of this is, of course, also true. Suppose a million sovereigns shipped from Australia to England and lost on the voyage. The spending power of those who lose it, and of those with whom they would have spent it, is in an analogous manner diminished, and the mass of the measure of value is permanently diminished, causing, sooner or later, a general fall in prices. 4676. {The Chairman) If you remonetize silver, do you mean that it would have the same effect as if you discovered so much additional gold ? — Pro tanto ; that is to say, the bi-metallic system having been adopted, and the whole commercial world using both gold and silver, the discovery or the reproduction of silver that has been laid by, and, as one may say, put back into the mines, would be the same as the dis- covery of gold, in the proportion of the fixed ratio. If silver (or gold) be absolutely laid by, withdrawn from any influence upon the price of commodities, it is the same as putting it in the mines. 4677. But if you do not change your ratio, and take your present ratio of silver to gold, that silver is at the present moment exchangeable with gold at the rate of 20 ounces of silver to 1 ? — There would be no addition if there were no change of ratio. My last answer was made on tlie supposition that there was to be a change of ratio. 4678. (Sir T. Farrer.) I wanted, if I could, to get at the exact point where the precious metal is ex- fhanged for commodities. I want to know exactly where it operates. The gold is somewhere. It is either in the hands of •the public as circulating medium, or it is in the bank reserves. I want to know, would this addition operate upon one, or upon both, or upon which of those ? — It would operate in turn upon all of them. Of course the production of more silver or more gold, the putting of a new store of money, in short, into the pockets of any individual, would tend to bring more gold into that reservoir of which we have spoken, the Bank of Eng- land. From that reservoir it would flow out ; it ' would be a reservoir from which there are discharging pipes all over the country. 4679. Then if it operates upon the circulating medium through the country would not you expect that it would operate on retail prices, because it is in retail transactions that gold and silver are used ? — Certainly, it is in those transactions that the metals pass from hand to hand ; but the effect, speaking generally, is that retail prices do not rise at the same time, at least to the same extent, as wholesale prices do. 4680. Then my next question is, are gold and silver used in wholesale dealings ? — Very little indeed, as passing from hand to hand. 4681. But what we find is this, that gold is used in retail transactions and not in wholesale, and yet you ."iay retail prices do not fall or rise with the diminished or increased supply of gold while whole- sale prices do. Can you explain that? — Wholesale prices will rise. That means to say, whether gold passes or not, that if, for example, I have received a commodity for sale, T am able to sell it at a higher rate, for a greater quantity of gold. I sell it. I touch Ji 240 ROYAL COMMISSION ON GOLD AND SILVER Mr. H. H. I'o g*^ld, but instead of receiving 5,000/., I receive Gibbs. 6,O0OZ. for my commodity. That belongs to me. It — — is transferred to me in the books of my bankei;'. It 9 May 1887. jg a mere transfer, but I am the richer. If we both bank with the Bank of England, it is a mere transfer. 46S2. But we have been talking of the greater or less quantity of this physical material gold, and this physical material gold does not appear in those trans- actions at all. I want to know where it does appear to influence the transaction ? — It appears in this, that by that transfer, gold in the vaults of the bank which was the buyers' becomes mine. Your point seems to be that retail prices, where sovereigns are actually passed from hand to hand, ought to rise when more sovereigns have been produced which should so pass. My point is that the passing of the gold itself from hand to hand is of no moment. Gold is the basis, and has been broadened, and a larger superstructure can be raised on it. I gain spending power, and thus prices rise. I, who have got this money at my credit, am able to give a higher price for a horse than I otherwise would, or for an estate ; and the seller of the horse or the estate is in his turn enriched and would enrich others, the effect diminishing with each step as time goes on. 4683 . You have got an order by means of which you can draw upon your banker ; and for which he is obliged to give you sovereigns if you want them ; but you never do want them ? — -Let us put it in a more concrete form. Let us suppose, as it was in 1853, that I receivedaconsignment of alarge quantity of gold. We will suppose also that the consignment, instead of belonging to my friend in Australia, belonged to myself. I had made a speculation in the gold and I had written out " any amount of ounces that you can buy at 3/. an ounce send over to me ; " it is quite clear that I should have made 17 s. lO^d. an ounce for my gold; I should be the richer. Two things would happen, in the first place that I am made richer, able to give a - higher price for an estate, or a horse, or a breakfast, or anything, and besides that, the measure of value in the world is increased as compared with what it was before. 4684. (The Chairman.) Your first proposition I completely follow. Of course there is more gold which measures value, but the question is, whether such an increase as that added to the quantity, of gold pro- duces an appreciable effect upon the total of prices in transactions, which transcend enormously the quantity of gold that exists ? — I think it would be impossible for us here to go into that whole argument. I should not feel myself competent to do so, iii the time at our disposal. I give my authority ; I say that is Hume's statement, which has always been accepted by economists, namely, that the mass of the measure of value, as compared with the mass of commodities, is that which in the long run and as a whole is price ; that is, not only regulates price, but is price. 4685. (Mr. Barbour.) Do you think that the value or purchasing power of gold depends on the demand and supply, as with the value and purchasing power of other things ? — Yes, surely it does. The way I put it is, that the gold is cheaper. I have to offer my gold, when I get a quantity of it, at cheaper rates, just as if I had wheat, an inordinate production of wheat. I am forced to offer that -at cheaper rates. That is how it happens. 4686. {Mr. Courtney^ There are two theories which are a little independent of one another, and have to be connected by some element of time. First of all there is this theory that prices vary directly as the quantity of the money in circulation ? — Yes. ^ 4687. So that if you have got a quantity of money in circulation, a, to which there is an addition made, h, then the new price is to the old price a plus 6 to a ? — ^Yes. 4688. And if h is small compared with a, there is very little change ? — That is precisely it. 4689. But the immediate effect of the addition to your stock of a certain amount of gold might very greatly alter the range of prices in certain commodities. There would ultimately be a new level, but there might be an immediate effect differing widely from that level .? — I quite agree that the alteration of price in certain commodities would be very large at first, that is, at the place and time of any new discovery of the precious metals ; but a level would be reached in time. 4690. {The Chairman^ Would not the extent to which prices generally were affected by an addition to the stock of the precious metals which form the standard depend not merely upon the per-centage which the addition bore to the total amount of the stock, but upon the relation which the number of transactions, measured by the money, bore to the amount of the stock ? — Certainly, it might not be simply the per-centage ; but I am not sure that the number of transactions is of much importance. It is the number of commodities which affects the matter. If commodities increased pari passu with money, there might be no change in price. I think Mr. Courtney's way of putting it is exact, but it of course requires the addition of the words ceteris paribus. There are many things which would alter that proportion, and that you have now mentioned is one of them, that every banking expedient makes a new discovery, perhaps, more important. 1 mean that if you discovered 100,000,000/. of gold now, that would have a greater effect upon the stock, the more the banking expedients had made the use of gold, in general transactions, not necessary. This point can be better investigated if we cast aside the idea of banking expe- dients, and imagine a community transacting all its busi- ness by delivery of coin in exchange for goods or ser\'ice. Then it is manifest that though there may be a mul- titude of transactions (only limited by the physical possibility of effecting the transfers in the 24 hours) where the same piece or pieces should pass through many hands, and convey the same goods, or others of the existing stock of goods ; but it is manifest that simultaneous transactions must, at any given moment, be limited by the number of the population, the number of pieces of money, and the number of commodities or acts of service. E.g., if there were 1,000 men, having 1,000 pieces of money, and 1,000 exchangeable com- modities, it is clear that 1,001 transactions could not take place at the same moment. Add 10 per cent, to the money, the spending power would be increased, and the ultimate result would be that the commodities measured by the 1,100 pieces would, taken as a mass, be higher in price. Let the money remain constant, and let the commodities be increased, the contrary result would of. course take place, and prices would fall. If population increased to 1,100, while commodi- ties and money remained constant, no change of price would ensue, but transactions would multiply. But increase of population really involves increase of com- modities, and we may therefore treat commodities and population as ohe. It is clear therefore that increase of money or scarceness of commodities must raise prices, and scarceness of money or multiplication of commodities lower them. We know how fiduciary notes economise gold, how cheques economise notes, and how the clearing-house cancels cheques. Take away these expedients, and not all the gold in the world would serve for the internal transactions of Great Britain alone without great inconvenience to commerce and the daily transactions of life. But not on this account is the effect of the changes in the relative amount of gold and commodities diminished; on the contrary, it is increased. If the gold in Eng- land were 800,000,000/. instead of 100,000,000Z., the addition or subtraction of 50,000,000/., or a corres- ponding subtraction or multiplication of commodities, would alter the proportion by -^. But if the total were 100,000,000/., such a sum subtracted or diverted from it would alter it by one half. The gold money in the world is computed at upwards of 800,000,000/. One quarter of that sum has been taken away from its former office of measuring the goods of the gold-using nations, and set to measure the goods of Germans. In other words, the mass of commodities measurable MINUTES OF EVIDENCE. 241 by gold has been increased by those used by Germany, and prices, as shown above, could not but fall. 4691. I am not qnite sure that I understand why, on the hypothesis you are putting, prices should have gone down of late years, because though there have not been such large additions to the currency, there have been additions to the gold currency? — It is because of the subtraction that has taken place ; that is to say, that the Germans, and the United States, and the Italians, have set the gold to do other work, or rather to do work that it had not had to do. It is the same sort of work, but more work than it had to do before. 4692. You put it, that it is by excluding the silver that they previously used ? — They excluded silver, and took gold. 4693. Taking gold would not matter, because it would not matter where it was. You are not speaking of the amount of precious metal in any particular country, but you are looking at the whole world, are you not?— Yes, certainly ; but for the reason you have just stated, the taking of gold is important. The more nations are using gold, and the more gold is used from hand to hand, so much the more com- modities has the gold to measure. What you have just now advanced would be perfectly right if the ex- cluded silver filled the place left vacant by the gold that had been taken ; that is to say, if gold and silver were joined together, and were working the whole ex- change business of the world ; but gold has to work the exchange business of the gold-using countries, and the more countries you put into that category, the more the gold has to do in the way of measuring ; the more commodities the mass of gold has to measure. It is not a case of destruction of precious metals, such as I spoke of in a late answer, but of diversion to new tasks. :Mr. Mill in describing incr-sased production of the precious metals, speaks of it thus : — " The " money which thus overflowed would spread itself to " an equal depth over all commercial countries." To follow his metaphor, I may say that there is always a certain water-level of currency over those nations more or less suited, or with time suiting itself, to .the wants of their trade. It was in this case gold, and spread over the gold-using nations. If between them and their silver-using neighbours the sluice is drawn up, and the gold allowed to spread itself over them also, the increased area of the whole gold-using region must necessarily cause the attenuation of that which overspreads it, and which therefore must stand at a lower level. But that level is the measure of the purchasing power spread over the gold-using countries, and a lower level, therefore, necessarily means low prices. The adverse effect on prices seems to me to be conclusively shown ; and even the proved presence of other circumstances, some of which, such as bank- ing economies, should raise prices, some of which, such as increased production and increased facilities of transmission of commodities, should contribute to lower them, in no way affects the demonstration. That which I have asserted is, and must be, a neces- sary factor in the lowering of price. The only problem is to what precise extent it has been assisted by the last, and to what precise extent it has been counteracted by the first, and that is a problem which no man can satisfactorily solve. Mr. II. H. Gibbs. 9 May ] 387. Witness withdrew. Adjourned till Friday. Twentieth Day. Friday, 13th May 1887. PRESENT : The Right Hon. LORD HERSCHELL, the Chairman, presiding. Mr. D. M. Barbour, C.S.T. Mr. J. W. Birch. Mr. H. Chaplin, M.P. Mr. J. Chamberlain, M.P. Mr. L. Courtney, M.P. Sir T. H. Fareee, Bart. Mr. C. Fremantle, C.B. Mr. W. H. Houldsworth, M.P. Sir John Lubbock, Bart., M.P., and Mr. Geo. H. Murray, Secretary. Mr. Samuel Smith, M.P., called and examined. 4694. ( The Chairman.) You have given consider- able attention, I believe, to the subject of the cur- rency ? — Certainly, for many years. 4695. And to the variations in the relation of gold and silver, to one another and to commodities ? — Quite so ; I have taken up this subject from the very outset of the movement about 10 or 11 years ago, and followed everything or nearly everything that has appeared on the subject. 4696. Your view is that there has been a material appreciation of the gold standard of late years ?— Certainly. 4697. Do you mean by that an appreciation of the gold standard in relation to commodities by reason of the appreciation of gold as distinguished from the depreciation of the commodities ? — I think so ; I think that the purchasing power of gold has increased very much in all gold-using countries. 4698. In what way do you think that is established ? — Well it would be a long argument to give all one's reasons for thinking so, but I would state what is the result of close observation of the causes that determine prices gained by 30 years' commercial experience. I have been engaged in a trade on a large scale in which one is called upon to observe very closely all that affects price. I may mention for the information of the Commission that I have been engaged in the cotton trade, much of the time on a large scale, especially in the Liverpool market, but also in India and in America, and it has been my chief busi- ness to watch everything that tells upon price with the greatest closeness, in fact the success of our busi- ness wholly depended upon accurate views regarding all influences affecting price, and it has been made obvious to me for several years past, that the heavy and long continued decline of prices was not owing merely to the ordinary causes, which cause fluctuations from year to year, but to some deeper and subtler Ii2 Mr. S. Smith, M.P. 13 May 1887. 242 KOYAL COMMISSION ON GOLD AND SILVER ; Mr.S. Smith, M.P. 13 May 1887. cause whicli I have no doubt whatever is a decided appreciation of the gold standard. There are ample reasons for that appreciation. 4699. Can you tell us why you attribute it to an appreciation of the gold standard rather than to an increase in the supply of commodities, or a diminished demand ? — I will give you one reason which to me appears a very cogent one. We had a steady increase in the prices of all commodities from the discovery of the Australian and Californian mines about 1850 which went on more oi less up to 1873. The general rise of prices was about 40 per cent, during that period. We had during that period, a rapid increase of production. We had a continued increase of ap- pliances for cheapening production. We had, keen competition, a reduction of charges. We had the rise of our great railway system. We had the introduc- tion of steam and telegraphs ; in fact all those agencies came into play which ought to have produced a fall of prices according to ordinary calculations, and in place of that we had a steady rise of prices amounting to about 40 per cent. 4700. But is it a fact that there was a steady rise of prices ? Were there not many cases in which the prices were lower than they were in years before that ? — I would not say so. There were of course credit cycles which we are all familiar with, years in which there was more inflation, in which there was a commercial crisis and depression. We had, for in- stance, the commercial crises o£ 1857 and 1866, each of which produced a temporary fall of prices, but the average kept rising, the steady average of prices kept rising year by year as you can see by referring to the index numbers of The Economist. 4701. Then do you depend for that statement upon the prices as shown in the index numbers of The Economist ? — Not entirely upon The Economist, upon tJie index numbers of many of the leading economists. 1 have examined some of them and I have given in my own pamphlet one compounded from several index numbers by Professor Poxwell, which I imagine is as copious and complete as any that has been published, as it deals with a very large number of articles. 470i!. But the results shown by using index numbers differ considerably do they not, according to the articles that you include or exclude ? — Not very greatly. I have gone over several lists. They do not differ very materially. 4703. And the results are arrived at by setting falls in price against rises in price are they not ? — The results are arrived at by giving the average price of these commodities in each year. 4704. You take a certain number of articles, the index numbers of those articles, and you find what was the total result in the year as regarded all these articles put together ? — The usual principle upon which we arrive at prices is to take the average of a year for one article, we divide the quotations week by week, we add together the quotations for the whole year and divide by the number of weeks. 4705. But if you take it separately for each article you do not mean to say that in respect of each article there was a rise up to 1873 and a fall since ? — No; Avhat I would say is this ; all commercial statistics depend upon averages. There are separate influences which affect each article undoubtedly, and you can only go by large averages in calculations of this kind. Some articles rise more, other articles rise le.?s,, but the general average rise of all commodities together was as I state about 40 per cent, between the year 1850 and the year 1873. 4706. Yes, but some fell as well as some rose did they not ? — I should think very few fell, the great bulk rose, and some rose of course more than 40 per cent, to balance those that fell. 4707. And do you think that that rise during say the five years preceding 1873, arose from the cur- rency. There had been no fresh discoveries of gold for a long time before that had there? — I should judge that the perjocf immediately preceding 1873 was in some degree a period of inflation as the period from 1866 to 1868 was one of depression. 4708. You would expect a period of inflation to be followed by a period of depression ? — Yes. 4709. And the greater the inflation the longer the period of depression ? — Usually. 4710. Was there not about the time you have named a great unwillingness to trust foreign States which previously had been trusted with large sums of money for railways and other industrial undertakings ; and would not that tend to diminish the demand for many important articles of commerce ? — Somewhat. 4711. You consider that the appreciation of gold standard is put by the best authorities at no less than 20 per cent. '> — I think so. 4712. Appreciation since what date do you refer to ? — Since 1873 ; I take that date as my starting point because that was the year in which the demone- tization of silver first fairly came into view. 4713. But in the five years succeeding 1873, the prices were much about the same wore they not, or rather higher than in the five years preceding 1873 ? — Taking The Economist numbers I find that in the five years preceding 1873, they were 122, 121, 122, 118, and 129, and then the five years succeeding 131, 126, 123, 124, and 115, therefore, higher every single year until you come to 1878 ? — I think the best test is the value of British exports. The value of British exports reached 255,000,000/. in the year 1873, and they fell steadily and almost continuously after that to 1879, in which year they were 191,000,000/., and yet the quantities kept increasing all the time. 4714. May not those two things have had some- thing to do with one another ? If quantity increases beyond a certain point, is not that one of the very things that will bring down prices ? — I allude to the question of quantity to show what a very great decrease in prices there must have been, because in 1873 the value of our exports was 255,000,000/. In 1879 it was about 191,000,000/., and yet there was a considerable increase in quantity. The object of my argument is to show what a heavy fall there was in the price of many articles. 4715. But taiiing coal for example, was not there ample to account for a great decrease in the price of coal, without any reference to an appreciation of gold? — I have no doubt there were reasons for a fnll of price apart from the appreciation of gold, but for a very much more moderate fall than has taken place. If I may be allowed to remark further in connexion with that, I would point out that we are all perfectly familiar with the principle of credit cycles in business, according to which there are two or three years of great activity and rising prices, and then a commercial crisis or a check at least of business, and two or three years of falling prices ; the swing of the pendulum usually is about 20 per cent, from top to bottom — -10 per cent, above the mean on the one side and 10 per cent, below the mean on the other. I have no doubt thai, we would have this downward swing of the pen- dulum from the prices ruling in 1873, probably a fall of 10 to 20 per cent, from the highest point. That I fully allowed for, but I think the long con- tinued fall in prices is owing to the appreciation of the standard itself. 4716. Hoiv do you suppose that appreciation of the standard has acted ? — The result of its action is this constant dwindling of prices. 4717. But how has that result been produced? — That is one of the most subtle problems probably in economics, and very difficult for any one to precisely explain. It is like asking why the influence of frost upon vegetation is so and so. We see and know that a cool temperature has a certain influence on vegeta- tion, and a warm temperature has another influence. In the same way I should say that a steady increase in the supplies of money always has had in human histoi-y a tendency to raise prices, while on the other hand a steady falling off in the supply of money has had a steady and constant influence in the way of reducing prices. That l>as beeri proved, by human MINUTES OF UVIDBNCK. 243 history spread over many hundreds of years, conclu- sively. 4718. But would it not be much more likely to have an effect upon prices at a time when the course of commerce was to exchange commodities for some precious mstal which was the standard, than at a time when the bulk of commercial transactions was carried on without any such payment of the precious metals ? — -I do not think I could answer that question. 4719. Of course you do not differ from the view that at the present time a vast proportion of the commercial transactions are carried on without the payment or exchange of any of the precious metals ? — Certainly. 4720. And the more that is the case would not the effect of a diminished supply of the precious metal which was the standard be less felt ? — I doubt that, because the precious metal is the basis upon which all credit is based. All notes, cheques, and so forth are in the last resort exchangeable into the precious metals. 4721. Yes; but what I want to get at if you could give me an idea of it is, how you suppose that a diminished supply of the gold or the currency has this very greac effect in depressing prices ? —I would say that in this particular crisis which has existed for about 12 years, one of the methods by which the fall of price has been brought about is the competition of countries having a silver currency. Those countries are able to produce cheaper now than countries having a gold currency, and wherever the products of coun- tries having a silver currency come into competition with the products of countries having a gold currency, then the tendency is to force down prices in countries having a gold currency. 4722. That I perfectly understand ; but is not that an entirely different question from the general question of the diminution of price by reason of the apprecia- tion of gold ? — I think it is in some degree, but you ask me to explain the methods by which a diminished supply of the precious metals forces down prices. I reply that it is one of the subtlest of all agencies, and it is doubtful whether any one could give a perfectly accurate account of the process, but in the present instance, this crisis which has existed for the last 12 years, I think you can put your finger upon one cause which undoubtedly tends to force down prices, and that is the competition of the produce of silver- using countries. 4723. That brings in of course the question of a change in the relative value of silver and gold? — Yes. 4724. Then you attribute the diminution of price in part to an appreciation of gold generally in relation to commodities, and in part to the effect of competi- tion with silver-using countries, owing to the change in the relative value of gold and silver ? — I must say the two things are mixed up together, because the appreciation of gold has been largely caused by the depreciation of sUver ; they are, in fact, one and the same thing to a very large extent. 4725. As between silver and gold they may be, but not as between gold and all commodities ? — I think they do affect that as well, because had silver not been depreciated, had tie old ratio of 15J to 1 existed, we would have had to-day a higher scale of prices in all countries having a gold currency and a lower scale of prices in all countries having a silver currency. 4726. Yes ; but that is from a different cause, is it not from the appreciation of gold in relation to commo- dities owing to the scarcity of gold ?— I should say as I said before that the two things are inextricably mixed together. Had we had no change in the bi-metallic system of Europe T stUl think there would have been a fall in prices, because the joint production of the metals is not sufficient now, scarcely sufficient for the wants of the world. We would have had a fall in prices, but we have had a much greater fall in countries having a gold currency, owing to the sepa- ration between gold and silver. 4727. Now you say that even the joint production of gold ^■nd silver is not sufficient ? The productipp is very considerable both of gold and silver still? — Smith M. P. Yes. _1_ 4728. And much more than sufficient to replace i3Mayl887. tear and wear ? — Yes ; but there are constantly new . uses and large new uses for the precious metals. For instance, in the last 12 years the new uses for gold have reached about 200,000,000/. sterling, that is to say, we have filled up countries that had a paper cur- rency before with gold. 4729. That has been done and has added so much to the currency of the world, has it not ? — I would rather say it has taken the reserves out of one class of countries in order to fill up the reserves of another class of countries. 4730. Yes, quite so ; but when you are speaking of the appreciation of gold you are not speaking of one particular country, you are speaking of the whole commercial world, are you not ? — Yes. 4731. And you must look therefore at the total which exists in all countries ? — Yes ; while in all countries having a gold currency the fall of prices since 1873 is enormous; in all countries having a silver currency there is a very slight fall indeed. 4732. Yes ; but what T was directing my question to is this : You said that even if you took the joint production of gold and silver the difficulty would remain, although it would not be so great ? — The difficulty would be much lessened. 4733. I want to understand why it exists at all ; you say it arises from an insufficient supply of the precious metals, how does that affect people ? I want to look at the thing practica,lly; where does it come in to produce the mischievous effect which you suggest ? — Let us take an extreme case. It is always by an extreme case that you can test a principle best. In the middle ages the mines almost ceased to yield altogether ; the stock of the precious metals of the world ran down immensely from what they were- in the time of Alexander and the times of the Eoman Empire. Every one knows that there was a very large stock of the precious metals then, as shown, for instance, by the enormous captures that Alexander made in Asia. He captured some 20,000 talents of gold, as you will remember, at one time. Very well, the mines almost ceased to yield for several hundreds of years, and the stock of precious metals, in the view of all economists, ran down in the 14th century to an extremely small point, and along with that the prices of all com- modities fell to an extraordinarily low figure. For instance, the selling price of a bullock in England was 21., the selling price of wheat was 10s. or 12«. a quarter, the price of wages, the wages of a man was about Zd. to Qd. a day, and everything measured by money in the same way fell to an extraordinarily low price. Then came the discovery of the South American mines, and for 200 years there was a con- stant steady rise of prices till the average was raised fourfold. The price of all commodities in the 17th century was about fourfold what they were in the 14th and 1.5th centuries, and the stock of money in the world was very much larger. 4734. At that time the practice of commerce was exchanging the commodity for tlie precious metal, was it not ? — Even in those ages I should think that the greater part of commerce was carried on by bills ; bills were used for purposes of exchange from the earliest times. Much the larger part of commerce I should think was carried on by bills and bank notes. 4735. Do you think in the same proportion in re- lation to the commerce then as now ? — ^No, I should not think so. 4736. But what I rather wanted from you, if you could give it, was how under existing circumstances the want of this currency comes to be felt; there is enough existing for all practical purposes, is there not ? — I will put it this way. There always will be enough for all practical purpose.", because prices will always adjust themselves in proportion to the volume of the currency, that is to say, if you were to close up the mines for 100 years, at the end of that ^00 years you could still say theye w?is enough 244 ROYAL COMMISSION ON GOLD AND SILVER : Mr. S. Smith, M.P. 13 May 1887. currency for all practical purposes, but prices would be then one quarter, or one half, of what they are to-day. 4737. Of course that is so ; prices will fall in that way, but we will suppose there is a diminution of 10 per cent, in the production of gold, how should that bring down appreciably the prices of commodities which are dealt with during the year to the extent of 10, 20, 30, or 40 times the amount of the total currency in exist- ence ?— •! think that the relation between the annual yield of the mines and prices is but slight, and hardly perceptible. You have to take it over a period of years before it tells, because the existing stock in the world is so large that the addition of one year's supply is very trifling, and therefore the changes in the yield from year to year, I would say have not a perceptible effect, but when spread over periods of years, long I periods of years, then the effect is very perceptible. For instance, between the year 1809 and the year 1850 the effect was most perceptible; there was a prodigious fall of prices, and there was a very small yield from the mines. For several years the yield of gold was only about 4,000,000/. or 5,000,000/. a year in all the world. The yield of silver was almost extinct for several years owing to the closing of the Spanish mines, and there can be no doubt that that had much to do with the extraordinarily low prices ruling between the years 1830 and 1850. Then again the great rise of price from 1850 to 1870 was clearly connected vnth the immense addition to the currency of the world caused by the discovery, of the gold mines of Australia and California. As to the broad effect, there is no doubt ; as to the method in which that effect was brought about, I think it is very difficult indeed for any one to give the rationale. 4738. But, except the monetary change in 1873, there has been no particular change since, has there, affecting the precious metals ? — Since 1873 there has been a great reduction in the amount of the precious metals available for money in Europe, a very large reduction indeed, and it has arisen from two causes ; first of all, the mints of Europe have been virtually closed against silver since 1873 and 1874. 4739. I speak of since that time, say since 1874; there has been no other change since that time, has there ? — ^No ; but there has been a constant falling off in the supply of gold, and a very large new demand for gold, amounting, as I said before, to 200,000,000/. sterling. That new demand amounted to much more than the whole production of the mines, and was largely drawn out of the stocks of countries that already had a gold currency. It is generally believed, for instance, that the stock of gold held in England to-day is very considerably less than it was 12 or 14 years ago. 4740. I think you said that when you were looking at this question, you looked at all commercial coun- tries together, so in that • view it would not matter that the gold was in one rather than another, would it, if the same total currency existed ? — I think it would very materially, because, take 1873 ; at that time the United States had an inconvertible paper currency. They had not resumed specie payments. There was no specie in America. It had all been expelled during the civil war. A higher scale of prices ruled in America, as usually happens in countries with an inconvertible currency. Then it was decided to resume specie payments, and the same effect happened in America as' Ti^ppened in England after 1816. We resumed specie payments. We had a period of very great depression and heavily falling prices. So they had in America. From 1873 to 1878 was a time of intense depression in America, prices of everything falling enormously. At the same time they purchased a great quantity of specie in Europe, and they were able to resume specie payments, and specie supplanted inconvertible paper currency. The tendency in America has been towards lower prices generally over the last few years, just the same as in England. The same causes which produced low gold prices in England produced low gold prices in America. 4741. But why should that be so if all countries together still possess the gold. Although its transfer- ence has taken place from one country to another, why should that produce low prices everywhere? — Well, there is a much larger amount of work for gold to do. Gold is called upon just now to do the work of exchange over a far larger area of the world than was the case prior to 1873. 4742. You mean by substitution for the silver ?-^ Yes, partly by the substitution of gold for silver, and partly by the substitution of gold for inconvertible paper wherever nations with inconvertible paper took a metallic currency. Of course they have to draw their supply of specie out of the stock existing in the world, and that tends to lower prices all over those countries in which gold is the circulation. Let me give an illustration. Russia just now, Austria, and some other States are countries with an inconvertible paper currency. Supposing those countries were to do what Italy and America have done within the last few years, and what some other countries are trying to do ; supposing they were to replace their inconvertible paper by a gold currency you would again have a very heavy draft upon the existing stocks of gold, the effect of which would be to force down prices further in all gold-using countries. 4743. You put it at 20 per cent. Is it the com- bined effect of all the causes to which you have alluded, or the appreciation of gold in relation to . commodities alone that you put at 20 per cent. ? — Of course it is only a guess. No one can give anything but a guess. I have formed my own opinion after reading the views of the best economists on the subject, and indeed most of the literature on this subject, and in a very rough sort of manner I would put the appreciation of gold since 1873 at 20 per cent, on the same principle that Jevons and other writers put the depreciation of gold at 15 per cent, between 1850 and 1870. I think they were too low. My opinion is that the depreciation was more than 15 per cent., but still I adopt the same basis on which they acted, and I should say that 20 per cent, is a fair estimate of the appreciation since 1873, and the other 20 per cent, fall in prices I would attribute to other causes such as the natural reaction from a period of inflation, and the economising expedients which are always tending to reduce certain articles. 4744. {Mr. Houldsworth.) How much do you put to that ? — I would be inclined to divide the fall of 40 per cent, between the appreciation of gold which I put at 20 per cent., and the economising process in the production of commodities and other causes which I would put at the other 20 per cent., but it is only an estimate of the roughest kind ; no oiie can give any- thing else on such a subject. 4745. {The Chairman.) You attribute the rise of prices from 1850 to 1873 to the discoveries of gold coupled with the free use of silver ? — Yes. 4746. But there had been no great discovery of gold for some time before 1873, had there ? There had been what we may call a normal annual supply ?— The supply of gold kept steady and large to that period, not quite so large as it was a few years before, but the supply of silver was increasing, and the aggre- gate supply kept about the same all that time. I think it averaged about 40,000,000/. of both metals, or nearly so. 4747. You say the annual supply since 1873 has been insufficient for the purposes of currency ? — I would rather put it this way. I think it has been insufficient to maintain the standard of prices that existed in 1873. I would not say insufficient for the purposes of currency, because, as I observed already, no matter how much you may reduce the supply of the precious metals they vtIU always appear to be sufficieut because the fall of prices will occur contemporaneously, and the two things will balance one another. 4718. Do you think that the consumption of gold for purposes other than currency has increased ? I think very much. I have been carefully inquiring ioto the opinion of the best authorities, and I am MINUTES OF EVIDENCE. 245 surpi-ised to find that a man like Soetbeer, who ia looked upon as the best authority on the subject, puts the consumption of gold in the arts as high as 12| millions annually, out of a total supply of 19 millions. Laveleye, who has also devoted great attention to the subject, puts it at about the same. 4749. Is that higher than it used to be ? — I think much higher. 4750. How do you account for that if everybody is so badly off? — Look at the gold watches and gold chains used all over Christendom compared with what used to be the case. 4751. One would rather have expected a reduction in the demand for the arts in times when there is so little money to spend ? — I think as matter of fact, however, much more gold is used. I am told, it is an amusing statement to make, but I am told that the amount of gold used in the United States for stopping teeth is half a million sterling every year. 4752. Then the amount remaining for the currency is of course so much reduced. And you calculate that of what remains for currency a portion goes to India ? — The average export of gold to India or to India and China is about 4,000,000/. sterluig annually and that is not used as money, it is melted into ornaments or hoarded. 4753. Then there is some consumption in the British Colonies ? — A very considerable consumption. 4754. I beheve you do not think that during recent years the economising expedients have been much developed ? — I scarcely think there has been any change in the last 10 years or so. I think they have been carried about as far as it is possible to carry them in countries like England and the United States. 4755. I think it has been suggested that the system of cheques as one economising expedient has been a good deal developed in France of recent years ? — Yes, in France because that was a backward country in the use of commercial credit. 4756. And in Germany has it been increased also ? — I do not know enough of Germany to be able to say. 4757. In this country has it not to some extent been increased by an increase in the number of branch banks now to be found in small places where pre- viously there were no such facilities ? — I am not aware that that reduces the amount of specie required for trade to any extent, because these banks all must hold reserves. The best proof of the necessary re- quirement of a large amount of specie even in a country where every economising expedient has been developed is to be found in the United States of Am^erica, because as I observed already since the resumption of specie payments America has taken about. 150,000,000/. sterling of gold and silver com- bined to supply its circulation. 4758. But do you know how that money is utilised in America ? — I presume very much the same as it is in England, but less largely. 4759. Do you think that there is anything like that in circulation or in reserves of banks ? — Well, a large portion abvays must lie in banks in reserve as security for their circulation, that is really being used. That is the method in which gold is largely used nowadays. 4760. But where do you get the figure from, because I think it is considerably higher than what we have had from any other source P^Well, I think Mr. Goschen amongst others stated it, and- 1 have seen it repeatedly assumed as true. I have no doubt of the fact that the United States have taken about 100,000'oOOZ. of gold since it resumed specie payments, and' the' coinage of silver, I am speaking roughly, from memory, has been I think nearly 50,000,000/. sterling; that is 150,000,000/. 4761. (Mr. Birch.) You stated just now that on account of these numerous banks much greater re- serves had to be kept than formerly ?—I am inclined to think that wherever there is an extension of the banking system there would tend to be larger reserves. 4762. But then I think you also stated that you Mr. S. consider that there is 20,000,000/. less gold in the SmM, M.P. country than there was a short time ago ? — Well, I have seen an estimate that there are 20,000,000 fewer 13 May 1887 . sovereigns in England. I have seen several estimates to that extent as compared with what we had 10 or 15 years ago, but I think that was taken partly out of the pockets of the people as well as out of the reserves of the banks. The general belief is that there are fewer sovereigns in circulation. 4763. (The Chairman.) There do exist large accu- mulations of bullion do there not in some of the national banks ? — Certainly. 4764. And interest has ruled very low of late years ? — Yes. 4765. How do you account for that? — I would account for that by the great depression of trade. There is no surer index of the depression of trade than a very low rate of interest. I suppose during the last 12 years we have had the lowest rate of in- terest that has ever been known in England, taking the average. 4766. I am not quite sure what you mean by a great depression of trade, because I understood you to say that the trade that we have been doing, though not a valuable one, had been a bigger one ? — ^The trade that we have been doing has been exceedingly unprofitable. During the last 12 years nearly every branch of it has been exceedingly unprofitable. 4767. Yes, but it has been very large in amount, in quantity ? — The money value has been greatly reduced. The quantity of commodities produced annually in- creases with the increase of the population and machinery. It cannot be otherwise. That does not indicate a prosperous trade. 4768. But when you speak of the value having been very much reduced as regards a great many branches of trade, that might be perfectly true, and yet the profit may be the same as before, may it not ? — I think the general profit made by the commercial community during the last 12 years has been very greatly less than it was in previous periods. 4769. That hardly answers the question I was putting to you, that the fact that there is a reduction in the value of the manufactured articles is not a test of the profit that is made on the manufacture, in as much as if you get your raw material 20 per cent, cheaper you can afford to manufacture 20 per cent, cheaper and make the same profit ? — That is quite true. But the value of the exports from this country were 255,000,000/. in the year 1873 while last year they were only 212,000,000/. 4770. (Mr. Chamberlain.) There has no doubt been a fall in the money value of the exports from the highest period, but as far as my knowledge goes the returns of the banks and the turn over of business has been as great or greater than it was ? — Well, I am not able to answer that question, but I should have thought that there was a shrinkage in value pretty much all along the line. I would put it this way, however, that prior to 1873 there was a very rapid constant increase, and that rapid constant increase came to an end and has been at an end for several years past. 4771. (The Chairman.) But a large part of the shrinkage in the value of exports would be accounted for, would it not, by the fact that raw material had very much diminished in value also ? — No doubt. 4772. By depression of trade you mean the unpro- fitableness of trade, not the small extent of trade but its unprofitableness ? — Well, the unprofitableness mainly, but when trade becomes very unprofitable it affects the quantity as well, because works are shut up or worked upon short time. There has un- doubtedly been a great deal of short time during the last 10 years in most of the large trades of the country, 4773. That to some extent has arisen, has it not, from an increase in the number of places of manufac- ture and economy by means of machinery ? — No doubt in part, but the singular fact is, as I observed before, ■246 KOYAL COMMISSION ON GOLD AND SILVER : Mt.S. Smith, M.P. 13 May 1887. that in countries having a silver currency that depres- sion has not been felt ; it is only in countries having a gold currency. 4774. But prices of manufactured goods are lower in countries having a silver currency, are they not ? — A little lower, about 10 or 15 per cent. 4775. Because I thought one of the suggestions vras that because they produced and sold at so low a price, they brought down prices here ? — They were able to sell at a low gold price, but got back a good silver price. 4776. You mean prices as measured in silver ? — Quite. They got back satisfactory prices to them- selves measured in silver, silver being their sole standard, and they are able to sell at a very low gold price. 4777. ( Mr. Birch.) Yes, but imported articles, the articles that they imported would have risen in value measured in silver, would they not ? — Of course they buy them at a very low gold price. 4778. (7%e Chairman.) Then, in your view, high rates of interest with active trade are better than low rates of interest and a languid trade ? — Most certainly. 4779. Do you think that the damage done by the monetary crises in 1S57 and 1 866 was small compared with the damage done by what you refer to as the long continued depression since 1873 ? — Certainly the damage done by those crises was very brief; it was just a temporary paralysis, but in a year or two after- wards the country was at fyll work again, and trade very profitable. 4780. A large volume of trade, though with a small margin of profit, may be a very advantageous thing, may it not, for a country generally ? — I think it ' is best for the country generally that trade should be reasonably profitable. When it becomes very unprofit- able it ultimately tends to decay, besides causing a great loss of capital to the country. I have no doubt the classes engaged in many of our large trades are very miich poorer now than they were 13 years ago. 4781. You think the evils resulting from an appre- ciation of the monetary standard may be divided into two classes — those affecting ordinary trade, and those arising from fixed burdens payable in money ? — Yes. Of course I attribute most importance to the latter of the two. 4782. Take first the first of those two causes. What have you to say in regard to that ? — Well, with regard to ordinary trade, every man in business is familiar with the efliect of a long continued fall in prices. It produces the extinction of the poorer class of traders — the struggling, rising class of traders — the small men with little capital, who cannot stand heavy losses. That was the state of English trade during much of the period covered by this inquiry. Prices were constantly declining — crumbling away ; all calculations turned out illusory, till at last a feeling of something like despair crept over most of the trading centres of England. 4783. Tliat is the result of falling prices whatever the cause of the fall ? — Yes. 4784. That result of course would cease when prices had found their level, though it were a low level ? — It would cease to operate upon a new class of people. The old class of people have been largely swept away. 4785. They would have borne their loss, but it would cease to operate as soon as prices found their level ? — Yes ; I think last year was the lowest point of the whole decline. This year there has been a slight recovery in some things. 4786. Now the working industrial classes if they had been employed at the old rate of wages and steadily employed would have gained by the low prices ? — Yes ; if they had been employed, which 4;hey have not been. 4787. In your opinion they have suffered from a fall of wages, I do not mean relatively suifered, but they have had to submit to a fall of wages ? — Yes. 4788. Do you think to the extent to which they have benefited by the low prices ? — I think the fall of wages has not been so great as the fall in the price of commodities. That is matter of common know- ledge, but there has been a great loss of time, a great loss of labour power, because in most trades work has been very slack and the poorer and weaker class of labourers have been turned off altogether as a rule. 4789. There has not been any very great increase of pauperism, has there ? — The reason of that is that the system of out-door relief has been curtailed very greatly of late years. The tests are more stringent, and so pauperism is kept down apparently, but the amount of charitable means given for the relief of distress the last few years has been very great. I think much greater than it was before, 4790. (Mr. Chamberlain.) But if the volume of trade is as large as ever, is not the labour employed upon it as great as ever ? Is there therefore any reason to believe that the amount of labour employed is less now than it was 12 or 20 years ago ? — I think the labour of the country has not been so well em- ployed over the last 12 years as it was the previous 12 years. 4791. That may mean that the increase of the trade has not kept pace with the increase of the population, but it does not mean an actual reduction, does it, it would only be a comparative reduction ? — Yes, the volume of trade seems to me a somewhat ambiguous term. If you try to define it more exactly, I think you would perhaps come to somewhat different con- clusions. The volume of trade measured by its money value has decreased, I think. 4792. Yes, I am only speaking not of the money value but of the quantity ? — The quantity produced has increased in many trades owing to the improve- ment of machinery ; that is to say, the same machi- nery will turn out 25 per .cent, more in many trades than it would have done 12 years ago, but it does not employ more labour, meanwhile the population has increased and the number of the unemployed labouring class has increased. Let us take an illustration. Sup- posing you are the owner of a factory that employs 1,000 men and you turn out now 25 per cent, more than you did 10 years ago with the same 1,000 men, there is an apparent increase in the volume of trade, but your 1,000 men have growing families and you ought to be employing 1,500 men in order to take up the increased population, but you cannot do it. 4793. {The Chairman.) But if you have a con- tinual increase of production by the improvement of machinery and other means, must not the effect of that be necessarily to reduce prices and to diminish the amount of labour employed ? — Yes, as I observed before, I think there is a constant tendency in machine- made goods of all kinds to lower prices, because new inventions enable tlieni to be made cheaper. But there is another set of causes which tends to raise prices in all old communities which goes a long way to counterbalance that. In all old communities the tendency is to a rise in price in most things in which labour enters very largely, such aa building opera- tions ; food also. Many kinds of food usually grow dearer, so that, I think, if you take commodities as a whole and values as a whole, one can hardly say off hand that the natural tendency is for them to get cheaper from year to year. I doubt it. 4794. But in building operations, may you not overbuild ? I should have thought that that was a case in which it was very easy to out-run the needs of the population ? — Of course you can overdo any- thing ; but I mean to say that, taking long periods of time, the tendency of prices should not be lower in the country in one period as compared with another. 4795. You think that the persons employed in industrial occupations suffer in the end, but are longer before they feel the suffering than those who are employing them ? — Certainly ; that is always the case, because when trade becomes bad employers go on hoping for some years, spending capital, improving their works, trying to cheapen their processes, always hoping a turn of the tide will come, and during that period the workmen do not suffer, especially in trades MINUTES OF EVIDENCE. 247 where they have strong combinations. At last there comes a time when the employers can stand it no longer. Their capital is exhausted, works come to a stand-still, attempts are made to force down wages which are met by strikes ; then comes the time wliei\ the operatives suffer. 4796. Your next point has relation to the burden of fixed contracts payable in gold; what have jou to say with regard to that ?— That has long seemed to me to be the most weighty consideration as bearing upon this question which is before this Commission. In an old country like England the amount of perma- nent engagements of all kinds is soiijiething (enormous. I daresay this Commission may possibly have read an estimate which I have oflFered, which of course is a very rough estimate, for there are no figures available, but I have submitted it to several statists and actuaries and others with a view of getting further information, and no one has been able at least to point out any defects in it, and some have pointed out that probably some of the figures are much larger than I have put them. We have first a National Debt of 750,000,000/., with interest and sinking fund amounting to 28,000,000/. per annum. I suppose we must call it 26,000,000/. now since the last budget. Then we have railway bonds and preference shares amounting to 500,000,000/., with interest averaging, say 4 per cent., or 20,000,000/. a year. Local and municipal debts are estimated at about 160,000,000/., say at 4 per cent., 6,400,000/. per annum. Then we have the vast amount of mortgages on land. I have tried to get information on that subject from the best authorities, and find it is impossible, but I think that 500,000,000/. is a very moderate estimate ; indeed, I would not be at all surprised if they amount to much more. Let us take interest at 4 per cent., and that will be a fixed burden of 20,000,000/. a year. Then we have the mortgages upon all kinds of property other than land, such as house property, factories, ships, and on industrial plant of all sorts. I have put that down at 500,000,000/., but I am inclined to think that it is very much more from what I have since learned ; but call it even 500,000,000/. at 4 per cent., that is 20,000,000/. a year. Then we have further to take into account the great number of long leases in our country. We have a great portion of all our towns built upon building leases of 99 years, with fixed rates of payment. I have not been able to get any estimate of the amount, but I suspect it is at least 30,000,000/. a year that is drawn from these long leases. Then there are the royalties on mines, which have been felt as a heavy tax of late years owing to the very low price of minerals. These royaltit'S I have put at 8,000,000/., but I am told by those who are investigating the subject that probably the amount is nearer 12,000,000/. In addition to all these there is a very large amount of fixed annuities, pensions, life interests, &c., chargeable on most estates or payable by the Government. It is. well-known that many of these estates have of late years hardly afforded any surplus to the nominal owners after paying interest on mortgages, annuities, and other fixed charges. I roughly assess the total of annuities, pensions, and other fixed charges, not included in the other items I have dealt with, at 18,000,000/. a year, and this will make the total fixed charges payable out of the industry of the country about 150,000,000/. a year, but I think it is not impossible that the amount may turn out to be 200,000,000/. if we had the means of making an exact computation. 4797. Some of them at all events would have been borrowed at a lower rate of interest because of these depressed times when the interest was low, would they not ? When you can borrow at 3| per cent, owing to depressed trade and the appreciation of gold, you may be as well ofE as if you had borrowed at 4 per cent., or rather had to pay 4 per cent, with brisk trade, and gold not appreciated ? — Well, that is an objection which I have often heard made. The reply I will give to it is this. Suppose I am the owner of a factory for which I paid 100,000/. during a period o 24358. when trade is prosperous. I put a burden upon it of j^r, S 50,000/. I have 50,000/. of capital of my own. After Smith, M.P. 10 years of bad business I feel myself compelled to sell the factory. I get 50,000/. for it. The whole of that 1 3 May 1887 . goes to pay off the mortgage, and I am ruined. That is the process through which thousands of persons have gone during the last few years ; it is the position in which thousands stand at the present moment. The mortgages, which were originally but a reasonable and moderate portion of their property, now eat up the whole property. 4798. That is by reason of depreciation in the value of the property .'^Exactly. 4799. That no doubt arises from other things than the appreciation of gold ? — No doubt it does. 4800. In Lancashire, for instance, are there not a number of mills which were formerly supposed to be worth a great deal, worth only a very little now, because they are not suited for the kind of machinery necessary to turn out the goods that are now used ? — Even the newest mills are very largely depreciated. 4801. Is it not a fact that there is a good deal of depreciation due to the cause which I have suggested ? — Some of it is due to that, but I think a large part of it is due to the other cause, because had this country had a silver standard this depreciation would not have 4aken place, and those difficulties would not have occurred. My own impression is that if at the present time you could put up to auction the whole of the industrial plant of this cuuntry and sell it ofi", it would not do much more than pay the mortgages and fixed charges. 4802. But now, taking railways which you have given us, people have to pay a large amount of this annual burden of debt, but they can get money now more cheaply than ever they did, can they not ? — They can borrow at a lower rate of interest. 4803. And they have of late been paying off old obligations and contracting their new ones at a con- siderably lower rate of interest ? — No doubt they can borrow at a lower rate of interest, but if railway rates are reduced, as is generally thought to be unavoidable and quite necessary, they will still be left with this enormous burden of mortgages, and their own pro- perty will be greatly reduced. 4804. Then as regards the payment of the public debt, the people who would suffer would be the tax- payers, who would be obliged to find the amount in gold although the incomes which they derived from business and otherwise were less ? — Yes. 4805. Of course, so far as those payments were made by persons with incomes payable in gold, there would be no suffering at all ? — No, the class that benefits by this state of things is the annuitant class, all who have fixed incomes payable in gold. They benefit undoubtedly at the expense of the rest of the community. 4806. Of course it is very difficult to work the matter out, but the people who have been paid interest or dividends by all these railway companies, and in respect of so much of the national debt, from which a certain deduction was made for the payment of the taxes of the country, would feel no additional burden ? — I suppose not. 4807. The burden would result in the case ol people trading, I suppose, or engaged in agriculture ? — I should say the classes that suffer most from the present state of things are all the active industrial classes of the country, the farming class, the owners of factories, mines, workshops of every sort and kind ships, and so forth. These people all trade upon borrowed capital more or less, and, owing to the shrinkage of their property, the borrowed capital comes to represent a far larger per-centage of their property than it once did. In the case of very many they have been sold off, and the mortgagee has appro- priated the property, and oftentimes it has not been enough to pay off the value of the mortgage upon it. 4808. The depreciation of agricultural land arises from low prices, does it not .?■■ -Of course the fall of Kk 248 KOYAL COMMISSION ON GOLD AND SILVER: Mr. S. Smith, M. P. 13 May 1887. prices in the produce has, forced down the price of the land. 4809. Therefore the cause of the low value of land must be sought in the cause of the fall of prices ? — Yes. 4810. Do you think that the fall of prices of agri- cultural produce is due entirely to the appreciation of gold, or largely ? — I would divide it between the appreciation of gold and the opening up of new markets, and the cheapening of transport and facilities of various kinds. I have no doubt that a very con- siderable part of the fall in wheat is owing to the imports from India, which the low price of silver relatively to gold enables the people of India to make to this country. Just as the rupee falls, so the Indian producer can lay down his wheat cheaper and cheaper here. When the rupee is at l^. 6d., the Indian pro- ducer can lay down his wheat here at 30^. a quarter, but when the rupee is at 2s. the Indian producer can lay down his wheat here at not less than 40s. a quarter ; and, of course, when he sells lower than others he forces down the price of all the other wheat to the same rate. It is the lowest seller that dictates the price to other sellers. 4811. That must depend, must it not, on the extent of his supply as compared with the supply elsewhere ? He cannot, by selling a limited quantity at a low price, force everybody to sell at a loss ? — No, but as long as the supply keeps up to the same level, and he chooses to take that price, he forces down all the other supplies to the same price. 4812. Do you know what proportion the Indian wheat imported into this country bears to the total quantity of wheat imported? — I think India now sends about 4,000,000 of quarters of wheat; we receive altogether, I think, about 15,000,000 of quar- ters of wheat into this country. 4813. That would be something over 25 per cent. ? — ^Yes, I think India sends about 4,000,000 quarters of wheat ; perhaps not all to England, but I think she exports now about 4,000,000 of quarters. ,4814. Of course you must look at the relation which what India sends bears to what is produced here, plus what we import from elsewhere ? — Well, the effect of these very cheap supplies is gradually to lessen the area sown in this country. Every year the area gets less a,nd less, and we are also getting somewhat less from America than we did, but a very small surplus of supply is quite sufficient to force down the market. 4815. We may take it that in your view a large fall in value at all events has been brought about by the demonetisation of silver in Europe ? — Yes, concur- rently with the falling off in the supplies of gold. 4816. In addition to the evils that you have already mentioned, in your view the result of an appreciated standard is that the creditors benefit at the expense of the debtors ? — Quite so. I think that is one of the most serious evils. 4817. That, of course, must depend on the time at which the parties respectively lent and borrowed ? — Yes, but in the main debts are permanent : that is to say, the trader who mortgaged his property in 1873 for 50,000/. cannot afford to do without the mortgage at any future time ; he is obliged to keep the mortgage on, to keep renewing it. Take the case of land- owners. They cannot afford to reduce the amount in mortgage in depressed times, they rather increase it. I think the total amount tends to increase from year to year. At the present moment it perhaps represents, we shall say, probably 50 or 60 per cent, of the property of the country. Probably 10 years ago it did not repre- sent more than 40 per cent, of the property of the country. 4818. In your view, as the debtors are the most numerous class and the creditors are the rich and leisured class, that increases the evil ? — I think so ; I think the working of our whole system tends to make the richest class in our community still richer at the expense of a far larger number of comparatively poor people. 4819. Do you include in that far larger number of comparatively poor pBople those who borrow 50,000/! . lapon a manufactory ? — Well, I should say that, as a rule all the industrial class, large or small, are large borrowers of capital. The banking deposits of this country, which amount to 500,000,000/., are nearly all lent out to the trading class. TJ)e trading class absorb the bulk of the floating capital of the country, and use it in their busines.s, in addition to a certain amount of capital of their own. Well, the very heavy fall in the price of all property has, so to speak, largely bankrupted, that class. It has swept away their own margin of capital, and their property now is little more than sufficient to pay the heavy claims upon it. 4820. Still the person who lends that money, the creditor takes a low rate of interest for it ; the person who borrows it, if trade is profitable, makes largei profits, which the creditor in no respect gets the benefit of ? — Quite so. 4821. Therefore it is natural, is it not, that the risk should rather fall upon the debtor than the creditor ? — Well, I think not. During a period of ordinarily prosperous trade it is a very healthy opera- tion this, by which the capital of the leisured class is used by the actively employed class. ' The leisured class is content to take four per cent, for it, we shall say, and the employed class used to make, perhaps, an average of eight per cent, interest. It suited them to borrow, and to give their brains and energy to the management of business ; but for the last 10 years, the employing class has, perhaps, not in the a^'erage, earned so much as four per cent. ; I much doubt if they have earned that, and there has been such a shrinkage in the capital value of their property, that now, in many cases, it would only be sufficient to pay off those mortgages, and leave them nothing at all. They have had all the labour, all the toil, and all the anxiety of conducting business for many years, and find themselves getting poorer and poorer all the time, whereas their creditors, who have had no trouble at all, are entitled to their full tale of bricks. 4822. Because they would have got none of the benefit if things were profitable. The whole benefit and profit would have gone to the debtor ? — The debtor would have been entitled to that. 4823. Yes, but one does not quite see why you suggest that it is reasonable that some of the loss should fall upon the creditor, if things are not profitable ? — I would rather put it this way. It is not so much a question of reasonableness as what is for the good of the community. Now, seeing that the active indus- trial class is a far larger class than the capitalist class ; seeing also that they are the mainspring of the pros- perity of a country, I think what works for their good is of more importance to the country than what works for the good of a comparativeljr small class of capitalists, some of whom are enormously wealthy. And the hardship I feel arises from this, that the burden of debt has been artificially increased by changes in law. If these changes in law, which de- monetised silver so widely, had not taken place, this burden of debt would not have been increased nearly so much ; prices would have been higher ; trade would have been more profitable. 4824. You attribute to this depression of prices, I believe, the protective tariffs which have been imposed or increased in different continental coun- tries ? — I think it has largely tended to increase protective tariffs all over Europe. It is only within the last few weeks that both France and Italy, and I think Germany also, have increased their duties upon food owing to the outcry of the agricultural class. 4825. Coming now to the remedy, what do you think is the proper remedy for the evils to which you have called attention ? — The only practicable remedy that I can see is a restoration of silver to its full use as money by a group of nations. 4826. And coining silver at a fixed ratio to gold ? — A fixed ratio to gold, yes. I would restore the system which existed before 1873 in France and the Latin union, only I would make it a condition now MINUTES OF EVIDENCE. 249 that the union should be a much larger and wider one. 4827. What area do you think would be sufficient to bring about the results that you desire ?— I think if we could induce Great Britain, the United States, France, and Germany, to enter the uuion, it would vijrtually fix the ratio for the whole world, and very soon would be adopted by nearly every country in the world. 4828. {Mr. Courtney.^ Would Great Britain include India ? — I think it would be better to keep India a single silver standard country ; that is rather my im- pression. 4829. {The Chairman.) Why would you exclude India if bi-metallism is the proper basis? — It is a very difficult question, but I think on the whole it would be found desirable to keep India a silver standard country. One reason is this, that the European powers might be afraid of a deluge of silver coming into Europe in exchange for their gold. I think that is an imaginary fear, but it would probably operate as a very real drawback. 4830. {Mr. Houldsworth) Would you consider that if the countries that you named adopted the bi-metallic system and India was excluded, that still the bi-metallic law would operate in India ? — Oh, entirely, quite the same as if she was included. 4831. {The Chairman.) That is to say that the effect of introducing bi-metallism into these other countries would be to raise the price of silver ? — Yes, up to the ratio at which it was agreed to fix silver. Whatever price was adopted the price of silver in India next day would rise to that point. 4832. What is the ratio that you think should be adopted ? — That is a point upon which we ought to be allowed liberty of opinion, because it depends on expediency. I think it is of such importance to the world to gain a bi-metallic system that I should be prepared to sink any special views of my own in deference to whatever might be adopted by the nations interested, in the matter, but if you ask me what I think would be fairest and justest to all concerned, I certainly should say the old ratio, because upon the old ratio the great national debts of the world were contracted amounting to about 5,000,000,000^. sterling, and I think it is more just to all concerned that those debts should be restored to the basis upon which they were con- tracted instead of being made payable in the artificially enhanced standard. 4833. Tou mean the basis on which they were con- tracted, in this sense, that at that time silver bore a par- ticular relation to gold by law in certain countries and by market value in other countries ? — That is all. Even in England, where we had a single gold standard, we felt the effect of the French law quite as much as if we had it ourselves. That is to say, the value of the gold in England was as much affected by the Frencii law of loj to 1 as if we had had the law of 15^ to 1 in England. ' 4834. Would the effect of that be to raise prices ? — I think in all gold countries it would raise prices somewhat ; in silver countries it would reduce them and produce an equilibrium between the two. 4835. Would it be likely to raise all prices ? — In gold countries not very much. I think it would be a very gradual process, but it would partly undo the great mischief which has been caused by the excessive fall of prices. 4836. You think that there would be no mjustice in taking this course, because it would be only re- placing the state of things which existed prior to 1873 ? There would be a small injustice done to people who have pending contracts with silver-using countries for the purchase of produce, but that would rectify itself in a few months, because these contracts all run off in a few months, and a change of this kind should not be made without previous notice. I think the injustice, comparatively speaking, is trifling com- pared with the great injustice which has been already done to far larger interests by the demonetisation of silver. Of course, when an evil has once been done, it always causes some disturbance to get back to the Mr. S. former state of affairs. I have no doubt of that, but I Snath, M.P. think the disturbance is but trifling compared with the jg ^ jgg^ enormous evils that have been done by the previous , change. 4837. {Mr. Barbour.) I wish to ask you a ques- tion or two upon the effect of the supply of wheat from India. Suppose that the rate of exchange was such that India could supply any quantity of wheat at 30s. a quarter, would it not be necessary for the price of wheat grown in this country, or grown in America and sent to this country, to be reduced at least to 30s. a quarter ?-r-It would force the price of all other wheat down to that point. 4838. Because otherwise it could not be sold ; Indian wheat would take its place ? — Quite so. 4839. And the American and English wheat having been sown, India might have to send only a very small quantity of wheat to produce this effect upon prices ? — She would require to send a surplus of supply ; it need not be a large amount. 4840. But if India had a surplus sufficient to supply any quantity, then the prices of English and American wheat could not rise above 30s. ? — Of course not. ' 4841 . {Mr. Birch.) You stated that there has been a material appreciation of the gold standard of late years, which the best authorities put at no less than 20 per cent., and this is shown by the heavy general fall of prices, though other causes have contributed to it. I suppose you would allow that some of the authorities deny the appreciation of gold, though they acknowledge a general fall in prices, which they attribute to various circumstances, affecting an over supply of commodities rather than a short supply of the article for which the commodities are inter- changed ? — I suppose there may be such authorities ; though I have met with very few, I have read a great many opinions on the subject, and I think it is very generally admitted now by all thinking men that there has been a considerable appreciation qf gold. I believe every economist in France and Germany admits it, so far as I know. 4842. You talk pf the demonetisation of silver. Silver has not become demonetised. They have sus- pended the coinage in the Latin Union, but the 45,000,000^. in the Bank of France, and an enormous amount of silver in circulation, is just as much money as ever it was, and it is the same in Germany ? — Strictly speaking, what we mean is the stoppage of the free coinage of silver. There has been a very considerable demonetisation, for Germany has sold off a large quantity of her silver. So has Holland and the Scandinavian countries; but speaking particularly, when we speak about the demonetisation of silver we mean the stoppage of the free coinage of silver. 4843. Then the gold discoveries in 1848 and 1850, of course, affected prices, but do you not think that the great stimulus that then was given to railways and the manufacture of steamers and other things went a long way to help to raise prices ? — Wei!, I think that is just one of the results' of a large supply of money. You communicate an impulse to one branch of trade that communicates an impulse to another branch of trade, and it gradually spreads through every branch of trade. 4844. But then the result would be that with new facilities for moving produce, prices would naturally fall on account of increased production, would th^y not, and the labourers employed in making the rail- ways would Jose employment ? — I do not think that one could give a very sure answer to such a question as that. Prices kept rising from 1848 or 1849 up to 1873. It was a long period. The railway system of this country was almost completed before 1873 ; it did not cause prices to fall. 4845. {The Chairman.) You said that prices rose till 1873, but, taking the Economist index numbers, I find that in 1871 they were lower than in 1868 ; in 1869 they were lower than in 1868 ; and in 1870 they were exactly what they were in 1868 ? — I am quite aware of that. Kk2 250 ROYAL COMMISSION ON GOLD AND SILVER ; Mr. S. Smith, M.P. 13 May 1887. 4846. Then what do you mean by speaking of prices constantly rising? — There never was and never will be such a thing as a continuous rise of prices year by year; One has always to speak of averages or groups of years. What I mean when I say that prices rose 40 per cent, from 1849 up to 1873 is just this, that there was a series of upward ascents in prices, varied by short descents, but still the ascent continued pretty constant up to 1873, and by that time the general level was about 40 per cent, higher than it was in 1849. 4847. (Mr. Birch.) You stated that the annual supply since 1873 has been insufficient for the purpose of currency ? — It is hardly possible to say what supply of money is sufficient and what is insufficient for currency, because whatever the supply is, prices adapt themselves to the supply, and there appears to be sufficient for these prices. The two things mutually adapt themselves to one another. 4848. Yes, but you see when Italy thought she would introduce a gold currency, she wanted about 18,000,000/. of gold, and she obtained them without any difficulty at all ? — Quite so. 4849. In the same way the other day about 5,000,000/. were required, I think, by America, and she obtained them from the Bank of B'rance, paying 5 per mille premium ? — Quite so. 4850. Therefore it would not appear that there is this great scarcity ? — I have never said that there was a scarcity of currency ; I do not think there is. 4851. Then you state that it is true that as nations advance in civilization they dispense, more and more with coin, and use cheques and other economising expedients, but in this country and America it is doubtful if these expedients have developed much of late years. Is there not ample proof that, at all events in this country, there has been an immense development in economising expedients ? — There was a great development. I am not aware that ^t has made much more progress the last 10 or 15 years. I see the returns of the Clearing House have been nearly stationary the last 10 years. 4852. Then as to nations using inconvertible paper currencies going on to a specie basis, can you explain how you think they would be able to carry it out ? — The way Italy carried it out ; the way the United States carried it out ; the way Austria hopes to carry it out. They gradually acquire the means of doing so, if they steadily set it before them. I admit that it is a very difficult thing for a poor country to do. Italy was a very poor country a few years ago, but she managed, nevertheless, to make a convertible currency. 4853. Only by making a loan in this country which enabled her to do it ? — I have no doubt there would be a continual succession of countries, one after the other, that will seek to establish themselves upon a specie basis. That you may take for granted, it is the natural progress of civilisation. 4854. You have stated that if the currency of the world was reduced to one-half of what it is now, during the nexi 20 years there would be no scarcity of bullion at the central reserves, and the rate of interest would rule very low; that we should see an incessant fall of prices, intense depression of trade, a total absence of all enterprise, and a less demand for capital than usual. That to me is such an extraor- dinary statement that I should like to ask you how you think that could possibly be arrived at ? — I think the history of the past proves that that is accurate. You will find— it is, a curious fact, but it is the reverse of what one would think at first sight — that when you have a very large production of the precious metals you have generally high rates of interest. We never had higher rates of interest in this country on the average, I suppose, than from 1850 to 1873. They were much higher, I believe, than any preceding period, say from 1820 to 1830, from 1830 to 1840, and from 1840 to 1850, and they wer3 also much higher than from 1873 on to the present time. Now, you would have said, at first sight, that, having such a very large supply of both gold and silver, especially gold, coming into use as money, we ought to have had low rates of interest ; but the fact is exactly the opposite, and this is the reason of it. It caused a steady rise of prices, and every business man knows that that quickens industry in the most marvellous way, every one seems to be making money, every manufacturer tries to increase his production, it sets agoing the whole industrial machinery with the greatest energy, because every man is filled with hope and expectation ; new enterprises turn out well, and the result is that the demand for capital on loan increases in even a greater proportion than the supply of money that comes into currency, and therefore the rates of interest become higher. 4855. Surely the increased gold supplies did not cause the high rate of interest or the monetary crisis. The true reason must be found in speculation and great stimulation to trade of all descriptions .''' — Yes, I have no doubt there was a great stimulation to trade of all descriptions, and that that stimulation ran to excess, as is well understood. Whenever you have a long period of profitable trade you have always a sort of after-growth of speculation and inflation on the back of it, and that produces the crisis which is nature's wholesome way of throwing oft' the evil. 4856. If bullion were drawn in by the banks so as to reduce the currency by one-half, the tendency would surely be to make interest liigh ?■ — I think that would be the first and immediate effect, undoubtedly, but the tendency of long continued depression cf trade is to use much less money and to throw the money you have into the large reserves. 4857. With regard to using much less money, I find it is generally estimated that in our enormous operations only about one or two per cent^ is paid in cash, the balance being settled by instruments of credit. Do you think it is so ? — Yes, but you require to hold in the Bank of England, and other centres, an adequate supply of bullion, otherwise the whole commercial fabric would topple down some day. I think we hold too small reserves in this country for the amount of business we do. 4858. With regard to the very heavy losses you referred to in manufacturing. In stating that the fall was 40 per cent., I suppose you took into your estimate the fall in the raw material, and calculated what the fall had been in respect to the manufactured article ? — No, this is the calculation that I made. The exports of this country were 212,000,000/. last year ; the quantity had increased so much that, if valued at the rates that prevailed in 1873, it would have been 360,000,000/. That shows an average fall of 40 per cent, in the commodities exported from this country, and the fall is about the same in the com- modities imported into this country, they have also fallen about 40 per cent. too. 4859. {Mr. Chamberlain.) Since when do you estimate that that fall has arisen ? — Well, it has been spread gradually over from 1873 to 1886, which was the last year of the whole series. The scale of prices last year, 1886, was the lowest, with one exception, for 100 years. We have come back to the prices of 1849. 4860. Now, do you think that low prices are in themselves au evil ? — I do not think you can say that low prices in themselves are either a good or an evil ; you have to take them in relation to the previdus state of contracts, and obligations, and charges. I think low prices are a great evil coming after a period of high prices, a long continued period of high prices', when all sorts of obligations have been contracted upon the basis of the high prices then I think, a fall to a very much lower standard of prices upsets all relations of society. 4861. That means that a disturbance in prices involving a disturbance in obligations, is an evil ? ! Yes. 4862. But not that low prices are an evil to the persons who have to pay them ? — If you limit it to the persons who have to pay them, and exclude the MINUTES OF EVIDENCE. 251 persons who have to sell at the low prices, perhaps what you say may be true, but you nannot separate the one from the other. 4863. Take the illustration tiiat you gave us, which was that in the 14th and 15th centuries prices were lower than at any other time in our history. Are you aware that Thorold Rogers and Stuart Mill, and other economists, contend that the general condition of the people in the 14th and 15th ceuturies was much better than it was subsequently in the 16th and l7th centuries, when prices went up ? — E think that applies to a particular period in English history, wlien the population had been immensely reduced by the " black death," and when there was an amplitude of living in this country for 100 years or so. I do not think it had anything to do with the scale of prices at all. I would say, speaking broadly, the worst condition that humanity ever lived in was the middle ages.' 1 would say that the degree of misery that existed in Europe from about the 6th century down to the 14th was the greatest we know of, and that was a period of very low prices. 4864. You would admit that low prices are good for purchasers ? — If their income remains the same. 4865. Then how is the good to the purchaser lost so that low prices became on the whole an evil ? — I would not say that low prices in themselves are an evil. It does not very much matter what scale of prices obtains as long as it is a permanent scale, and all the obligations of society are reconciled and adapted to tliat scale. What I do say is a very great evil is that when you have had a customary scale of prices in the country, and heavy obligations based upon it, that that scale should suddenly and greatly be shifted. Then you bring abont all sorts of social dislocations. 4866. That state of things has happened, according to your view, recently ; a fall of 40 per cent, in prices has taken place in the course of 15 years. How has that affected the condition of ihi working classes ? In the first place, I think you admit that their wages have not been reduced ? — I think the general scale of wages has been very considerably reduced. 4867. Let us take the ordinary mechanic who is called a " fitter." Is it not the fact that 30 years ago his average rate of wages was 28s. a week ? — I could not answer the question. 4868. Do you know that his average rate of wages now is at least 32s. a week ? — It may be so, for all I know. 4869. And with regard to that very large class which represents hundreds of thousands of workpeople who depend upon engineering and similar work, wages have increased in the last 30 years ? — My impression is that there is no large class of operatives amongst which wages have increased. I think that they have largely decreased since 1873 amongst the great body of the operatives as far as my experience goes. 4870. I said 30 years ? — Wages rose enormously from 1850 to 1873. I have gone oyer a great many tables as to the average wages in manufacturing districts between the period of 1840 to 1850, and the period from 1870 onwards, and I should think prices on the average rose 50 per cent., but I should say wages have fallen on the average, taking all ~ the employments all the country round, I should say wages must have fallen on the average somewhere about 20 per cent, since 1873. Of course I am speaking very widely ;ind loosely. 4871. I can only put it, however, to you as far as your knowledge goes. I take this class of " fitters." Is it a fact that their wages, the wages of engineering mechanics, have fallen 20 per cent, or even 10 per cent since 1873 ?— I think it is quite possible that there are several skilled branches of labour in which wages have not fallen at all, and a few in which they have risen. j u -ij u 4872. Take the case of masons and builders ; have their wages faUen 10 per cent, since 1873?— I could not say, but they have had an immense amount of short time. The average earnings are really what we have to deal v/ith. 4873. Then take the case of agricultural labourers, not skilled labourers ; have their wages fallen 10 per cent, since 1873 ? — I have a very good reply to that. I have astatement here, prepared by one of the largest estate agents in England, in reply to a number of queries I put to him as to the condition of the agri- cultural classes. Mr. Squarey has taken great pains to make up this statement as to the fall in all the different departments of agricultural life, and he puts the average fall in wages at 20 to 30 per cent, since 1873. 4874. Well, take the average according to your estimate of a 20 per cent, fall ?■ — It is more a guess than an estimate that ; I would hardly call it an estimate. I know something of the average wagps of operatives in the cotton districts. I think the fall (here is not more than perhaps 10 per cent. 4875. But assuming, for the sake of argument, that it would be a fair estimate all through to take the fall in wages at 20 per cent., inasmuch as the fall in prices has been 40 per cent., the labouring classes have benefited by the fall to the extent of 20 per cent.? — That would only be the case if they had constant employment and full earnings. Now, my belief is that, for the last 10 or 12 years,' there have been very few trades indeed in which the labouring classes have been fully employed. There have been very long periods of short time, frequent strikes, and great social suffering. 4876. You are not aware then that inquiries have been made, which have shown that the total sum of wages paid has not diminished ? — That may be so, of course. The population of the country has in- creased since 1873 by 4,000,000 or 5,000,000. 4877. But any change due to the increase of the population would be rather outside our present inquiry, which is how far changes have been caused by the depreciation in prices ? — No, but I thought you were speaking of the total amount of wages paid. The total amount ought to have been steadily increasing along with the increase of population in a healthy state of trade. 4878. But your impression is that there has been a great want of employment. What I want to suggest to you IS, that so far as there has been any want of employment, it is due entirely to the increase of the population, and not to any lack of the umount of employment which existed previous to 1873 ? — My impression is that trade in all its branches has been very slack and very unprofitable since about 1876. It began to tell upon labour about 1878/ and I think, from 1878 on to 1886, the average employment was much less regular than it was in the previous 10 years, and the total earnings of the men were much less. 1 think that this is in accordance with the statements of all the great trade unious whose reports I have been in the habit of reading from year to year. 4879. There are two points which are quite sepa- rate, and which I want to keep separata for the moment. The first is whether trade has been profitable or not ; the second is whether it has been equal in volume. Now 1 am dealing absolutely with the volume of trade. Of course you are aware that the traffic returns of the railways siiow a continuous increase ? — I think the rate of increase has been considerably less of late years. 4880. Bu£ I am talking of the coal traffic. I put it to you that up to last year, at all events, there has been a continual increase in the coal traffic of all the railways together. 1883 was thehighest ever attained, 225,000,000 of tons of the weight of goods and minerals conveyed. In 1884 there was a slight falling off to 219,000,000, and in 1885 it was 218,000,000. So that practically there has been no falling off" from the very highest. If you go back to 1873, which, I think, is your date, the total weight then was only 162,000,000 ? — Yes, but how much has the mileage increased ? 4881. The total increase there is 45 per cent, between 1873 and 1885. Well, now, I understand your Mr. S. Smith, M.P. 13 May 1887. 252 ROYAL COMMISSION ON GOLD AND SILVER: Mr.S. Smith, M.F. 13 May 1887. argument is that the appreciation of gold affects trade injuriously, but the only illustration you have given of it is the case of the smaller manufacturers, who cannot bear the loss of their capital caused by the fall of prices, and who are cleared out of the way ? — No, I think I gave many more illustrations than that. I think the effect of a steady long-continued fall of prices upon the trading classes is a general im- poverishing of all, great and small, and the extinction of the weaker €lass who have not had reserve capital of their own. 4882. And the extinction takes place because their original capital is reduced in value by the fall in prices ? — Yes. 4883. Is not that fall in prices always gradual ? It has been gradual since 1873, has it not ? — ^It has been in some periods quicker than others. It has not been a continuous fall ; it has been met by counter eddies, but the general tendency has been downwards all the time. 4884. And as it affects the raw material as well as the production, is not the manufacturer able to guard himself against serious loss ? — Not fully. All men have to take certain risks, more or less ; the custom is to hold stock. 4885. But in a falling market the tendency is for a business man to reduce his stock ? — After the losses have been made. The first heavy fall of silver caused enormous loss, because people were caught with very large stocks, and goods are mostly sold in the Eastern markets on credit. Our trade is largely with silver- using countries and on credit, and we were suddenly caught when we had immense outstanding credits with those silver-using countries, and enormous loss fell on the mercantile classes and on the manufacturing classes who are shippers of their own goods in conse- quence of that. 4886. I am not denying that there is a lose, but I mean the loss would not be all that would appear from the total fall in prices ? — I think the total fall in prices was spread over the existing stock, and has been realised at some time or another by some one or another. 4887. Then to the extent to which the smaller traders were extinguished the larger traders would gain, would they not ? — ^No, the larger traders suffered very much also. 4888. Yes, but they would gain by the absence of subsequent competition ? — No, that has not been my experience of business. I think the general profit- ableness was exceedingly reduced all round, and the weaker class went to the wall, and the stronger class struggled on with an impaired constitution. 4889. But surely the extinction of the weaker class, pro tanto, is an advantage to those able to hold on ? — But when a firm fails, the manufacturing plant is bought up at a much lower price and set agoing by some one else ; the trade is not extinguished. 4890. The loss is an individual loss, and not a loss to the country ? — I think it is a loss to the country when a large class of people become impoverished who were formerly well to do. 4891. But your view is that, on the whole, taking large and small traders together, the profits of trade have been reduced from 8 per cent, to 4 per cent. ? — Well, that is hardly an estimate. I would put it this way, that whereas in times of prosperous trade, such as we had prior to 1873, you might reasonably have said that, in most branches of trade that were vigorously and well conducted, there ought to be a profit of 8 per cent, on the average of the working capital, and if the ordinary rate of interest was 4 per cent., then there v/as an inducement to borrow capital, because the person borrowing it would pay the 4 per cent, and have another 4 per cent, profit to himself. That has pretty much disappeared since then. 4892. Your view, therefore, is an estimate, of course, that the profits have been reduced from 8 per cent, to 4 per cent., which is a fall of 50 per cent. ? — I think it is exceedingly likely, if we had any real means of assessing the profits upon mercantile trade from 1876 to 1886, that we would find the average profit on capital not to be more than one-half what it was in the previous 10 years. 4893. Then how do you account for it that that does not appear in the returns of Schedule D. ? — I cannot fully account for that. I have often puzzled over it. I should think that probably a large part of Schedule D. may come from interest on lent capital. I do not know whether that is so or not. 4894. One can understand if the fall in profit had been a mere 5 per cent., or something of that sort, that it might not appear in the returns ; but if your impression is anything like accurate that there has been a fall of 50 per cent, it must appear in those returns. It is impossible to suppose that those returns would have continued to increase in the face of a reduction of 50 per cent, in the total amount ? — Yes, because I think a very large part of the com- mercial profit of England now goes simply in payment of interest upon borrowed capital, a very large part of it. 4895. A larger proportion may, but not more in amount than before 1876 .' — I could not say. I think a much larger proportion of the trade of this country is now carried on by borrowed capital than was the case 10 or 15 years ago. I have asked myself the same question as you ask me now a hundred times, and it has been to me a perfect puzzle how, the income tax returns keep up, because, from my experience of the cotton trade, a pretty wide one, I should certainly say that the great mass of that trade has been carried on at an exceedingly small profit since about 1874, so small in some years as to be hardly perceptible at all. I have compared notes with many of the largest people in the trade, and I have found no difference of opinion on the subject. I have got the returns of many companies, and the returns of private individuals as well, and that is the result of my experience. 4896. Do you not find that people are very ready to confess to bad trade, and they are not very willing to confess to good trade, or very large profits ? — Well, after allowing for all that which my business ex- perience has taught me as it has taught you, after making every discount and allowance, my opinion is that the capital employed in the cotton trade of Lancashire has returned very much less profit during the last 10 years than it did the previous 10 years. 4897. But are you judging entirely from one trade? It may be the case in regard to the cotton trade, and yet any deficiency in the cotton trade may have been more than made up by the other trades in the country ? — Well, I am speaking of it now, but I think you would get the same information from all persons largely concerned in the iron trade, the coal trade, and the shipping trade, and, indeed, in most trades of the country. That is my impression. 4898. But I ask you whether the only adequate explanation of the income tax returns is not that the total amount of the profits of the trade of the country must have continued as large as ever, although the proportion of profit upon the returns may be less than it was, and, in fact, whether the whole tendency of modern business has not been to get larger returns with a smaller proportion of profit, the actual profit being, perhaps, the same ? — I think there is one particular branch of trade that has benefited ; that is the distributing trade. A very great fall in the wholesale prices has benefited the distributing trades because the retail prices have not fallen in the same proportion, and they have got a good portion of the profit. Tliese retail prices have not fallen 40 per cent. Wholesale prices last year had fallen 40 per cent., and the whole class of retailers have, I think, done well. 4899. What I want to put to you is, that while your impression is that this appreciation of gold has been unfavourable to trade, you do not find any trace of the depression in the official returns i* — I think you do find a very considerable trace of it. Look at Mr. G-oschen's budget speech for instance. I will just quote a few of his figures, showing the extreme want of elasticity in the revenue of late years, as an example. MINtJTES OF EVIDENCE, 253 4900. Of course we admit that the elasticity is not so great, that is to say, the revenue does not come up by leaps and bounds, but it remains at a higher level ; the income tax is at a higher level now, certainly, than it was in 1873, very much higher? — Yei;, but the remarkable point is that from 1870 to 1875 it increased at the rate of 25 per cent., while for the last five years, allowing for increase of population, it has been stationary. 4901. In that case the only evil you would point would be a failure continually to increase, but not any positive reduction in. the profit or volume of trade? — But I think that of itself is a very noticeable feature. 4902. But do you confine your argument to that ? — No, I do not confine it, but I say that is a very notable point, because in other countries I imagine there has been very great progress during the last few years. In the United States there has been great progress ; in this country we have had a cessation of progress. 4903. {The Chairman.) In the United States I thought they had been sufiering from low prices ? — The general trade has improved considerably. It went down very much in 1880, and is recovering again now ; is that the case ? 4904. {Mr. Houldsworth.) Is it not the case that in Schedule D. the incomes returned from foreign investments are included, and will not that possibly form an explanation to some extent ? — Possibly. 4905. {Mr. Chamberlain^ The gross amount of property and profits under Schedule D. from 1870 to 1874, which is the period you take as the favourable period, was 210,000,000^., in the last period from 1880 to 1884 it was 268,000,000/. That is to say, it has increased 25 per cent, during the time in which you estimate that profits at home have diminished 50 per cent. ? — I did not say profits at home, I said the portion of profit represented by capital of those engaged in trade I thought was very much less, but the portion of profit represented by the hire of capital probably remains as great as ever. 4906. Very well, but in the time in which you estimate that reduction of 50 per cent, upon the capital engaged in trade, the returns of the income tax under Schedule D. have increased by 25 per cent. ? — In reply to that I will quote what Mr. Goschen said, which does not in the least correspond with that. He said, " Under Schedule D., containing, as it does, " the profits of trade and business, in 1869 the " assessment was 161,000,000/., while in 1876 it was " 242,000,000/., being a jump of 80,000,000/. in seven " years. But from 1876 to 1886 it only rose from « 242,000,000/. to 247,000,000/., being an increase of " only 5,000,000/. in 10 years. I wish the Committee " to grasp the full significance of these figures. While ^' in the earlier period there was this gigantic increase " in the revenue of the country, the turn came in " 1876, and since then there has been only an " aggregate increase of 5,000,0000/. in 10 years." 4907. That is to say, the increase has been at a much less rapid rate, but still there has been an increase ? — A much less increase' than of population 4908. But I put it to you that any increase at all is inconsistent with your view that there has been a very considerable decrease in the most important item of it ? I admit I cannot fully understand it. I have thought over this for many years. One partial explanation I would give is this. I think the income tax is collected now very much more rigidly than it was 20 years ago. I am speaking from facts within my own knowledge when I say that, in the early years of income tax, a large amount of income evaded pay- incr income tax, and I have known of incomes which natd only for one-fifth or thereabouts of their amount, whereas of l&te years I have known cases where people have paid considerably 7er their income. Assess- ments have risen higher and higher until people tlnnk they are assessed beyond their income. I would not be surprised if that accounts for an enormous sum if it can be worked out. 4909. I want to turn for one moment to the other Mr. S. evil which you consider arises from the appreciation Snuth^.P. of gold, that is, the effect of the burden of fixed jg jja^y jggj-. contracts payable in gold. I understand that that _[ is an injury only to one class, the class of debtors as compared with creditors ; it is not an injury to the country as a whole? — I think it is an injury to a very much larger class, and a class that ought always to be considered, namely, the active industrial class who are working for their living, whereas the people that benefit are, as a rule, people who do nothing at all except live upon the interest of their capital. 4910. You think the debtors are a more deserving class of people than the creditors ? — I think the industrial class actively engaged earning their living ought to be more considered than the idle class who already have more riches than is good for them. 4911. But I am right in saying that whatever weight may be attached to that it is not an evil to the country as a whole, but to one class of the population as compared with another class of the population ? — Well, my reply to that is that I think all unjust transference of wealth from one portion of the community to another is an evil to the country as a whole. 4912. I will change the word and say, not that it is not an evil, but that it is not a pecuniary loss to the country ; it is a pecuniary loss to a class of debtors as compared to a class of creditors ? — Well, I will give a strong illustration of what I mean ; not a very happy one you will think, but it brings out what I mean. Why is thieving a loss to a community ? The com- munity is not poorer on account of the money stolen, it is only transferred from cue man's pocket to another's, therefore you might argue that it is no disadvantage to a country to have a class of thieves who live by plunder, but all communities think it is a very great disadvantage. I do not wish to infer the analogy is complete, but I say that any unjust transfer of wealth by means of law from one class of people to another is a great injury to a country, especially when the transfer is made from the poorer to the richer class. 4913. Now, I want to consider the case of these two classes. You put the debtor as above the cre- ditor, but is not the creditor a person who by industry and frugality hais collected the capital which he lends to the debtor ? — I would say that, speaking broadly, the large capitalists repj-esent reservoirs of capital which have been accumulated for centuries. These reservoirs are used aU over the country amongst the multitude of small traders. These traders are the brains of the country ; they carry on the trade of the . country ; their enterprise develops the country, and upon them hang for sustenance the great mass of the labouring class. I say it is much more for the good of the country to have the trading community prosper, which means prosperity to the vast mass of those who hang upon them than it is to add to the already excessive riches of a small class of capitalists. 4914. But you propose by legislation to transfer from one class a part of their property for the benefit of another class ? — No, I do not accept that as a fair statement. I say unjust legislation has added to the weight uf debts in all countries having a gold cur- rency ; unjust legislation has benefitted the capitalist class at the expense of the vast mass of the com- munity. I wish, then, legislation to undo the wrong that has been done, and place us where we stood before silver was demonetised. 4915. {Chairman.) Do you think that the bulk of the money which has been invested in industrial occupations, by way of loans or otherwise, by those who are not carrying them on has been mainly fiom the resources of a few or a considerable number of wealthy capitalists ? Has not the bulk of it come from the pockets of persons of small means ? — I should think not. I should think that the loanable capital in this country, speaking broadly, mainly belongs to the capitalist class. 254 ROYAL COMMISSION ON GOLD AND SILVEE I Mr. S. 4916. {Mr. Chamberlain.) But you take the Smith, M.P. bankers of the citj of London as the type of that " capitalist class. Are not their deposits made up of ay 1887. enormous numbers of very small sums from frugal people, who put them there for safety ? No doubt the capitalist class includes, for instance, the savings banks, which includes over 80,000,000/,, so that you can hardly anywhere draw an exact line between a class that are creditors and a class that are debtors, and a class of capitalists and a class who are not. You may say all the traders are capitalists up to the extent of the money that is employed in their own business, but in addition to that they employ borrowed capital, and that is drawn from the class which do not work at business themselves ? 4917. {Mr. Courtney.) Take the case of the land- owners, who are, as you say, very greatly indebted. Is it not the fact that a very lai'ge portion of their mortgages are held by insurance companies, who represent the savings of the most frugal and industrial classes ? — No doubt they are, but I say it is a very hard thing for a man who has inherited an estate worth 10,000Z. a year, subject to burdens of 5,000Z. a year, owing to fall of prices and depression of trade, his rental falls to 5,000/. a year, and he finds himself without any income at all, and subject to the same burdens which he was before. These burdens absorb now a far greater share of the value of the land than they did before. 4918. {Mr. Chamberlain.) That is an individual case and quite a diiferent case. Your general pro- position was this, that you thought that it would be a good thing to benefit the debtor (the industrious trading community) at tlie expense of the capitalist who lends him the money. What I put to you is, that in very many cases the debtor is an unthrifty and profuse person, whereas the capitalist is really the frugal and thrifty person ? — There may be some instances of that kind, but I should say the opposite is the usual case. I think the trading class who employ capital are for the most part the thrifty, industrious, hard-working part of the community, and that those who live upon the interest of their money are for the most part the least industrious and the least frugal part of the community. Of course there are exceptions, but I think that is the rule. 4919. But the people whose capital is advanced to the traders of the country are not necessarily people who live on the interest of their capital alone, are they ? — Not necessarily. 4920. The capital advanced is made up of the savings of an infinite number of persons ? — I would think that a large part of the capital advanced belongs to rich people who simply live on the interest of their money. 4921. Are you a bank director ? — No.' 4922. Do you know anything about the proportion of small deposits in the banks ? — Well, I am pretty familiar with the Scotch deposits which amount to 60,000,000/., and know the class from whom they are drawn. 4923. Is not a large proportion of that 60,000,000/. made up of small deposits from small [)eople .' — No doubt it is. 4924. Who are not large capitalists living upon the interest of their money ? — But the bulk of these very small people would benefit by the change that I have recommended. 4925. That is a difl^erent argument. I must press you on your particular argument which was that it was an expedient thing to benefit this debtor class at the expense of the capitalist class, because the capitalist class were large property owners living upon the interest of their capital. What I put to you is that the capitalist class to which you refer really consists to a large degree of very small capitalists, who do not live exchisively upon the interest of their savings r—Still, the owners of the ground rents of London are in the main a very wealthy class of persons. They belong to that class which are bene- fitted just now. The fund owners, not a very large class, are also benefitted by the present state of things. The holders of mortgages and annuities of all kinds are very largely of the same class of people as the holders of ground rents. They are mostly people who are not actively engaged in business, and if you were to contrast what is good for them with what is good for the far larger class of people who are struggling on, doing the business of the country with great expenditure of brain and anxiety, I think I would consider the struggling and active class rather than the other class, but I do not mean by saying that that I would be doing an inj u'stice to the one or the other. What I say is this : Changes of the law have taken place which have been a great injustice to the debtor class, for the benefit of the creditor class. Those changes were not done for that purpose. The effect of them was not foreseen at the time, but it is almost universally understood that they have had that effect. All 1 want is to restore fairness and justice as between two classes of the community. 4926. I have only one other question to ask you. Is not England as compared with othei- countries a creditor country } — Yes. 4927. On balance it is very largely creditor ? — Yes of course, that is true. 4928. And therefore any alteration such as you propose would injure England as a creditor nation to the advantage of the debtor nations ? — So far as England holds gold bearing securities, and only so far England also holds a great deal of silver annuities in regard to which she is losing. For instance, she is holding all the capital by which the Indian railways have been made. 4929. And why does she lose there ? — The Indian debt is paid in silver. 4930. (Mr. Barbour.) What is raised in India is paid in silver ? — But there is a large amount of silver annuities held here. I have always understood that we held about 100,000,000/. of Indian securities in this country. 4931. About 20,000,000/., I think, speaking roughly ? — Then the balance is held in India, but by English people. 4932. {Mr. Chamberlain.) I do not think that very much matters ; the balance is very largely in favour of England as a creditor nation for gold .^ — Yes, I quite admit that, but I would also wish to call atten- tion to this fact. It is commonly held that English investments abroad are almost entirely in gold payiiig securities. Well, I have travelled a good deal abroad and made inquiries in o this subject, and the convic- tion has grown upon me that we have a much larger amount of capital invested in real estate, and plant, and trading operations of various kinds, the interest of which comes to us perfectly aparj from tlie currency of the country; much of it is in fact in countries having inconvertible paper currencies, and that is the portion of our capital which is increasing, and from which the interest comes to us perfectly irrespective of the standard in which the interest is paid. 4933. {Mr. Houldsworth.) If the effect produced upon the debtor, or what you call the industrial class, is as you have described, will not that evil ultimately affect tlie creditor in the rate of intere'^t that he would be able to get for his capital ? — No doubt, the rate of interest is steadily going down, owing to the extreme unprofitableness of trade, and the interest of all good security is very much lower. 4934. So that it will not be ultimately a question between two classes, it will be that both classes ultimately will suffer ? — Well, I think so in the main. I think wherever a great wrong is done to any large class of the community it ultimately diffuses itself over the whole community. 4935. {Mr. Barbour.) Do you not think that it would be a suicidal policy for a country to permit the appreciation of its own standard because on the balance of its foreign obligations it might be a creditor ? — I think it would be an exceeding great wrong dene to a far larger class of persons from whom MINUTES OF EVIDENClii. 255 I have made a computation that the amount of interest payable in this country in gold is not less than 150,000,000Z. sterling a year, probably it IS very much more than 150,000,000/. sterling, and I think, to add to the weight of all this in order that England may benefit upon 3O,OOO,000Z., payable to US by foreign countries, whose gold securities we hold, would be a suicidal mistake. ' 4936. (Mr. Chaplin.) I understand you to say that the fact that the income tax returns have not fallen off is partly accounted for by increased stringency in collection ? — I think so. 4937. May there not be other reasons to account for the same thing. Take for instance the case of farmers. They are assessed upon their rents at present, and not upon their profits ? — Yes, quite. 4938. You have been asked a good deal about the classes of creditor and debtor. I want to put the question to you in another way. I understand your contention is this, that the adoption of the bi-metallic system would be to raise the price of all commodities to some extent ? — In gold using countries. 4939. You include the labouring classes, I presume, because they have a commodity to sell, and that is their labour?— Yes, I think the effect would be to cause a rise in wages. 4940. Then it comes to this, that the owners or producers of all kinds of commodities, including the working classes, to that extent would be the gainers ? — I think so. ■4941. On the other hand, I understand you to admit that the holders of gold bearing securities might to some extent be injured ? — To some extent ; that is to say, their money would not go quite so far in purchasing. 4942. Even supposing they are injured or were injured, they would only be injured to this extent, I understand from your argument that they would lose only what they had gained and what their creditors had lost by the legislation which demonetised silver in 1873, 1874 ?— Certainly. 4943. It comes to this, does it not, that it really is a question between the interest of the owners of gold or gold bearing securities on the one hand, and the owners of all other kinds of commodities including the labour of the working classes upon the other ? — Pretty much that. 4944. You would contend that the latter class is infinitely the more numerous ? — Certainly. 4945. In reference to what you said as to the fixed burdens, you estimated them in round numbers, I think, at 200,000,000/. .?— Well, at 150,000,000/. in the pamphlet that I published, but I think they are a good deal more than that probably. 4946. Could you tell me what proportion of the annual income of the country that amounts to ? — "Well, the income of the country is very difB.cult to arrive at, and there are many different ways of com- puting it. If you add together the income of all individual persons in the country it is supposed to aggregate 1,200,000,000/. sterling, but much of that income is counted over several times, and does not form a part of the net income of the country. I doubt if the net income of the country is anything approaching that. 4947. Could you give an estimate of your own ? — Well, I used to think about 1,000,000,000/., but I am almost inclined to think that 800,000,000/. would be nearer the mark, when you allow for the immense decrease in the price of everything. I mean the net annual production of wealth. 4948. Then I am to understand that you would estimate the fixed burdens of the country as amounting to something approaching to one quarter of the net annual income ?— Something approaching one quarter of the net annual production of wealth. I would rather put it that way. , ^, , ,, » . ^ i, • 4949. Well, now, you stated that the first tall m jsilvpr occasioned an enormous loss. What is your opinion as to the future of silver ? Supposing that no legislation is adopted, is the value of silver likely o 24358. to remain stationary, or to improve, or to fall further ^[' m p than it has done at present ? — Well, my impression is "" '' ' " that the same causes which have caused the last fall, 13 May 1887. the fall of 25 per cent, compared with gold, will produce another fall equally great in the course of the next 10 or 20 years, provided that there is no step taken by the nations of the world towards the re- monetisation of silver. 4950. What did you estimate the fall at which has occurred already ? — Well, it is rather more than 25 per cent, compared with gold, for silver used to be QOd. an ounce; now it is 43^. McLean. [IS May 1887. 258 EOYAL COMMISSION ON GOLD AND SILVER: Mr. D. McLean. 16 May 1887. 5006. And what is the amount ; can you give us any idea ? — It is quite impossible. 5007. Still there would be a substantial burden on the export transactions from this country to China, a certain burden to the merchant resulting from the fluctuation of exchange? — Yes, the present rate is about 7 per cent., that is to say, we buy a bill at 3s., and buying out there to cover gives us an interest of 7 per cent, per annum while we are out of the money. 5008. That is to say, the interest which he would pay would be higher in that case than if he were selling a bill to a bank here dtawn upon a gold using country ? — ^Yes. 5009. Now, suppposing that you are not, or find you are not, able to cover yourselves, I suppose you would not quote to him a rate of exchange at which you would take his bills ? — We would quote a lower rate. There is always a rate that we can buy at in China, there are always bills offering ; if we could not get a biU to give us a profit at 3s. we would probably get a bill that would pay us at 2s. 1 \^d. or 2s. \\d. We would always be able to quote a rate to him. 5010. The result of that would be that he would have to pay more ? — Yes. 5011. But we have been told there were times in which a merchant could not sell forward in his transactions with China ? — That is very seldom. It happened, I think, about once last year, when the excitement was very keen about the heavy fall in India. 50! 2. I suppose if he could not sell forward he would have to bear the risk of the fluctuation i* — He probably would not do the transaction. 5013. So that in that case it would interfere, actually, with the doing of business ? — Yes, quite. 5014. Supposing that a very high rate has to be charged, do you think that that hampers business .also ? — No, we do not find it so. The business with China, the exports from this country this year, already are larger than the last. We do not find it to inter- fere. It makes business more difiicult, but it does not stop it. 5015. Now to deal next with the import business from China to this country, what is tlie practice with regard to that business ? — The merchant, I presume, has got his limits for, say, tea or silk here, and if can buy there, fixing the rate of exchange at the limits that he gets from his constituent in this country, he buys, and at that rate the bills are sold to the English banks. Say, for instance, he may get an order for silk, say, at 15s. a pound, and he goes to the banks there and finds at what rate of exchauge he can sell his bills, and then he buys the silk if he can lay it down at his limits. 5016. He makes the price for ihe silk at the rate at which he can buy bills ? — Exactly, and the same with tea. 5017. And in that case he is subject to no risk of fluctuations ? — He is not, if it is a firm order from a merchant here ; but, of course, the bulk of the business is done without a firm order from this side. For instance, tea you cannot sell to arrive here. 5018. If he can sell on a firm order from this side, then having ascertained the rate at which he can sell his biUs, and having fixed his price in relation to that, he would run no risk from fiuctuation ? — No. 5019. But if he cannot get a firm order from here, so that he has to buy to sell again here ? — Then he takes the risk of this market. 5020. That is, the risk of the fluctuations of the price of silver would fall upon him ? — Yes. 5021. Can he cover himself against that with the banks ? — No, it is impossible. 5022. And a large amount of the business, you say, is done without flrm orders from this country ? — In tea. It is impossible to sell tea ; quite impossible. 5023. So that as regards the import trade from China to this country, the merchant does run the risk of fluctuations of silver to a very great extent ? — Yes. 5024. Do you think that hampers his trade ? — No, it does not. It may make it a little more speculative. 5025. 'The profit that he anticipated may have disappeared in consequence of a fall in the value of silver ? — If silver goes down, probably the price here varies with it. 5026. So that it would render the business much more speculative, and so far as people were disinclined to do speculative business, it might hamper it ? — Yes. 5027. We will turn now to the export trade from this country to India ; will you be good enough to inform the Commission, what is the practice witli reference to that trade ? — That is very much the same. It is the same as the China trade, only they can do a firm order business much more readily. 5028. Is the usance the same ? — Yes ; 30 and 60 days. 5029. Well, the merchant selling a bill to the bank, and the bank covering itself in the same way, there are more facilities for the bank covering itself in the trade between this country and India, than between this countiy and»China ? — Yes. 5030. Is the interest that the merchant has to pay consequently less ? — About one per dfent. ; a half to one per cent, less per annum. 5031. Now, in the import trade from India to this country, does the merchant there run a risk to the same extent as he does in the import trade from China ? — No, he can more readily sell to arrive here ; for instance, wheat ; he can telegraph home that he has bought wheat there. Probably it is sold before he buys it. As a rule it is sold before he buys it in India. 5032. So that in the case of imports from India to this country, the merchant can protect himself from fluctuations in just the same way as in the case of exports ? — ^Yes. 5033. {Mr. Birch.) I think that is specially the case with regard to wheat ; you can sell wheat upon sample so much better than you can tea. They would not buy tea to arrive ? — No, they must see the tea. 5034. ( The Chairman.) Then may we take it that, as regards the export trade from this country, the mode of dealing through the banks and the position of the merchants is precisely the same as in the China trade, save that the transactions between India and this country being more constant in both directions than between China and this country, the merchant can carry through the transaction at less burden to himself? — Yes. 5035. But as regards the import trade from China and India respectively, whereas as a rule from China the merchant has to bear the risk of fluctuation, from India he can, as a rule, protect himself in the same way that he can in the export trade ? — Yes. 5036. {Mr. Barbour.) I suppose that the necessity for fixing exchange beforehand does hamper trade between the two countries ? — It does ; it makes business a little more diflScult. 5037. And has there ever been a panic about the exchange between England and India, or England and China? — There was last year. It began in August, I think, and lasted for two or three months. 5038. And that interferes a good deal with busi- ness ? — ^Yes, it did then. 5039. I suppose the panic arises from the fact that people do not know at what rate the exchange is about to settle ? — Yes. 5040. If they knew that it would settle at or about a certain price in the course of a short time there would not be that panic ? — Certainly. 5041. Do you find it very easy to forecast from time to time what tbe rate of exchange will be .? I am sorry to say we do not ; we just work from hand to mouth. 5042. And I suppose there is a certain difiiculty in always getting cover ; that is an inconvenience, is it not? — It is much more easy to get cover in India than China. 5043. But it is a difficulty ? — Yes. 5044. I saw in one of the financial papers some time MINUTES OF EVIDENCE. 259 a^o that tlie banks were talking of giving up the system of buying and selling forward; that they thought it was too risky and not satisfactory ; is there any truth in that report ? — No. 5045. Was the capital of y ur bank raised in gold or silver ? — Silver. 5046. By keeping a portion of your capital in the East you do not suffer any loss from depreciation ? — No, all our capital is in the East. 5047. Some of the banks have their capital raised in gold ?---Nearly all of them. 5048. They would be rather afraid to keep any considerable amount in the East, in silver ? — I should think they would not keep anything. 5049. They reduce the amount that is kept there as much as possible on account of the possible depre- ciation ? — Tes. 5050. And consequently the supplies of silver, say in Calcutta and Bombay, would not stand any con- siderable extra demand upon them that came sud- denly ? — No. The banks keep no money there at all. 5051. And has the result of that been that a very slightly increased demand in Calcutta and Bombay raised the rate of interest for the time very seriously ? 5052. I believe quite recently it was as high as 10 per cent. ? — 9 per cent. It may have been 10 per cent, outside the bank, but the bank rate was 9 per cent. 5053. And, of course, that is an inconvenience to trade ? — ^When you have dear money it interferes vrith trade. 5054. And I suppose, if people were confident that the portion of their capital in Calcutta and Bombay would not be depreciated, the supply that would be kept there would be rather larger ? — Yes ; they would send out money there to invest. 5055. And does the same cause that prevents the banks from keeping a larger portion of their capital in the silver countries prevent people from investing there too ? — Tes, it operates in that way. 5056. {Mr. Birch.) I gather from what you said that the difficulty is rather in imagination than in reality for the banks, inasmuch as the export and import bills balance themselves pretty well ? — Yes. 5057. And that with regard to the difficulties in dealing with China rather than with India, I suppose the Indian Government bills come in to your assistance very materially ? — Yes. 5068. That is an element which you have not got in China ? — No. Well, we use the Indian bills on account of China also. 5059. But not with the same facility ? — No. 5060. Has your bank anything to do with countries using a forced paper currency ? — No. 5761. But I suppose you would agree with me that banks dealing with a forced paper currency would have a much greater difficulty than those dealing with a silver-using currency ? — Decidedly, 5062. And that, with regard to buying and selling forward, the merchant has his risks, independent of the exchange, because he may buy forward, and when the goods are delivered they may have fallen con- siderably from the price at which he bought. Sup- posing I buy wteat for future delivery at 30s., it might be at 26s. before I got delivery 'of it. It is one of the mercantile risks ? — Tes ; but it assumes that you very likely have resold it. 5063. Of course it must be very much easier for a bank to deal with a country which has exactly the same standard, because they know that they have only got the expense of moving the metal in case the exchange goes against them ? — Yes. 5064. {Mr. Chaplin.) I think you said that the wheat in India was often sold here in England before it was actually purchased there ?— Yes, very often. 5065. Then how is the operation carried out? Is it bought by corn merchants here in England, and do they send out an offer for a certain quantity of wheat of a certain quality ?— Yes, and if the offer is sufficient thp wheat is shipped'. 5066. Some witnesses have told us that the rate of exchange between India and England acts like an export bounty or bonus upon the wheat sent from India to England. Is that your opinion ? — I think the fall in exchange has encouraged the export of wheat from India very largely. 5067. And every additional fall acts as a bonus ? — Tes. For instance, in China in the last 10 years many different exports that we never heard of before, such as straw-braid, and camels' wool, are brought in owing to the fall in exchange. 5068. The rupee is worth how much in England at the present moment ? — Is. 4§^rf. 5069. And is it the fact that in India it retains its purchasing power of 2s., or something of that sort ? — Tes, I believe it does. 5070. Then is the position of the corn merchant this, that he can with Is. 4d. of English money buy a rupee, and therefore practically buy 2s. worth of wheat ? — No. 5071. {Mi: Harbour.) You say the fall in exchange has largely encouraged the export of wheat from India, in your opinion ? — Yes. 5072. Do you think if exchange went back to the old rate of Is. lid. or 2s., or whatever it might be, that the wheat trade would be seriously affected ? — Well, I am not prepared to say ; I fancy it would. 5073. And you think that the fall in exchange has stimulated the export of wheat from India ? — Yes, there is no doubt about it. 5074. {Mr. Courtney.) Do you think that that will be an abiding stimulus ? — I think so. I think it will go on increasing. 5075. I mean, supposing the rate of exchange remains at what it is now, that stimulus would con- tinue to be as active as it is now ? — Tes, I think more so. I think that as India is opened up with railways it will bring more of the country into cultivation. 5076. But you are there pointing to an increase of the export due not to the change of the rate of ex- change, but to the opening up of railways ? — I think it has more to do- with the exchange. If the ex- change had been 2s. I do not think you would have had so much wheat. 5077. The present rate of exchange is Is. id. or 1 s. 5d. ; supposing it remained at that rate during the next 10 years, do you think that it would operate as an increasing stimulus to export during that 10 years ? — I think the stimulus would be exhausted. 5078. Ton said that the rate of interest paid by a merchant buying a bill on China did not exceed very much, you believed, what was paid to Australia ? — About 6^, sometimes 7 per cent. ; I should think to Australia it is between 5 and 6 per cent. 5079. And the rate to China does exceed the rate to India ? — Tes, by about a half per cent. 5080. So that the rate to India and the rate to Australia would be about the same ? — It is probable that the rate to Australia would be a liitle lower. Of course you have no risk. 5081. But an extremely trifling difference ? — Y'es. 5082. {Chairman.) As regards the increased open- ing up of the country by railways and such works, do you think that has been stimulated or diminished by the low exchange ? — No. 5083. Do you think that with the rupee at Is. 5d., the railway works in India are likely to be more ex- tensive or less extensive, or the same as with the rupee at Is. lOd. ? — I should think they would be able to raise more money for railways if the rate of exchange was low. 5084. Tes, but the money raised for railways is mostly in gold debt in this country, is it not ? — In rupee loans as well. 5085. As regards the money raised by gold debt in this cor.ntry there would be no advantage from the low rate of exchange ? — No. 5086. {Mr. Courtney.) In respect of China I think J understood you to say that you could always gpt D. Mr. McLean. 16 May rg87. 260 ROYAL COMMISSION ON GOLD AND SILVER: Mr. D. McLean, 16 May 1887. bills there, speaking generally ? — Yes, as a rule we can get them. 5087. Against bills here ? — Yes ; the slackest time in the Chinese business is between February and the beginning of May. 5088. That depends in fact upon the crops ? — Yes. 5089. But the trade with China is goods against goods ? — ^Yes. 5090. And they very nearly balance one another ? —Yes. 5091. But in the case of India there is a large annual payment made by India to England ? — Yes. 5092. And therefore the goods from India must always largely exceed the goods to India ? — Yes. 5093. And hence the trade bills one way must be largely in excess of the trade bills the other ? — Yes, that is covered by Council bills or silver, or both. 5094. But mainly by Government drafts ? — Yes. I think we export 6,000,00OZ. or 7,000,000/. a year to them of silver in addition. 5095. And that difference is an element in deter- mining the rate of exchange ? — Yes. 5096. {Sir T. Farrer.) You said that the effect of the present state of things was to cause very little silver to be kept in India, and that that raised the rate of interest ? — By the English banks there. 5097. What sort of enterprises does that, affect? — It affects loans on goods. You know, the merchants are not able to raise money so readily. 5098. And that would rather tend to check exports if it had any effect at all ? — Yes, but we do not find it does. 5099. And I suppose that that raising of the rate of interest would not apply to raising capital for railways ; it would be merely for temporary purposes ? —Yes. 5100. (Mr. Houldsworth^ In answer to Mr. Court- ney you said that you thought the stimulus to the wheat trade, for instance, would be exhausted if exchange was to remain as it is. Could you explain by what means it would be exhausted ; how you think the present stimulus would no.t continue ? — The country is opened up as much as it will be now, unless further railways are made to open it up. The ground is occupied. 5101. Then you think that the stimulus at present is due to the effect that is produced by the opening up " of India ? — ^Yes. 5102. Is there no . stimulus by the difference between gold prices and silver prices? — No doubt that has had a great effect. 5103. But is that a direct effect, or is it only through the opening up of India? — Through the opening up of India, I should say. 5104. What are your opinions of the probability of exchange remaining as it is between the two countries ? — I do not think there is any hope of it remaining as it is unless something is done to fix the value of silver. 5105. You think silver will fall ?— Yes. 5106. {Mr. Birch.) May I ask you why you think silver will fall V — Unless the exports of India increase enormously we are frightened to buy silver. 5107. Do you know anything about the statement that China is going to coin a large amount of silver ? — That is a very small business. It is for the province of Canton ; not for the Pekin Govern- ment. 5108. But China still takes a great quantity of silver, does she not ? — Oh, yes ; but we export a large quantity of silver also from China. For instance, from the month of February to now, we send a large quantity of silver from China to India. 5109. Could you throw any light upon the cir- cumstance I heard related about a large amount of silver pillar dollars coming from China, that had been formerly current there, and sent to Spain ? — ^Yes, very large. 5110. What replaced them ? — Mexican dollars. The Spanish authorities in Manilla have allowed the Mexican dollar to go in there, and so reduced the rate of exchange in Manilla from 3s. \Q^d. to ^s. 3Jd. 5111. By the introduction of Mexican dollars to take the place of Spanish dollars which formerly circulated at 3«. \0\d. to 3s. llrf. ? — Yes. 5112. {Mr. Fremantle.) Did the pillar dollar cir- culate at the higher rate because of its scarceness ? — No, it was because there was no other dollar allowed in Manilla, 5113. {Mr. Birch.) And the Mexican dollar has only now been introduced into Manilla ?— Well, in fact, it is smuggled in. 5114. But I am dealing more particularly with China, because you will remember many years ago the Spanish pillar dollar was at a very large premium in China ? — These have disappeared altogether. 5115. The ordinary Spanish dollars now have been replaced by Mexican dollars i" — Yes. 5116. {Mr. Fremantle.) But the reason of that is, is it not, that the piUar dollar has been withdrawn from circulation by the Spanish Government j" — Oh, no. 5117. Does the pillar dollar remain in Manilla? — Yes, they will not allow them to be exported ; indeed the only place you could export them to was Madrid j now they have stopped that. 5118. {Sir T. Farrer.) I should like to ask if you know anything of what is doing with the American trade dollar in China ? — Those are all sent back to America. 5119. In consequence of their being remonetized by the recent law ? — Yes, 5120. Were there many of them held in China ? — Yes, a great many, but they have been gradually finding their way back. 5121. But the remonetizing of them has given them an additional value, I suppose, in America ? — Yes. 5122. Consequently, the people who held these dollars when they were remonetized made a good thing of it ? — Yes. 5123. Do you know at aU what the rise in value was in consequence of the remonetization ? — 15 per cent. 5124. So that the people who held those dollars made 15 per cent, in consequence of the American law which remonetized them ? — Yes. 5125. {Mr. Birch.) How long have you been in the banking business with China ? — 28 year*. 5126. Do you find that many more bills now are drawn upon Germany and France and the continent generally than there used to be ? — Yes. 5127. Replacing bills that were formerly drawn upon London ? — Yes. 5128. To what do you attribute that ?— It is cheaper for one thing ; the merchant on the continent wants his goods iroported direct, and he finds the banks willing to meet him. 5129. Because one of the questions that we have had before us is as to whether there was any par- ticular advantage considered abroad in having credits on England, by reason of people knowing that those bills would be paid in gold, and that if they were drawn on Paris or Germany they could not be certain of what they would be paid in. Do you attach much importance to that ? — No. 5130. {Mr. Barbour.) Does the Secretary of State for India draw bills to the amount of from 13,000,000/. to 16,000,000/. sterling a year on India? — It was 13,000,000/. last year and 16,000,000/. this. 5131. Suppose he stopped drawing for one or two or three years, what would be the effect on the rate of exchange ? — Oh, upwards. 5132. It would go up very high ? — Yes. 5133. And that would be a great disturbance to trade ? — It would. 5134. Have you any idea how high it might go? — It is impossible to say. 5135. It might go to Is. 10 but it does not bring them in in the simple way as when applied to a single commodity of an ordinary kind. 5467. {Chairman.) By what is left over do you mean for coinage purposes ?— Yes ; what is left in existence, not speaking of the annua) supply. 5568. But do you not include in what is left in existence that which is used in the arts, and what is hoarded?— No, what is really hoarded would be practically like an ornament. My general proposition • is that the level of prices all the world over would be so adjusted that the total quantity of money finds employment and that corresponds to the general law of supply and demand as affecting any particular article. You say that the price of any article would be so ad- justed that the quantity demanded would be equal to the quantity supplied, and so I should say as regards the money of the world, that the level of prices would be so adjusted at any time that the quantity of money would be just used. 5469. {Mr. Houldsworth.) Do you mean to say that, supposing you eliminated the question of any fresh supply, and also eliminated the question of any demand for other purposes than currency, the level of prices would remain the same as far as gold was concerned ? — Yes, but there would come in the ele- ment of demand for gold for purposes of currency, and you might get a great change in the demand. 5470. If the bulk of the gold remained the same, any demand would only be a transfer from one place to another, would it not ? — There might be an increase in the total demand for currency. Suppose for instance, that one of our colonies in the course of a few years got double the number of people, and double the wealth, and so on ; then it might require double the amount of gold to circulate its commo- dities. 5471. Might that not be met by the use of various banking expedients? — Yes, of course that would operate also, but still, taking the world as a whole, I should say that the level of prices would be ad- justed so that the total quantity of money would be used, and in that way the level depends upon the quantity of money. 5472. {Chairman.) It is conceivable, is it not, that the whole of the transactions in any particular nation, and the whole of the international transactions of the world might be settled without the transfer of any coin at all by a system of set-off ? — I suppose it is conceivable by an effort of imagination, but I do not think it is conceivable as practicable, especially if you consider the case of a foreign drain. 5473. {Mr. Barbour.) The demands for gold would be of the following nature. There is a demand for gold for use in the arts, for hoarding, for ornament, as a medium of exchange to be actually passed from hand to hand, as a reserve to support credit and business transactions, and so forth ? — Yes, those are the principal elements of the demand. 5474. And would you say that when gold once had Ijeen used in the arts, hoarded oimade into ornaments, it would, for a time at any rate, pass out of the market and cease to be a portion of the effective supply, and would practically have no influence on prices ?— Yes, it would have practically no influence on the general level of prices, that is what I meant to say when I said it was the quantity which was left over which determined the level of prices. 5475. Are you aware whether the amount of gold passing from hand to hand in the exchange of com- modities has ever been very great?— I have no special information. 5476 It is in respect of this use of gold that the employment of cheques and the resort to clearing houses would effect au economy of gold?— Yes, clearly. 5477. Cheques and clearing houses would effect no economy as regards use in the arts, hoarding, or use o 24358. for ornament ? — Obviously not, except as regards hoarding. 5478. Could you say whether or not the more ex- tended use of cheques and clearing houses would tend to reduce tlie reserves ? — I should think an extension of banking involves a certain addition to the reserve somewhere. 5479. But you could not give a decided opinion upon that question? — It would depend upon other conditions, the conditions under which the system is established. You could conceive of an increase in the use of cheques and clearing houses, leading to less reserve being required, taking the nation as a whole. 5480. Is it not the case that standard money is not merely a measure of value, but also an equi- valent against which commodities, may be, and frequently are, exchanged ? — I think that every exchange implies in modern times a reference to some form of money, some standard of money. 5481. You could measure a thousand yards of silk with a yard measure, but you could not buy a thousand yards of silk with a yard measure ? — No. 5482. A merchant may sell commodities and be paid by cheque, and he may buy commodities and pay by cheque, and his transactions may be on a very large scale, and yet very little gold may pass through his lands ? — Certainly. 5483. But though this is the case, the merchant has got the right to claim actual gold if he likes, wlien he sells commodities, and he is liable to have to provide gold when he buys, and consequently the reserves which support credit and commerce, must always be of a certain magnitude ; you cannot do without reserves ? — No, it seems to me that it is impossible practically to think of doing without reserves. 5484 . And I suppose those reserves would have to be proportioned to the extent of the business, and to the risk of sudden claims being made for gold, other things being equal ? — Yes, other things being the same, especially considering the kinds of claims that may be made, whether the claims are known and the possibility of the claims being suddenly made, and so on. 5485. The possibility of a panic, for instance ? — Yes. 5486. So that by no elaboration of the system of cheques, clearing houses, and other similar devices, could you get rid of the necessity of keeping reserves of coin or bullion ? — No, it seems (o me that it would be impossible to get rid of that. The very essence of convertibility of bank notes, taking the simplest form of credit depends on a certain amount of reserve being held, and then there is also the danger of a foreign drain. Whatever great economies may be made in one country there is always the chance of a foreign drain. 5487. You are no doubt aware that it has been said that as people become wealthy they prefer gold to silver for various purposes; and if you divided the people of any country into two classes, those using silver for ornament or personal wear, and those using gold for the same purposes, it would be found, speak- ing generally, that the class using gold was, on the whole, the wealthier class ? — Certainly. 5488. Are you aware that the import of gold into India for hoarding and ornaments has amounted in recent years to more than 3,000,000 '. sterling yearly ? — I have seen the statement. 5489. And are you aware that the yearly con- sumption of gold in the arts and manufactures in civilised countries in the present day is estimated as high as 12,500,000/. sterling by Dr. Soetbeer ?— Yes those are the figures I adopted from him in a paper of my own. 5490. Of course, it is very diflScult to make an estimate on this subject, and Dr. Soetbeer's estimate may be too high, but I will quote Dr. Soetbeer's own words to show what he thinks of this estimate. " I have already ventured upon the attempt to make Go Mr. J. S. Nicholson. 20 May 1887, 280 ROYAL COMMISSION ON GOLD" AND SILVER Mr. J. S. " an approximate estimate of the application of the Nicholion. " precious metals to industrial purposes in the " civilised countries, taking an average for the last 20 May 1887. u fg^ years, of course allowing a large margin for, « error. I have again brought them foi-vrard, because " there are applications of the metals which were " then, either partly or wholly unknown to me, and •' which might lead to an alteration of the esti- " mate. However considerable the colossal sum of " gold annually applied to ornamental and other in- " dustrial purposes may at first sight appear, all " doubt of the probable truth of the estimate will " disappear when we consider how enormously the " demand for gold articles and for manufactured gold " goods has arisen, owing to the increase of popula- " tion and prosperity." Dr. Soetbeer's great reputa- tion would in any case justify consideration of any figures he may put forward, but I should like to know whether it is your opinion that the consumption of gold in this way must be very great ? — I think there are very good reasons apart from this calculation. I was referring recently to Mr. Jacob's book on the precious metals, Vol. II., chapter XXIV., and I find that he has made several calculations showing that an enormous quantity of gold was used for the arts during the eighteenth century. He quotes a number of statistics obtained from manufacturers in Birtning- ham, Paris, and other places. I should think that the demand for other purposes than currency must have increased very greatly since that time, owing to the great increase in the consumption of gold in the arts and manufactures, and even at that time he found it necessary to take account of that element in estimating the amount left over for coinage. 5491. (^Chairman.) With diminished prices, which would be likely to bring about diminished wealth, would you not expect that demand to dimuiish ? — If prices were to fall to an extremely low level, sup- posing they became a fraction of what they are at present, then no doubt people would think a good deal before they bought a gold watch. 5492. But if there were a diminution of the incomes of the individuals forming a nation, would not these articles of luxury be amongst the first to be dispensed with, and consequently a diminished demand for them soon come about? — Yes, I think so; but at present, in spite of the fall of prices owing to the increase in the quantity of wealth, there is not any absolute diminution in the nominal income of the world, and so there is the same amount available. I should, however, quite accept as a general principle what you say, that the general fall of prices would so far tend to diminish the demand for gold for the purposes of the arts. 5493. {Mr. Barbour.) I have got here a state- ment showing the yearly value of diamonds and other precious stones imported into the United States for the years from 1867 to 1884. I may mention that the recorded exports are very trifling, and it is stated that there is a considerable amount of smuggling, a,nd the value of the articles smuggled is, of course, not included in the figures. This statement shows that the average annual value for 1867, 1868, and 1869 was ^1,459,666, while for 1882-3-4 the average annual value was no less than ^8,792,704. Do not these figures indicate, firstly, that a very largrc expenditure is being yearly incurred on articles of value for use as ornament; and secondly, that the amount so spent tends to increase rapidly as a country increases in prosperity ? — ^Yes, I should think that is good analogical evidence that there would be an in- creased demand for gold for similar purposes. 5494. From the analogy of these figures you would infer that there may have been a large increase in the demand for gold for the purposes of ornament and art ? — Yes. 5495. I believe the average yearly production of gold in the first 40 years of the present century is estimated to have been rather less than 2,500,000/. sterling ? — ^I think that is the calculation. 5496. And it would follow from the figures that have been quoted that India is now taking more gold for hoarding and ornament every year than the total yearly production of gold 50 years ago ? — Yes. 5497. And it would follow that for use in arts and manufactures the civilised world is now taking perhaps four or five times the total production of 50 years ago ? — Yes. 5498. The total production of gold is now, of course, very much greater than it was 50 years ago ; but you are no doubt aware that it is not so high as it was in the years immediately following the great gold discoveries, and that in recent years it has perhaps shown a tendency to diminish ? — Yes, the figures that I am familiar with show a diminution in the production compared with the years immediately following the gold discoveries. 5499. Well, looking to the figures which I have quoted of the total yearly production of gold 50 years ago, and of the estimated consumption of gold in the present day, it would appear that there is no reason to doubt that during the last 50 years there must have been a very great increase in the consumption of gold for hoarding, for ornament, and for use in the arts ? — ^Yes. 5500. With the limited production of 50 years ago, it would have been simply impossible to have met such a large consumption as we have in the present day ? — Yes, it seems so. 5501. And looking to the fact that the value of the total yearly production of gold is now but a trifling per- centage of the income of the world, to the rate at which population is increasing, to the still more rapid rate at which wealth is increasing, to the tendency to an increased use of gold which appears to accom- pany wealth, and to the fact that the production of gold does not continue to increase, is there not reason to fear that the consumption of gold for purposes other than currency, may at no very distant date overtake the production of gold ? — That seems tome very probable. 5502. It would therefore appear that what we have to look forward, unless something unforeseen occurs, is a continuous and, perhaps, rather rapid increase in the purchasing power of gold ? — That is to say, there would be less and less available for pur- poses of currency ; and assuming, as I stated before, that the quantity of currency is, at any rate, one important factor in determining the level of prices, then we must get a fall in the level of prices, or an increase in the purchasing power of gold. 5503. Dr. Soetbeer, making what he admits is a very conjectural estimate, puts the supply of gold for money and gold reserve in civilised countries at the following figures: For the 10 years from 1851 to 1860, 1,621,000 kilograms; for the 10 years 1861 to 1870, 1,023,000 kilograms ; for the 10 years 1871 to 1880, 774,000 kilogi-ams ; and for the five years 1881 to 1885, 172,000 kUograms?— Yes. 5504. Under these circumstances does it not appear doubtful whether gold is well suited to be a monetary standard if used alone, and unlinked to silver ?_— I think there is a great danger of the rapid appreciation of gold if it is used in that way. 5505. And I believe it is only since 1873 that we have had any experience of the use of gold as a monetary standard, unlinked to silver ? — Yes ; prac- tically. 5506. And do you consider that the results of that experiment have, so far, been satisfactory ? — No ; I should say most decidedly not. 5507. And do you think that gold is likely to prove a better standard in future than it has done during the last 14 years ? — Taking the demands that have been pointed out for gold for purposes other than currency, and the growth of trade and population it seems inevitable that there should be a constant and rapid fall in prices if gold alone is used for money. 5508. And if people prefer gold for ornament as they get wealthier, the demand for gold would increase more rapidly than the growth of demand for silver ? I am not able, of course, to say as to the comparative MINUTES OF EVIDENCE. 281 demand, because the improvement in the condition of the working classes and the more equal distribution of wealth might lead to a great demand for silver, silver watches, and the like. 5509. It has been pointed out that the total pro- duction of gold between 1493 and 1850 was about 660,000,000Z., and that since 1850 the total produc- tion has been about 890,000,000^., while special demands within the last 15 years possibly came to 250,000,000/. From these facts it is argued that there cannot be a greater scarcity of gold now than there was before 1880. Have you any remarks to make on this point ? — The scarcity must be entirely a relative term which depends upon the work which the gold has to do, and one of the most remarkable con- sequences of the great gold discoveries, it seems to me, was the expansion which took place in trade and com- merce, and the consequent increase in the demand for gold. Scarcity must be always relative. As I ex- plained, in answer to another question, there is always sufficient gold to circulate commodities, but there may not be sufficient to keep the level of prices stable. 5510. And it is your opinion that there has not in practice been sufficient in recent years to keep up the level of prices r — Yes. 5511. I wish to call your attention to some facts connected with silver. The estimated produc- tion of silver from 1493 to 1850 is 1,470,000,000/. sterling, and from 1851 to 1885, 480,000,000/. ster- ling. These figures, compared with the corresponding figures of the production of gold, even after allowing for the extra demand for gold in the last 15 years, would appear to indicate that looking merely to the relative supply of the two metals, silver should have risen since 1850 as compared with gold? — Yes, if you look to supply only, and it was generally anticipated, at the time of the great gold discoveries, that there would be a rise in silver. 5512. And does not the fact that silver has fallen instead of risen point to the conclusion that we must look to the demand rather than to the supply to ascertain the causes of the fluctuation in the relative value of the precious metals ? — ^Yes, I think so. 5513. You have been asked some questions about the economy in the use of the precious metals, by the use of cheques, clearing houses, &c. These economies, assuming them to be of importance, would have much more effect in the civilised countries than in the backward countries ? — ^Yes. 5514. And therefore they would have affected the demand for gold rather than the demand for silver ?— Yes. 5515. As the civilised countries now generally use gold, does not this make it still more remarkable that silver should have fallen rather than risen ? — Yes ; it seems to me so. 5516. And does not the conclusion appear irresist- able that the demand for gold from some cause or other has increased much more rapidly than the demand for silver ? — ^Yes ; it seems to follow. 5617 I understand you to advocate the use of both sold and silver as legal tender at a fixed ratio, in the first place because in this way we should get a standard under which the effects of fluctuations, either of supply or demand in one or other of the metals, would be moderated ?— Yes. 5518 And in the second place because there •mnears to be a special tendency towards an increase of purchasing power in the case of the gold standard, which it is desirable to hmit by the use of silver at a ^ TZL to eold?— Yes, I think that the more Se you c!n |et the stanW ^^^ better ; and that this tendency towards appreciation on the part of o-old would be met to some extent by hnking it to silver 5519 And in the third place because all countries would have, in the essential matter of stability of vurchasing power, the same standard, and no country Culd be protected through the currency at the rxpen'.o of another country ?-So far as currency is concerned they would have the same standard. There Mr.J.S. would be local variations in the purchasing power. Ntchohon. 5520. So far as the general purchasing power of 20^^887 the standard was concerned, they would have the same standard ? — So far as general purchasing power is dependent upon the cuiTcncy, it would be the same. 5521. And in the fourth place because'all countries would have international money, the existence of which would facilitate international trade, and in all pecuniary transactions between different countries ? — I think one ought to distinguish between international money and what is proposed by a convention of this kind. 5522. The money of one country might not circu- late or be a legal tender in another country ; but the money of one country could be converted into the money of another country at a constant and well- know ratio ? — As regards what is the most important function of money, the stability of purchasing i)ower and the absence of any variations owing to the use of different standards, so far, they would have practicaUy the same money, but the phrase international money might suggest other difficulties. 5523. Do you think that if the old ratio of one to 15^ were adopted, and silver rose to 60| pence per ounce, there would be any danger of the world being injured by an enormous influx of silver ? — So far as I have seen the evidence, I do not think that there would be any danger of a great influx of silver. I may mention that I consulted on this point Professor Geikie, professor of geology' in Edinburgh, and he said he did not see any reason to suppose that there would be a great increase in the supplies of silver, from geological reasons, and the idea of the geologists is ratlier that silver is embedded in hard deep veifls, and that it is difficult to get. And then it seems to me also that in spite of a number of calculations which have been made lately to show that silver can be produced for a very small sum, we do not get any great increase in the production. Surely the present price of silver, if it can be produced at Is. Qd. an ounce, ought to make the silver mines produce as much as they could sell. THfe present supply of silver does not seem to me to be at all excessive, and would not lead to anything which could be called an enormous influx of silver. 5524. Have you at all considered the question of the supply of gold from a geological point of view ? — Perhaps I may be allowed to read a paper given to me by Professor Geikie — "The. annual output of gold is not likely in my opinion to vary much under the present conditions of exploitation. The richa uriferous gravels, &c. from which gold used to be obtained in such large quantities are practically exhausted over many regions, the chief supplies of that metal coming now from deep mines. Gold has, in fact, to be mined for, as a general rule, in the same way as many other ores ; and the experience of recent years has shown that when we take the average yield of all the gold mines of some extensive region, such as the United States of America, the annual output is found to vary but little. Of course so long as any part of the earth's surface remains uuexplored, there is always the chance of readily worked auriferous soils &c. being discovered. But from all that is knovra of the geology of the continents, it seems hardly likely that the early experience of California and Australia will be repeated on a similar scale else- where. " I should expect the output of silver to vary slightly from year to year, just as is the case with other ores ; but I see no reason for believing that the production of silver will become relatively greater than it is at present. The average annual yield of gold may increase as fresh mining districts are opened up, and the same may be the case with silver. But over a number of years the relative proportion of the two metals will probably not vary much. At present it would seem as if the yield of gold was decreasing, Oo 2 282 ROYAL, COMMISSION ON GOLD AND SILVER: Mr. J. S, while that of silver was increasing. But similar yicMgon. fluctuations have occurred in the past, and may be expected to repeat themselves in the future." 20 May 1887. 5525. Bo you think that even with bimetallism at the old ratio the world would be much more likely to suffer from the short supply than from the over- supply of the precious metals ? — I should think that still the tendency would be, if we restored what was the practical condition of things before 1873, towards appreciation of the double standard that is towards a general fall in prices. 5526. And you think the facts of the period immediately succeeding the great gold discoveries distinctly support that conclusion ? — Yes, certainly. 5527. Now I am coming to another point, So far as regards the standards of weight and measure, every country is independent of every other country. Each country fixes its own standard of weight and measure, and no other country can interfere in any way with those standards ? — Yes, that is unfortunately the case. 5528. But is that the case as regards the monetary standard ?— It seems to me there is no real monetary independence, though there is nominal independence so far as the actual form of the coins and so on is concerned. 5529. But, so far as regards the purchasing power, from time to time, there is no real independence of other countries ? — No ; because to say that we are really independent would be to say that the prices in this country are not influenced by foreign prices. 5530. And the monetary standard of every country is liable to be affected so far as regards its purchasing power by the monetary legislation of every other country ? — Yes, it seems to me tliat is perfectly plain. 5531. And as a matter of fact the gold standard of England has in this way been affected by the action of France, Germany, and other countries in recent years, and so has the silver standard of India ? — Certainly. 5532. Does not this fact point to the conclusion that the question of the monetary standard is pre- eminently one for international agreement, and that no satisfactory solution of a permanent nature is possible without such agreement ? — It seems to me to be quite clear, that so far as the essential elements of money are concerned, no nation can be independent of other nations. 5533. You iidvocate bimetallism because it would preserve a constant ratio between gold and silver. But I presume you would support any measure tending to prevent variations, especially rapid fluctua- tions in the relative value of the standards of different countries ? — Yes ; I simply advocate bimetallism as the best practicable remedy that is suggested. 5534. And measures of the nature I have indicated would be beneficial so far as they went, would they not ? — Yes. 5535. You consider that no permanent and satis- factory solution of tlie present difficulties is pos- sible without bimetallism in some form ? — I do not myself think that any other remedy is practicable. 5536. {Mr. Birch.) In your answer to a question by the Chairman, you referred specially to the 16th century as a period when there were very slight variations between the ratio of gold iind silver ?■ — Yes. 5537. In the I7th century, I suppose you will allow, the variations were very considerable ? — There was a considerable fall in the value of silver as compared with gold in the I7th century. 5538. Can you tell us to what extent ? — I do not know without reference, but I referred on that point to Dr. Soetbeer's materials. 5539. Have you been able to refer to Stebbing's "Gold Coins" as an authority? — No, I have not referred to that. 5540. You do not know that he gives the variation from year to year, and he makes the variations to have been from 1 to 1 to 1 5 to I ? — I was under the impression that the ratio at the end of the 16th century was about 12 to 1, but that there was a great change in the ratio in the I7th century. 5541. You stated in reply to Mr. Barbour just now that a country possessing a good stable standard holds a higher position than other countries with a more variable standard ? — Yes, so far. 5542. Well, do you not think that the single gold standard in England has been a good stable standard, and very beneficial to us generally? — I cannot see what special benefit we have derived from the single gold standard. 5543. But I think you said, in reply to Mr, Bar- bour, that with a good stable standard a country holds a higher position than other countries ? — Yes ; but I do not see that if we had gone on with bi- metallism as in France, that there would have been any real difference. I do not think that this country has gained by the mere adoption of the sovereign. 5544. Have you any particular information which enables you to state that there will be less gold available for currency in coming years ? — I have only the ordinary quoted statistics. 5545. Have you read Mr. Michel Chevalier's work in which he stated that gold would be shortly so depreciated that the sovereign would only be worth about 10s. ? — Yes ; I think I remember reading that sometime ago. 5546. Prophets occasionally make serious mistakes in their prophecies as to currency? — ^As to the pro- phecies of abundance, they generally seemed to. 5547. Mr. Barbour appeared to mix up the falling off in the production of gold with the demand for Germany. He told us that 200,000,000/. were required for Germany and France for coinage pur- poses, and then that there had been a falling off in the production of gold, and he put them together and seemed to infer that the whole constituted a loss or a reduction of the currency in some way ? — The falling off in the supply and the increase in demand. 5548. You do not consider that the 200,000,000/. has been hoarded ? — Oh, no ; not at all ; but then to a large extent it would replace silver, and would be abstracted from the currency in some other place to some extent at any rate. 5549. But you say that a great quantity of silver has gone to replace that very gold ? — No, I do not say that. 5550. Well, a great quantity of gold has gone from some of the bimetallic countries, and silver has replaced it, especially in Spain, I believe ?— I was not aware of that. 5551. You are not aware then of the amount of silver that has been coined during the last few years in Spain ? — No, I am not aware of that. 5552. Nor the amount of gold that was held there some ] 5 years ago ? — No, I am not aware of that. 5553-4. (Mr. Chamberlain.) In what way do you consider that the people of this country have suffered by the appreciation of gold ?— Well, in the first place the capitalists have suffered a loss of profit. I should think in nearly all industries there has been a great loss of profit. 5555. How does that arise ? — From the want of an adjustment of the cost of production to the fall in price obtained for their product. 5556. What portion of the cost of production has not followed the fall in the article produced ? — Well, I believe in manufacturing districts the wages have not followed. 5557. Therefore the artizan population will have gained, even if the capitalists have lost ? — They may have gained so far as that particular cause is con- cerned, but I should not think that they have gained on the whole ; on the contrary. 6558. Well then, if they have gained because their wages have remained nearly the same, while the cost of everything which they purchase has been reduced, in what way have they lost ? — In the first place, there is always a tendency on the part of the MINUTES OF EVIDENCE. 283 capitalist who has lost profit to economise the employ- ment as much as possible. 5559. But has there been any reduction of em- ployment in this country ? Is it not the fact that the production of the country is larger now than it was at any previous period? — I am not able to give statistics as to the amount of employment of labour, but at any rate it would seem to me to follow clearly that there would be always an efibit on the part of the capitalist to employ less labour and to reduce wages as much as possible. 5560. But if you found, as matter of fact, that the production of the country continually increased, then you would not urge that the artizan class had lost anything to set against the gain to which you had previously referred ?— If I found it proved that the artizan class was as regularly employed and at the same nominal wages, and that there had been a fall in the price of their articles of consumption, of course I should allow that the artizan class had benefitted, 5561. (Chairman.) It has at least been suggested that the increased production has arisen from im- proved machinery, with smaller amount of labour ; do you know at all how that is ? — I cannot speak as to the question of f ;ict. 5562. (Mr. Chamberlain.) If there were a smaller employment of labour at the present time than at any previous time, would not that be likely to manifest itself in the returns of pauperism ? — Yes, but it seems to me a relative question ; and though we may have had no great want of employment, it does not follow if, under a better condition of things, capitalists obtained some profit that labour would not have been better employed and at higher rates. 5563. Permit me, that is a new contention ; I asked you what the artizans have lost, and you suggest that they have lost because they -have lost employment. I then put it to you that all the figures show that we have more employment now ; I understand you to say, non constat, that they might have had still more employment if the circumstances had been different ? — I am not able to speak of the statistics of employ- ment in the manufacturing districts. 5564. Do you confine your contention to this, that the artizan class have lost, but that probably under altered circumstances they might have gained more ? — ^I am not able to give any answer as to the question of fact owing to the extreme difiiculty of getting any reliable labour statistics ; but, taking the causes one by one, it seems to me that if the capitalist has lost profit, — and that is generally admitted, — that he at any rate will attempt to reduce wages or to make employment less regular, and that so far the labouring classes will suffer. 5565. It does not follow, does it, that he would attempt to reduce employment. He might attempt to get wages at a lower rate if that were possible, but he would not gain anything by reducing the number of hours, for instance, that his mills worked ?— I do not know how much loss a capitalist would submit to before he decided not to employ labour. 5566 You know the common commercial maxim that it is the quantity that pays, and manufacturers endeavour to keep their works fully employed in order that the interest of capital may form as small a pro- portion of the cost as possible ?— Yes, I am quite aware of that. . „ 5567 But after all it is as you say a question of fa«t,and will you not admit that if it were the fact that there was any large increase m the number of persons out of employment, that must show in the pauperism returns ?- Yes, so far, unless that is neutralised by other causes; for ins ance there have been great accumulations on the part of the workmg classe!. It is quite possible that they may have been living on their own savings to a large extent. 5568. But this appreciation of gold has been going on for a considerable number of years 12 years at least ; surely in the course of 12 years, if you assume that during that period there has been a great want of employment it must have told before now on the Mr. J. S. hoarded earnings of the working classes and upon the Nicholson. returns of pauperism ? — But I do not think I said, I TiZ^Tasr did not mean to say, that there had been actually a ■^ ^ " want of employment. I said there was always that tendency on the part of the capitalist to reduce em- ployment, and that aggregate wages were not so good as they otherwise would be. 5569. Well, I put it to you if there has as matter of fact been any considerable diminution of employ- ment ; and if there has been no considerable fall in wages while at the same time the prices of all com- modities have been reduced, surely the condition of the artizan has been improved ? — Yes, that is quite possible. 5570. Well then, in that case, besides the capitalist, whom do you suppose to have been injured in any way by the appreciation of gold ? — But is there any objection to my putting in the qualification that I think the condition of the working classes would have been much better if it had not been for this depression . If we take the condition of ■ the labouring classes 12 years ago, and compare it with what it is now, wc ought to expect in the natural course of things great progress, and not only mere stability. The period has been one of very great prosperity. There has been no great war, nor any great political disturbance. There have been enormous improvements of all kinds, and a great increase in the efficiency of labour and capital, and we ought to expect a constant increase in the prosperity of the working classes. 5571. Can you say that there has not been such constant increase in the prosperity of the working classes ? — ^All I meant to say is that the improvement in their condition, and I am alluding only to the manu- facturiixg districts, is not so great as it would have been if the capitalist had at the same time been earning profits. 5572. How do you prove that statement ? — Well, I argue from general principles. 5573. During the whole of that time, the deposits in the savings banks have very largely increased; that is generally assumed to be an indication of the prosperity of the working classes, is it not ? — The point I wished to insist upon is this general principle, that if the capitalists are also gaining profits, then the working classes will be gaining better wages than if the capitalists are not gaining profits, and whatever view you take of the deteimination of wages, it seems to me that must follow, 5574. I am endeavouring to test your theory by facts. I have asked you about the savings banks which are generally considered to be a test of the savings of the working classes. Then take the consumption of articles of food, such as tea, cofiee, and tobacco ; has not the consumption per head steadily increased during the whole of those 12 years ? — Yes; I believe there has been progress on the part of the working classes. 5575. Then it is only a theory of yours that that progress would have been still more marked if gold had not appreciated ? — Yes. It is only a theory, but I think it is a theory that would not be seriously dis- puted. I was only alluding to the wages in the manufacturing districts. 5576. You have not yourself made any statistical investigation into the question of wages ? — No statistical investigation, but I have ' always inquired when I have been in any large town as to the con- dition of the labouring classes, and I think that what I have said is quite true. The working classes do feel, to some extent, the depression of trade. 5577. You must admit, I think, that it is rather a curious thing, if they feel it, that it is not shown in any of the statistics which usually are held to test the condition of the working classes ? — If that is so, I should take the single cause as it is. You may show an improvement on the part of the working classes, but I should say that it ought to have been more, but for the absence of this cause. 5578. But then I understand your position to be 284 ROYAL COMMISSION ON GOLD, AND SILVER! Mr. J. S. this, that in spite of the facts that the savings of the Nicholson. working classes have increased continuously (during the past 12 years, and that their power of purchasing, 2 May 188 7. ^^ shown by the consumption per head of the articles chiefly consumed by them, has also increased during that period, you would think it desirable to make a great alteration in our currency system, with the hope of still further increasing their prosperity ? — Yes, that would be one element ; and I should certainly think that the result would be an improvement in the condition of the working classes. 5579. And how do you think that their condition would be immediately benefited by it? — Well, in the first place, I should think that better trade with the silver-using countries of itself would tend to improve their condition. 5580. That is to say, that the silver-using countries would suffer, and that we should gain in proportion ? — No ; 1 rather meant that you would take away simply a disturbing element which depends purely upon money. 5581. But at present, I think your view is that silver-using countries have an advantage ? — Yes, but it is a temporary stimulus due to monetary causes simply. 5-'82. You would take away that advantage from them ? — So far, yes. 5583. And therefore your view is that the opera- tives of Manchester for instance would benefit, and in proportion the operatives in Bengal or Bombay would lose ?— -Well, I cannot say how far the opera- tives in India would lose if this stimulus were removed. 5584. But if they did not lose then the operatives of Manchester would not gain ? — You must take into account prospective loss and prospective gain, that is all. 5585. But whatever is to be done it is in the nature of a transfer from one country, or from one class to another ? — It is in the nature of a transfer of a certain stimulus ; that is so, but at present a certain number of factories have been actually established in India, and it does not follow that if this system were adopted these factories would not go on simply through their own natural advantages. 5586. But if they did continue to exist through their own natural advantages, the operatives of Man- chester would not be benefitted ? — But you may go on rapidly increasing these factories in India, giving an undue stimulus to production by that action, and afterwards the reaction may come. 5587. But then to whatever extent that stimulus is given it is an advantage to India as long as it lasts, although it is a disadvantage to Great Britain ? — Yes ; as long as it lasts. 5588. Still, if it is only to last a very short time, it is not necessary to take it into account at all, probably ? — It is very difficult to say how long it will last. I used temporary as opposed to permanent. 5589. But if it would last without the alteration, and would cease the moment the alteration which you suggest takes place, it is a fact, is it not, that your proposal would benefit, if it succeeded according to your expectation, the English operative to the disadvantage of the Indian operative ? — Prospectively, that is to say. I have taken the opinion of some people who know something about India. They tell me that they do not think that the factories alj-eady started would be stopped by the adoption of this bimetallism. 5590. But the future develop uient of India would be retarded by the change that you propose ? — But then after all international trade, what is produced by one country and sent to another, must depend on something more solid than mere monetary conditions ; it must depend on comparative natural and industrial advantages in the main. 5591. If that is so, if Indian competition is due to natural advantages, why meddle with currency? — Because I say Indian competition at present is not due merely to natural advantages; it is receiving a stimulus n one wa,y in exports, and receiving what is practically a protective duty on imports. It is not natural advantages only; there is also a purely monetary disturbanceVhich is influencing the trade of India." 5592. Well, then, so far as you deal with that monetary disturbance by legislation in this country, you will be injuring the operatives of India for the advantage of the operatives of Great Britain ? — Yes but I think on the whole both of them would gain by the adoption of what I have proposed, taking a term of years. 5593. The appreciation of gold is due to the large production of silver and the small production of gold, is it not ? — I do not think so. That is only con- sidering the element of supply. 5594. But that is the first cause, the primary cause .'' — It is one cause that must be taken into account. 5595. And by artificial legislation you could alter that and establish a fixed standard ? — But it seems to me that the annual supply of the precious metals is only one element and sometimes a very small element in changing the relative values. 5596. What other elements do you take into account ? — ^All the elements of demand. The prin- cipal demand being for coinage, it makes a very great difference if you allow or do not allow these precious metals to be coined. If for example all the nations in the world ceased to coin gold, that would have a very great effect upon the value of gold. The value of gold depends upon artificial causes quite as much as upon natural causes, and the natural produc- tion of gold is only one of the elements to be taken into account. 5597. But the chief reason for the present com- parative depreciation of silver is its enormous com- parative production with gold, is it not ? — ^Not the chief reason, and by no means the true reason. I thought it was admitted in the report of Mr. Goschen's Com- mittee on the Depreciation of Silver, that the additional supply of silver was not sufficient to account for the depreciation that then took place. My own opinion is most strongly that the depreciation is entirely due to the changes in the demand. If the old monetary relations had continued the changes in supply would have made absolutely no difference to the relative values of the precious metals, 5598. Then do you mean by the alteration in the demand the greater demand for gold for such purposes as Mj, Barbour suggests for hoarding and ornament, and uses in trade ? — Well, we must take into account all the elements of the demand. There would be the demand for currency as well as the demand for pur- poses of the arts. 5599. Well, all those demands are in the nature of ordinary and natural causes, for the appreciation of gold ? — Quite so, but then the principa demand always for the precious metals has been the monetary demand, and the monetary demand is purely an artificial thing, purely the product of legislation. 5600. But at the present time the people of India benefit, and the operatives of Great Britain in your opinion suffer, owing to the natural increase in this demand and the other causes to which you have referred. Do you think that you are justified by legislation in taking away from India this advantage, and in conferring it upon their fellow subjects in Great Britain ? — Well, I think so far as India is con- cerned that there are a number of compensating advan- tages which would accrue to India, and it is not certain that there would be any positive loss at all by the adoption of this method. For example, capital would flow to India and the rate of interest would fall, 5601. But you have admitted that unless there is a positive loss to them there can be no positive gain to the operatives of Manchester? — I was looking rather to the future. It is quite possible that in the future, if this depreciation is allowed to go on for a term of years, India might develop certain trades which otherwise she would not do, and then I think that a reaction MINUTES 01' EVIDENCE. 285 would afterwards occur. As far as possible, we ought not to allow any trade -to be determined purely by currency causes. 5602. {Mr. Chaplin.) Mr. Chamberlain referred you to statistics, and to the fact for instance that savings have increased, and that the consumption of commodities has largely increased as a proof that the condition of the working classes here has not been seriously affected by the present system; may that not be owing to some extent to the great im- provement which has been made within the last few years in the compilation of statistics ? — Yes, I think that is an element that ought to be taken into account. 5603. You were asked just now whether it was not the fact that there had been no considerable fall in wages, and no considerable diminution in employ- ment so far as the working classes are concerned, and if that was the case, what their loss had been. I want to know if you have any knowledge of these facts of your own. Do you know for yourself that there has been no considerable fall in wages and no considerable fall in employment ? — ^No, I do not ; I do not know the statistics of that question. 5604. You are not able to say for yourself, then, whether the evidence which was given by a witness on the last occasion to this effect was true or not. What he said was that our towns had been crowded with unemployed people, and "I never saw such " continuous distress in Liverpool as in the last few " years." You could not say of your own knowledge anything as to that ? — I have no means. I can only- go on general statistics and statements, and statistics as to labour are not in very good condition. 5605. Your general experience would lead you to believe that there probably has been, I understand, a fall in the prices of their wages and some loss in employment ? — Yes, I think so ; but in the manu- facturing districts not such a fall in wages as might perhaps have been anticipated at present. 5606. You suggested that this loss of employment might not be shown possibly in the pauperism returns, because they might have been living to a certain extent upon their own savings ? — That is a statement that I have often seen made. 5607. And when you were asked whether the fact that gold has appreciated during the last 12 years, would not, before this period, have con- sumed all their savings ; do I understand that the effect of that appreciation has been felt during the whole of that period, or has it not been coming on gradually, and only been felt acutely within the last few years ? — Well, that is a question which involves the degree of the general depression of trade. I am not able to say in what years depression began to be most keenly to be felt. 5608. Let me ask you one question as to India, and the effect upon the operatives there. I under- stood Mr. Chamberlain to ask whether the adop- tion of the remedy that you suggest would not be injurious to the operatives in India, although it might be beneficial to the operatives in England. But is it not the case that it may be said that the present system, at all events as far as the wheat industry is concerned,— I will limit it to that for the moment,— is making the fortunes of the rajahs and the ryots in India, while it is ruining the asHculturists and the agricultural labourers in England '—I think there is no doubt of the injury tothe agricultural classes in this country. Of course I have no information as to the matter of fact in India though I should think that the present state of things gives a great stimulus to the production of wheat in India, and it is quite possible that part of that stimulus may take the form of exceptional profit to the producers in India. ^3.3 5609 ^And that stimulus, as I understand you, is afforded by the rate of exchange between England and India, which has been brought about entirely by foreign legislation since 1873 ?-Tes, I think that the stimulus is due to the fall in the price of silver, which operates upon and is shown through the Indian exchange, and that the fall in the price of silver is due to legislation. 5610. Are you aware whether England is respon- sible at all or not for the legislation which was adopted at that time ? — As far as I know, England did nothing directly, but I suppose there is not much doubt that England refused io make an agreement which other nations would be wilUng to make. So far there was a want of legislation upon our side. It would have been better, it seems to me, had England agreed to a convention at the former conference. 5611. We have had evidence given" before us to the effect that England could not be said by any means to be free from a share of responsibility in the matter ; I wanted to know whether that is your opinion ? — That is my opinion ; in that indirect way. 5612. {Mr. Barbour.) Are you aware whether or not England or some authority in England recom- mended the French to adopt the gold standard ? — No, I do not remember that. 5613. {Mr. Chaplin.) You were asked in question 3971, whether there had been an universal fall in prices, and that was what at present there was no sufficient evidence of. I understand you have no doubt upon that point, have you ? — No, I have ho doubt that there is a general fall in prices, but I ought perhaps to explain that that does not mean that there is an uniform proportional fall in prices in every case. 5614. Did I understOind you to say this- morning that there had been a diiference of 25 per cent, generally in prices ? — I do not think I quoted figures. The estimate founded on the index numbers gives a fall of from 25 to 30 per cent., I believe. 5615. At all events, whatever the fall may be, you date that i'all from the time that silver was de- monetised by foreign legislation ? — Yes, there has been a fall since that time. 5616. Can you trace it partly to that cause ? — I should certainly trace it partly to that cause. 5617. In the reference to this Commission we are instructed to inquire as to the effect of the present system upon the internal trade and industry of the United Kingdom. Are you of opinion that the internal trade and industry of the kingdom has been injured in any way in all of its branches!' — Wey, there again I should repeat the answer that I gave before, that the loss of profit to the producers must have acted detrimentally upon that important interest, at any rate, the interest of the capitalists, and indirectly upon other classes. 5618. I should like to take the agricultural industry. Are you of opinion that that has been in]uriou'sIy affected ? — I should think the agricul- tural industry has been mos injm'iously affected of any. 5619. And in what branch chiefly ? — Well, again it is difficult to give the facts of the case ; but I should think, especially on the analogy of other trades, and from general principles, that in the first place the farmer would suffer, then the farmer would throw some of the loss upon the landowner, and some of the loss upon the labourers. In the first place the loss would fall upon the farming profits, that is what I should think ; then it would fall upon the landowner, then it would fall on the labourer. 5620. {Mr. Courtney.) Do you discriminate be- tween farmers, between producers of different kinds of produce ? — ^Yes, I think that the grain farmers have suffered more than the stock farmers. 5621. {Mr. Chaplin.) Several witnesses, or some witnesses at all events, have given evidence to the effect that the present state of things acts exactly like an export bounty upon the wheat that is exported from India to England ; is that your opinion ? — That is my opinion, under present con- ditions. 5622. Would you state how that arises ? — Well, the fall in the price of silver enables some one in India to sell the same amount of wheat for a less amount of gold than before, because in return for Mr. J. S. Nicholson 20 May 1887. 286 ROYAL COMMISSION ON GOLD AND SILVEll ; Mr. J. S. Nicholson. 20 May 1887. this less amount of gold the same amount of silver is obtained. The general position is that silver prices in India have remained practically steady, and as a consequence, so long as the same amount of silver is obtained for the wheat, for instance, the producers in India are satisfied; but ov?ing to the fall in silver, this same amount can be obtained for a less amount of gold, and that causes a fall in the price of the wheat on this side, and in that way it seems to me to operate exactly like a bounty. The general effect of a bounty is to make a fall in the price of the article in the country to which it is sent. 5623. And to give a great artificial advantage to the grower of wheat in India ? — So far as he can keep that advantage ; so far as competition does not take from him that advantage and lead to the fall in prices on this side. I cannot say how the advantage is precisely distributed. 5624. At page 334 of the Third Report of the Royal Commission on the Depression of Trade, there is a table to which I want to call your attention. Mr. Palgrave says : " By examining this table, it " appears that, speaking generally, every fluctuation " of a penny in the rate of excliange is equivalent to " an alteration of \s. 5d. in the price of the quarter " of wheat in England." Are you able to verify that statement ; do you agree with it ? — I remember reading the figures and quite agreeing with the general statement that the result may be such a fall in the price. 6625. But the effect of that statement as I under- stand it is this, that the price of wheat in England would rise and fall with the price of silver ? — Yes. 5626. And you believe that to be so ; you agree in that opinion ? — Yes, so far as the Indian production influences the market, and at present, I suppose, it largely does so. I should like to refer to my answer in my first day's evidence to question 4147. 5627 Well, Sir Thomas Parrer asked you on the last occasion whether in the case of the appreciation of gold the loss did not fall on the capitalists and the producers chiefly ? — Yes. 5628. I do not want to ask you any further ques- tions with regard to the artizan working classes, but I want to know if you have any knowledge with regard to agricultural wages at the present time, whether they have fallen considerably or not? — Well, I made some inquiries myself since I was last examined here as to agricultural wages in the north of England, and I gather from a very trustworthy source that the wages there have fallen 20 to 30 per cent, in the agri- cultral districts. The person who gives me that information is a man who holds several large farms in Northumberland under different owners, and who also knows very generally about agriculture in the north, and that is certainly the case with the labour that he employs. He gives me his own figures, showing a reduction of 25 to 30 per cent, in the wages. 5629. Is it not the case with regard to the agricul- tural labourers that the greatest mischief is not the actual fall in their wages, but the fact that a vast number of them have lost their employment altogether ? — Yes, I think that there hasf. been a great loss of employment in the agricultural districts. 5630. Then in that case the chief loss is not limited by any means to the capitalist or the jDroducers, but that the working classes are injured equally also ? — The agricultural working classes are certainly in- jured. 5631. Now, with regard to other commodities, does this system act as a bounty also upon them as well as upon wheat ? — Yes, as regards other exports from silver- using countries it seems to me under the conditions so far as we know them of silver prices remaining practically the same in those countries that it must operate as a bounty upon those exports, but whether the bounty will lead to a corresponding fall in prices always or whether it may lead first of all to an increase of profit it is impossible to say in every case. 5632. Well, then with respect to commodities sent from England to India, how are they affected ; does that act as a protective duty against them ? — I should say that was the best way of desbribing it, that it really acts as a protective duty. 5633. That is, in fact, the English producer is hit in both ways ? — Yes. 5634. And this is not owing in any way to natural causes ? — Purely to a monetary disturbance. 5635. In consequence of legislation ? — In conse- quence of a change in the monetary policy of different nations. 5636. Well, yOu have told us what is the remedy that you suggest. I want to ask you what would be the general effect of your remedy, firstly, on the prices of all commodities, and secondly, on the prices of the commodities which are specially affected by the rate of exchange between England and the silver- using countries ? — Well, as regards the effect on the prices of all commodities, the general level of prices, I should not be iuclined to suppose that so far as this cause was concerned there would be any great infla- tion of prices. I should rather say that if we return to the condition of affairs which existed before 1873, the utmost we could expect in the rise of prices would be a rise to the normal level before that time j but then when we take into account the great increase in trade and population and the great deinand for currency of all kinds, then I should expect that we could not quite attain that level again ; the result of this would be a check to the further appre- ciation rather than a restoration even to the old level. 5637. That would be the case with regard to the prices of commodities generally ? — Yes. 5638. What do you say with regard to the prices of those commodities which are specially affected in the way I have described ? — I should imagine that the effect on the prices of those commodities which have been influenced by the depreciation of silver must be a rise. 5639. Well, just to sum up what you have said. I understand you would be of this opinion, that if the remedy you propose wtsre adopted it would be bene- ficial to trade, and it would be beneficial to agriculture in England ■• — Yes. 5640. And that as far as the agricultural labourers are concerned it would improve their position also ' —Yes. 5641. Would you say the same thing with regard to the artizans in the towns ? — Yes, I should expect a general improvement in their condition. Perhaps 1 might mention, as there seems to be some fear of an inflation of prices from abundant supplies of silver, if silver is made a standard metal, that I think it is generally admitted that the persons who gained most altogether in the great gold discoveries were the labouring classes. It is quite possible that if there was an abundance of silver, sufficient to produce a corresponding rise in prices, that the labouring classes would gain very much. 5642. Do I understand you that the labouring classes were the flrst to gain formerly in consequence of the great gold discoveries, or that in the end they were the chief gainers ? — Yes, the impression on my mind from reading Tooke's History of Prices, where great attention has been given to the subject, is that there was an immediate rise, as far as could be calculated, in wages of 20 to 25 per cent, as the effect of these great gold discoveries. 5643. (The Chairman.) Was not that in part because the gold discoveries in Australia led to a great many people leaving this country to go to Australia and to their having increased spending power and consequently increased activity arising in commerce generally, shipping and other respects ? Do I understand that the rise in wages was due to the falling off in the supply of labour in this country owing to emigration ? 5644. In part to the falling off in the supply of labour in this country owing to emigration, in part to the increased demand for commodities produced by the increased spending power of the people who had Minutes or evidence. 28'7 gone to Australia to work for gold, and the necessity for transporting articles of commerce from this country to Australia, which again increased the prosperity of the shipping and other trades ?— Yes, I should think all those causes operated. There was certainly a large increase in emigration from this country to those countries. There was a special difficulty in getting sufficient agricultural labour in the country. 5645. I mean those causes would operate, and operate quickly, quite independently of an increase in the volume of the currency ?— But then I should not suppose that if the same amount of wealth had been produced in some other form in Australia that that would have produced the same effect as it did, taking the form of gold. I think that the effect of a great discovery of the precious metals is altogether different in kind, and in directness from, supposing it were possible, the discovery of a similar amount of other wealth. In support of this view I may quote a passage from Tooke, Vol. VI., p. 190. " A sud- " denly increased supply of no other commodity " would produce effects so decided and rapid for the " simple reason that (say) a tenfold quantity of no " other commodity could find an instantaneous and •' impatient market." 5646. {Mr. Chaplin.) Then I understand you that if the result of the remedy that you propose was to cause a certain rise in prices that the working classes would distinctly be gainers, in your opinion, by that operation ? — Yes, I think that this check to falling prices would benefit the working classes, and I think that follows from the generally accepted view now as to the way in which wages are determined. Both wages and profits are really paid out of the price which is obtained for the product. If prices fall the whole of this fall in prices cannot be continually taken out of profits, especially considering the small proportion relatively of profits ; it must ultimately fall on some form of labour. 5647. Well then, you say it would help trade and agriculture, which are the two great industries of the kingdom, and that it would benefit the working classes algo ? — That is my opinion. 564 8. Would it injure any other classes, and if so, what class, and how ? — The answer would depend upon the extent of the rise in prices. If there was, as I do not suppose there would be, a very great inflation of prices, the people who would suffer principally would be those in receipt of fixed incomes. Those classes would suffer who were enjoying the benefit of former contracts. Middlemen also might suffer, and so far the consumer would not. 5649. Those enjoying the benefit of former con- tracts would lose because, to some extent, gold might lose part of its purchasing power ? — Yes, and that is the way in which they would lose. 5650. They would be, I presume, then a very limited number of people compared with those whom you anticipate would gain ?— I think the number of those whose incomes would not be raised by a rise in prices must be very small compared with the mass of the people of the country. The incomes of the mass of the people of the country feel very soon movements in prices, but it is only a comparative few who obtain fixed salaries, and so on. 5651. It has been urged by some witnesses that there are considerable objections to be raised to your proposal, some contend that it would vitiate contracts ; others that the gold would leave the country ; and again, others maintain that there would be an immense difficulty in maintaining a fixed ratio between gold and silver. Do you beUeve in any of these olgections. Have you any apprehension of consequences of that tind?— Well, these are objections which I have very carefully examined, and on which I have published papers/and I do not think myself that they are of any force. I would answer them, if you wish, more in detaU, but that is my general conclusion. 5652. (Mr. Courtney.) I understand you to say that the effect of either a greater production of silver and the diminished production of gold, or else ot the 24368. dislocation of the relation between silver and gold in consequence of the ces.sation of free mintage has operated in India by way of a bounty to the producer ? — That seems to me the best analogy, yes. 565,'5. Whereby wheat can be brought from India and sold here at a less cost than would otherwise have prevailed ? — Yes. 5654. And you lay down the principle that that is an injury to the people of this kingdom ? — I admit that getting wheat cheaper than otherwise they would do benefits the consumers of wheat, as long as it lasts. 5655. No doubt the consumers of wheat, but the kingdom, I said ? — Well then, on the question of the kingdom, it seems to me that we have to take into account a summary of all the various interests affected, for instance, the interests of the agricultural labourers that I have just been asked about. 5656. Well, I wish you to take into account in your own mind all these interests, and to answer the question whether the operation of that cause which produces the effect that wheat is sold here at a less price than it otherwise v/ould have been sold at is an injury to the inhabitants of this kingdom ? — I think that when we take into account the loss sustained by agriculture, and the probability that the wheat, at any rate, would never rise to any great height if this change took place, the change would be an advantage. On the whole, I think the change would be an advantage. 5657. On the whole, what change would be an advantage ; the introduction of wheat at a less cost would be an advantage ? — The change which would neutralise this cheapness due to the depreciation of silver. 5658. Wheat is imported into England and sold in England at a less cost owing to the operation of a certain cause, than otherwise it would have been im- ported and sold at; is that an injury to the people of this country ? — Well, it is not an injury to the consumers of wheat, that is all. It is impossible for me to add up all the different effects and give you an answer to the sum after it is added up. I must take them one by one. I say the agricultural labourers are injured by it ; the farmers are injured by it. 5659. And you cannot venture upon an estimate of the effect upon the general well being of the mass of the inhabitants ?—- -I cannot make a reasoned sum- mation at a moment's notice, it is impossible. 5660. Suppose twopenny loaves rained like manna from Heaven every morning,, would that fact be in- jurious or beneficial to the people of this kingdom ? — I do not quite see the meaning of the question. I acknowledge, of course, that cheapness is a good thing for the consumers of certain articles. We must also consider producers of the same articles. It is very difficult to estimate the gain of the one and compare it with the loss to the other. Suppose, for example, that the cheapness only lasts sufficiently long to ruin the agricultural interest of the country, that land goes out of cultivation, and buildings and improvements are not kept up. The nation might pay very dear in the end for this temporary cheapness. 5661. (7%e Chairman.) I suppose you would say that if the same cause which produced this cheapness was operating at the same time to reduce the purchas- ing means of those who could purchase, that that must be taken into account in estimating the total result ? — Yes, so far there might be no gain. 5662. ( Mr. Chamberlain.) Would you entertain the same doubt as to the general result of the impo- sition of a 5s. duty on corn. That also wouldt accord- ing to your view, benefit the agricultural labourer and the farmer, would it not ? — Yes, I suppose it would. 5663. And you would feel yourself unable to say whether or not the destruction of our free trade theory and the imposition of a 5*. duty on corn would be a good or a bad thing for the country ? — ^Well, there again I should have to reckon up what would be the danger of admitting any exception to all free trade principles, what would be the practical effect of the abandonment of a general policy. If I might say Pp Mr. J. S. ' Nicholson. 20 May 1S87. 288 EOYAL COMMISSION ON GOLD AND SILVER ; Mr. J. S. Nicholson. 20 May 1887. Anything about the question of free trade, I think, theoretically, it is quite possible to conceive of certain exceptions, but taking the whole question you have a general impression that the policy is so important for this country that you would have to consider very carefully before you ever thought of making any change of that kind. Continental nations are applying protection to wheat. 5664. But if you are convinced that the effect of a change in the currency which would increase the price of wheat in this country, would be good for the labourer and the farmer, and you are uncertain whether on the whole it would not be a good thing for the country, I suppose exactly the same answer would apply to the proposal to put a 5s. duty on corn ? — There would certainly be benefits. By a 5s. duty on corn there would be benefits to the agricultural interest certainly. 5665. ( The Chairman.) I suppose you would say that the 5s. duty on corn would not afEect the general spending 'power of those who purchase corn, in the same way as you say changes in the currency might ? — Well, it is very difB.cult to trace the indirect effects of any duty ; possibly the effect would be to lessen the spending power whilst the proposed change in currency would increase it. 5666. (Sir T. Farrer.) On the same ground you would doubt whether the making of the Suez Canal, the cheapening of freights, and the opening up of India by the railways, by which corn has been in- troduced so cheaply into this country, is a benefit to this country or not ? — Yes, I think it might be doubted, just as it is quite possible that owing to some change of that kind which benefited the world as a whole, one particular country might lose its commerce. It is said, for example, that the discovery of the Cape route to India ruined the towns of northern Italy. 5667. We being the great purchasers of the com- modity which is so cheaply produced ? — But then we are also producers of that commodity. Agriculture is still our most important industry. 5668. (Jfr. Barbour^ May I ask you one question ? Do you think that under any circumstances it cau be a good thing that the producer in one country should have a bounty as compared with the producer in. another country ? — ^I think that the system of bounties for the world at large is certainly a great source t)f mischief. 5669. Do you think a bounty on wheat from India would be an injurious thing to\ the Empire as a whole, including both India and England ? — ^Anything in the nature of a bounty or a monetary disturbance which, acts like a bounty is prejudicial to this country and to India, taken together. If it is not it would be a good thing for the Empire if all our colonies gave export bounties or adopted a silver standard. 5670. {Mr. Courtney.) Mr. Barbour called your attention to the great increase in the production of gold between 1850 and 1873 in relation to the -pro- duction of silver and to the steadiness of the relative price of gold and silver during that period ; and he asked you whether you agi'eed in the conclusion that the price of gold and silver depended rather more on the demand than on the supply ? — Yes. 5671. And you did agree with his conclusion ? — Yes. 5672. (^Mr. Barbour.) I think my exact words were that we were to look for the causes of the variations in recent years rather to the demand than to the supply ? — Yes, I should put it in that way ; we must always consider the supply as well as the demand. 5673. {Mr. Courtney^ There were variations in supply between 1850 and 1873 which did not produce a variation in the price of gold and silver ? — Yes. 5674. There has been a variation in the price of gold and silver since 1873, and that must be ascribed to the variation in demand, and not to the variation in supply ? — I think it is due to a variation in demand ; that is to say, a change in supply that has occurred would not, if other things had remained the same, have produced a change in the relative value. 5676. You think those questions and answers are exhaustive in that part .? — Not in that brief form in which you have put them now. 5676. Is it not very necessary to take into con- sideration the existence during the first period of free mintage in France which has not existed since; so that the effect of the variation that has arisen since 1873, which did not arise before 1873, may be as- cribed to the cessation of free mintage ? — Certainly ; I mentioned that as one of the causes that I thought did operate. 5677. {Mr. Barbour.) Would you look upon the cessation of free mintage in France as an alteration of demand ? — The difference is between losing sUver really as token money and coining any quantity brought to the mints as standard money. 5678. But may I ask if you look upon cessation of free mintage as a reduction in demand ? — Yes, it is equivalent to a reduction in demand. I should look on it in that way. 5679. {Mr. Courtney.) Now, the prime factor in determining the value of the precious metals is its use as money ? — Yes, certainly. 5680. A prime factor in determining the amount of the precious metal which is produced is the combined possibility of its use as money ? — Yes, I think that operates, certainly. 5681. And if the nations united together to agree that gold and silver should be equally applicable to the payment of debts in the relation of 15^ to 1, that would have a considerable influence on the production of gold and silver ? — I think that the condition of things would be like it was before the change took place. 5682. {The Chairman.) But I thought since the change in demonetising silver [took place you had not had less silver produced but more, and not more gdd produced but less ? — ^Well, so far of course I would say that, owing to the fall in the price of silver rela- tively to gold, there has been or there may have been a contraction of the production of silver, and so iar there may be an increase again in silver. As regards gold there can be no such increase, and there might possibly be a further slight falling off in the produc- tion of gold, owing to this cause. I should certainly admit that if you raise the price of silver reckoned in gold you tend to get greater supjilies from the mine, so far as that cause may operate, but I do riot think that the effect would be very great. ' 5683. {Mr, Courtney.) Well, the miners are speculative people, but even miners will not carry on mines at a loss ? — We must take into account the differences in the relative production of the various mines, and it is only the mines on the margin of mining, or whatever the phrase you choose to describe it, that would be affected. The good mines and the more productive mines would still continue to produce whatever the prices were, within any reasonable limits. 5684. Mines are abandoned and opened ? — Yes. 5685. Abandoned because they cease to be profit- able, and opened because they promise to be profit- able ? — Yes. 5686. If you had a general law amongst civi- lised nations, that silver should be to gold in the proportion of 1 to 15, you would have silver and gold produced roughly under conditions that the gold cost 1 5 times as much labour to put upon the market in a civilised country as silver ? — I do not think that follows at all, because it may be that the gold can be produced for nothing at all, and yet, owing to the 'limited quantity of it, it might still be of that value. I do not think that the cost of production element enters in, in the way you suggest. 5687. But there is neither gold nor silver as the amount that can be produced absolutely fixed ; there is a margin of production ? — There is a margin of production, yes. 5688. You can always get more with greater labour ? — Yes, a certain amount. MINUTES OP EVIDENCE. 289 5689. Well, is not that margin of production one or other, speaking roughly ; would not that be fixed by the law of ratio established in the market where both are brought for sale ?— No doubt the margin, to whicn the mining was carried would depend partly on the ratio. If, for instance, silver measured in gold, were to sell at QOd. per ounce instead of 46d. per ounce, that might lead to the opening up of gome silver mines. 5690. Or possibly to the shutting up of some gold mines ?— Or possibly to the shutting up of some gold mines, though that, I think, would be much less likely. 5691. But why now, if you declare that 15 ounces of silver shall be of the same use in London as one ounce of gold, and you can produce now 20 ounces of silver and bring it to London at the same cost as one ounce of gold, is it not clear that the people would come to the silvei- rather than to the gold, and that the producers of gold would be put to a disadvantage, and would gradually work ofE their less profitable workings? — But I cannot understand how the cost of production could possibly operate in that manner. It is not as if it were open to the workers in gold mines to go and work in silver mines, and produce silver instead. You cannot get a trans- ference of capital from gold mining to silver mining ; it could only operate in a very indirect manner. There would be an encouragement to invest capital in silver mines rather than gold, and I do not see that it could operate to a greater extent than that. 5692. A gold mine would find that its cost of labour and materials relatively to what the produce was, was continually increasing, that the enterprise was less profitable, and it would gradually diminish, and ultimately might be abandoned ? — Yes ; but so long as the gold mine yielded any profit at all the gold mine would be worked. I should imagine that the greater part of the return to the owners of gold mines is really a form of rent, and until the whole of that had disappeared there would be no cessation of the gold mining. 5693. But are you at all acquainted with the cir- cumstances of gold mining in Australia. You suggest that the greatest part is in the form of rent ? — 1 say that the production is under different circumstances. If you take the first eifect of any change then you would only operate upon that .part which was pro- duced under the most unfavourable circumstances. I presume, in taking gold mining on the whole, that gold is produced with different degrees of cost, and you would only operate upon that element which is pro- duced at the greatest. 5694. No doubt "the margin of cultivation," to use a classical phrase, would feel it most, but gradually there would be a contraction of gold pro- duction ? — Unless there was such an efiect on general prices as to raise the wages of the gold miners and the cost of machinery, and so on, there would be no contraction of gold production. 5695. But is it not reasoning in a circle to say that differences in supply do not affect the relative price of the metal when in truth the differences in supply are determined by the relative price of the jnetal ? — I do not see any difficulty. I can quite understand how the differences in the annual supply depend upon not only the relative differences in gold and' silver, but the general level in prices. That seems to me quite clear, and yet the annual supply operating through the infinitesimal addition to an immense stock has a very small influence. _ 5696. Mr. Barbour spoke of the possibility of a general increase in wealth leading to a greater con- sumption of gold in ornaments in domestic use and a consequent still greater appreciation of the standard ? Yes. 5697. But would not the greater increase of wealth be a function of the quantity of gold used for domestic use and ornaments, or rather, would not the quantity of gold used for those ornaments be a function of the general increase of wealth ?— Certainly, that is what I understood Mr. Barbour to mean, that the amount of gold used for the purposes of the arts, ornaments, and so on, would be a function of the growth of wealth in the community. 5698. And under a natural system, would not there be the same movement in the standard ; would not that be a function of the general wealth of the community ? — I am afraid I do not follow. 5699. Supposing the general increase of well- being is such that people with the same quantity of labour, so to speak, could go to the sacrifice of pro- viding themselves with a gold watch, ought not, on the other hand, those who have a claim to a sovereign, or the possession of a sovereign, expect that that sovereign would in the same way represent a varied command of the use of labour ? — That is, we ought to expect a variation in the purchasing power of the standard. 5700. Do not the two things go together ? They depend on the same causes ? — Yes, they depend upon the same causes, but operating in different ways. 5701. Is there anything to object to in the two operations being conjoined ? — Well, the difficulty, as I understand it, is that you abstract from the available supply of gold for currency a certain amount, and use it for the arts and so on. At the same time you get a constant increase in the demand for currency, if you are to keep prices at the same level. Well, the supply is not forthcoming, and so prices fall; then you have the difficulty of a changing standard, and I should say the less change you get in your standard the better. 5702. (Sir T. Farrer.) I do not think I quite understand what you look to as the ideal oi: summum honum in the standard. Is it that the same quantity of the standard should at all times be exchangeable for the same quantity of the same commodity ? — I do not think that, because that would imply that you would get no change in the relative prices, that prices would always remain permanently fixed in the same manner. That is impossible, I should think. 5703. But in order to follow up Mr. Courtney's question concerning the relation . of wealth to the standard, let me ask you this, supposing gold to be the standard and supposing further that we had only one commodity — wheat, that the supply of gold re- mained absolutely constant, but. that the supply of wheat was doubled from improvements in agriculture and transport, should, you think it the summum honum of the standard that the same quantity of it, say 21. or 40s., should exchange for one quarter of wheat? — It is very difficult for me to look upon the standard as measured by one commodity. 5704. But I want to get at what you were looking for when you were talking about an ideal standard ? — Well, I would illustrate it perhaps best in this manner, that I think nothing can be worse for a country than the adoption of inconvertible paper. It leads to a fluctuating premium on gold, and that really means a fluctuating purchasing power, which is the worst thing that could happen to a country. Well, so far as gold approximates to that, gold is a bad standard. 5705. Let us make a further hypothesis ; supposing that all the commodities exchangeable against gold, or measurable in gold, which is perhaps a better phrase, are doubled in quantity at the same cost in labour or human effort, while the quantity of gold re- mains the same, should you think it a defect in the standard if the same quantity of gold then purchased double the quantity of commodities ?— That is to say, should I think it a disadvantage if prices fall a'pray to increased production ? 5706. Yes ?— No, certainly not, because I should say that any relative fall in prices due to decreased cost of production must be shown in that manner. 5707. {Mr. Barbour.^ But do I understand you to mean that if production is cheaper it is still better for the world if the standard keeps pace with the cheapening of production, so that prices are always the same ? — But then my difficulty is whether I am Pp 2 Mr. J. S. Nicholson, 20 May 1887. 290 EOYAIi QOMMISSION ON GOLD AND SILVER: Mr. J. S. Nicholson^ 20 May 1887. to understand all commodities to be increased in tlie same proportion, which is a very difficult position to take up, or if I am to understand that you get some particular commodity cheapened. I think it is ne- cessary that any diminution in the cost of pro- duction of a particular commodity should be shown by a fall in its price and so over ' a large number of commodities. 5708. {Sir T. Farrer.) I wanted rather to illus- trate Mr. Courtney's proposition about the. wealth of the country. I want to know whether, supposing the wealth of the country doubles, that is to say, suppose all the commodities which people use are doubled with the same expenditure of human labour, while gold remains the same, and the same quantity of gold consequently buys twice as much of every commodity, whether you would consider that a defect in the standard ?— Well, then I should think that it would be better if everything were doubled, and the number of transactions were doubled, and the number of people were doubled, it would be better for gold also to be doubled. 5709. It would be better that the foot rule should be doubled as well as all the other things that are measured by it ? — I should think so. 5710. {Mr. Barbour.) Do you think the change should be described as a doubling of the foot rule. There is no close analogy between the measure of extension and the measure of value ; is it not rather that the foot rule should remain the same? — It is very difficult to seize the exact point of any analogy at once, but I do not see that there would be any objection theoretically if you suppose everything doubled to have the quantity of money doubled also. In that case nominal wages would remain the same, in the other they would be halved. 5711. {Sir T. Farrer.) You spoke rather positively about the effect of this deprciation of silver upon the price of Indian commodities, and especially upon wheat, have you examined the data that we have had before us, papers by Mr. O'Conor and others, as to certain causes which have cheapened Indian com- modities, such as transport and railways, freights, &c. ? — Well, I have looked into these papers, but I cer- tainly did not mean to express myself positively at all as to the influence on the final price of wheat ; all that I was doing was to take the effect of one par- ticular cause, and to say that, so far as that was con- cerned, it ought to operate in that way ; it may be neutralized by other causes. 5712. You have not looked at the other causes which operate, to see whether those causes are suffi- cient in themselves to account for the fall in Indian wheat ? — I should take it up analytically that if you have a fall in the price of silver that of itself does permit of the Indian wheat being sold at a cheaper rate. 5713. But you have not looked into the actual causes which operate to see whether there are not other causes which ought also to operate to make them fall ? — I can only refer to my former answer to question 4147. 5714. Now, let me take a statement you have written with care, and therefore I would rather take it than what you have said to-day. You say : " Observe now " the consequences which follow from the failure of " Indian prices to move in correspondence with the " fall in silver. Prices in India being the same, or " indeed a little less, the producer of wheat, or any " other Indian staple, will gain quite as much as " before, as well as have the same real income in " India, if he obtains the same number of ounces of " silver as he did. If, however, in London, an ounce " of silver, reckoned in our currency, is worth 25 per " cent, less than it was, the Indian can sell his com- " rnodity for a gold price, less by that per-ceutage, " and yet obtain his usual or profitable number of " ounces of silver." Now I want to ask you whether that does not assume that a rupee is worth Is. Qs., or \s. &d. worth of commodities in London, and 'Z.i. worth of commodities in India, at the same time ? — I adhere to the quotation you have made. .5715. Well now, does not that assume that a rupee is worth 2s. worth of commodities in India and only Is. Qd. worth of commodities in London. I want to know whether it is possible that a rupee shall be worth Is. 6d. worth of tea or wheat in London, and, at the same moment, worth 2s. worth of wheat in Calcutta ? — I am afraid I have not followed the point in your question as bearing on this asser- tion of mine, because what I say is that the eflfect will be the reduction in this gold price on this side, so that, so far as the wheat is concerned, you would get the same price. 5716. {Mr. Birch.) Would you allow me to put the real meaning of it. It is this : he sells for Is. Gd. in gold, that is the difference. It is Is. 6d. in gold, not Is. 6c?. in silver, because Is. 6c?. is simply token coin, whereas the 2s. in India is a real coin ; that is the difference ? — I agree with Mr. Birch's statement. 5717. {Sir T. Farrer.) I perfectly understand that. I am speaking of 2s. and Is. Qd. as fractions of a sovereign. I want to know whether I am right in my construction of your paragraph. Whether that con- struction is true, and if not where is the bounty ? — The point that I wish to bring out by saying it is a bounty is that it leads to a reduction in price, like every other bounty. 5718. You told us that you did not know where the extra sixpence went to, whether it was the profit of the Indian rajah or ryot, or where it went, but there is, according to your account, sixpence to play with, and I want to know where that sixpence comes from. Is not the real fact this : the man in England spends Is. Gd. on his rupee, but that Is. Qd. is gold, and, gold having risen, it is as much as 2s. was before ? — Yes, that is the monetary position. 5719. Therefore, the real thing is that gold has risen in England. He buys his rupee ; the rupee is worth Is. 6d., and he buys with his rupee the same quantity of wheat that he could originally have bought with 2s., it is true, but it is because that wheat has fallen from other causes in the same way in which the silver has fallen. You do not think it possible that a rupee can be worth one quantity of a transportable commodity in London and worth a separate and a different quantity of the same com- modity iu India .? — No, not more than by the cost of carriage and other reasons of that kind. 5720. ( The Chairman.) I understood your position to be this ; that owing to the change in the value of silver, as compared with gold, a lower gold price here gave to the producer the same silver price there ? — ■ Yes, that is my position. 5721. That he was content to get the same silver price because he paid wages in silver, and the other burdens that fell upon him were payable in silver ? — Yes. 5722. And so his position, being to him, apparently, the same, getting as much silver as he did before, he was content to sell at a lower gold price than he would have been ? — Yes. 5723. {Sir T. Farrer^ That is on the assumption that gold- is appreciated ? — I think we can separate the direct effect of the depreciation of silver from that of the appreciation of gold. 5724. In that case the producer in England will also have had his expenses reduced ; gold will have appreciated against all things in England as well as in India ? — But I do not see that we bring in the question of the appreciation of gold at all. This is an illustration of the effect of the direcc operation of the depreciation of silver. 5725. {The Chairman.) Supposing that he gets a lower gold price here (which is the hypothesis), which brings himthesame number of rupees that he got before, I am not quite sure that I can see how that stimulates production there. If he, owing to the change, got the same gold price, and therefore, more silver rupees, and therefore made the transaction more profitable, I can understand that stimulating production ; but if MINUTES OF EVIDENCE. 291 the net result is to bring the gold price down, by reason of his being content with the same number of rupees as before, I do not see what there is to stimu- late production ? — When it arrives at that limit, there would not be any stimulus of that kind ; but it seems to me to operate just as bounties on production or on exportation from foreign countries. In the first place, there is an attempt on the part of the producer, or on the part of the importer, or on the part of those who have to handle the corn, to keep the bounty to them- selves ; but then this constant attempt to keep that bounty to themselves is finally defeated by competition. 5726. But then, when it has arrived at that point, there ceases to be a bounty ? — When it has arrived at that point there ceases to be a bounty ; but any further fall would act again as a bounty. 5727. {Sir T. Farrer.) Then what you mean is, what we have heard before, and what other witnesses, when pressed, have come to, that the bounty really consists in this, that pending the adjustment of ])rices, the producer in England has to pay the same nominal wages and expenses as before, but which, owing to appreciation, are really larger than before, while the producer in India had to pay no more than he had before ; — That is the real adjustment. 5728. But when the adjustment is effected, theu that bounty ceases ? — Supposing all the elements in cost of production are adjusted, then it would cease. 5729. I want to ask you one question with regard to the figures which Mr. Barbour put to you. He put these figures, I think, that from 1493 to 1850 there had been 650,000,000/. of gold produced on the whole, out of which, of course, a very large amount must have been wasted or consumed before 1850 ; that from 1850 to 1885, 890,000,000/. had been produced, of which also a certain quantity must have been consumed. Well now, supposing your remedy is adopted, and you bring in silver to the assistance of gold, remonetize it, the amount of silver, I think, produced from 1850 to 1885, was 480,000,000/. ?— Yes. - 57.30. Now, if I understand the effect of bimetallism, it would not be to raise the value of silver as money by more than one-fourth, or more than it has fallen, would it ?— No. 5731. Therefore, what you would bring in to the assistance of gold would be certainly not more than one-fourth of the 480,000,000/. as compared with the 890,000,000/. ?— Yes. 5732. Well now, if the demands upon gold have been so great during the last 15 years that we want a very much larger quantity of money for our standard, how long and to what extent will this addition of silver to the gold have any such effect as you desire ? All that I said was that it would operate to a certain extent in assisting gold and m preventing this appre- ciation, but I tried to bring out the fact that the effect would not be very great. We should still get the appreciation going on even if we had the two metals. 5733. So that it would be only a very small de- preciation, would it, of the present value of go d. It, during these last 15 years, we have so largely con- sumed gold as to make the 890,000,000/. produced since 1850 insufficient for our wants, then the present addition of about 100,000,000/., which would be the additional value given to silver, would make uncom- monly little difference, would it not ?-Then there is the other fact to consider, of making the two standards 5734 But that is quite a different point. My nresent question is only with regard to the scarcity of Sold ?--Yes, the position that I have always taken up E that even with the two metals together, we shall ^^Vsrit^ril^ery'Scuh thing to distinguish 5735. it IS a veiy hoarded and currency purposes; it is very difficult to draw the line?— In the operation upon prices. 5736. You cannot tell when the French peasant may be tempted to bring his gold out of his stocking Tthe Indian peasant take off his wife's bangles to be coined ? — We cannot tell that, but till they do so Mr. J. S. they cannot operate upon prices. Nicholson. 5737. {Mr. Barbour.) I think you said that the r general level of prices depended upon the amount of 20 May 1887. gold "left over as currency, after all other demands had been satisfied ? — Yes. 5738. And probably the amount left over as cur- rency may be very much less than the total pro- ducion of gold, since 1850 ? — Yes, certainly. 5739. Then if the amount left for currency happens to be very much less than the production, an addition of not very many millions to it might make a con- siderable difference in prices in the future ? — ^Yes, it might do so, certainly. 5740. {Sir T. Farrer^ Have you thought what would be the effect of adopting bimetallism with a ratio of 15^ to one in India, first of all, on the sup- position that India were included in the bimetallic League, and secondly, on the hypothesis that India were excluded. Let me ask you first, would you include India in the Bimetallic League ? — ^Well, I have never thought out very carefully the different points in that question ; naturally I should be inclined to include India. 5741. Suppose India were included, what would be the effect of adopting the ratio of 15^ to one upon India and upon the currency in India ? — I should not think there would be any difference on the currency of India. I should think it would still mainly consist of silver. 5742. You do not think gold would go there any more than it does at present ? — I cannot see any reason why India should change its actual currency from silver to gold. 5743. I was not asking so much with reference to that as to what would be the effect on the value of the Indian currency. Would it raise it by 20 or 25 per cent. ? — Would the total mass of Indian currency rise in value, supposing India had so many millions of silver ? 5744. Yes ? — It would compared with the present prices on this side ; it would raise it, but not in India. 5745. You think it would make no difference there ? — No, no difference. 5746. But it would make a difference in its value for the purposes of export ? — For purposes of expprt. 5747. And that would raise the value altogether, I suppose, would it not ? — I do not think the adop- tion of bimetallism would make any difference on the general level of prices in India, because India would still use silver, and have the same amount of it. 5748. But you think it would make a difference on the level of prices here ? — General prices on this side would rise to some extent. 5749. Why on this side and not on the other ? — Because India already has silver, and it would uot affect the currency of silver. 5750. But if it made the silver much more valuable for export in India, would it not cause an export from India or prevent an import of silver into India ? — But I do not think the condition of trade would ever be such as to lead to the export of silver from India. 5751. But how could it have an effect on one side and not upon the other ? — I am afraid perhaps I have not understood the question you put as to the value of the currency. 5752. Let me put it again more clearly. If I understand you, the adoption of the bimetallic system would have the effect of raising the purchasing power of silver in this country, at any rate ? — Yes, silver would at any rate obtain more gold, and unless com- modities rose in equal proportion, more of them too. 5753. .And would it have the effect of raising the purchasing power of silver in India? — I think the general level of prices in India, being silver prices, .would remain the same, and silver would fetch the same as before. 5754. {The Chairman^ You say that the change from 15J to 1, to 20 to 1 in the relative value of silver and gold, has not affected silver prices in India, as a matter of fact ? — Apparently not, as I understand it. 292 ROYAL COMMISSION ON aOLD AND SILVEK ! Mr. J. S. Nicholson. 20 Mav 1887. 5755. {Mr. Birch.) But would it not aiFect them, supposing prices remained here the same ? Pripes would have to fall in India to meet a rise in the exchange ? — I do not foUow that. I do not think prices on this side would remain the same. 5756. The so-called bounty would disappear ? — In my view the so-called bounty has caused a fall of prices on this side, not a rise in India. 5757. (Sir T. Farrer.) I am taking England as a gold-using country, and India as a silver-using country, as a case on which to try the bimetallic system, and I want to understand what would be the effect ; do you think that the adoption of this bimetallic system would be slightly to raise the level of prices in Eng- land, or make it higher than it would otherwise have been ? — Yes. 5758. Would it have any, and if any, what effect on the silver prices in India ? — Unless silver were sent to the East, general prices in India could not rise. Of course, articles of trade between the two countries would be the same, allowing for transport. 5759. It would make silver slightly more valuable here, and therefore it would make it a less desirable article of export ? — So far. 5760. That would diminish the supply of silver for India ? — It might not be sent to India in such quantities, so far. 5761. And in that way it ought, theoretically, to cause a fall in prices in India, ought it not ? — So far. 5762. {Mr. Barbour.) There is a great deal of silver sent to India at present, is there not ? — Yes. 5763. And there is good reason to believe that a large proportion of that silver is hoarded? — Yes, I have seen that stated. Of course I have no informa- tion. 5764. Assuming that to be the case, that silver would have no effect upon Indian prices ? — iN'o. 5765. But if that silver instead of being sent to the East had been coined in France, it would pro- bably not have been hoarded to the same extent, and would have had an effect on prices in the West. 5766. {Mr. Fremantle.) I understood you to infer, in answering Mr. Chaplin, that the failure of the Paris monetary conferences was due to the action of England ? — That was my impression, that England refused altogether to have anything to do with any international convention. 5767. And are you aware that the resolutions which were passed at the Conference of 1878, and which did not recommend the adoption of bimetallism, were proposed by M. Leon Say, the President of the Conference ? — Well, I have not read the report recently, 5768. The third resolution ran as follows : " That " the differences of opinion which have appeared, " and the fact that even the States in which the " double standard exists, find it impossible to enter " into any engagement with regard to the unlimited " coinage of silver, precluded the discussion of the " question of establishing an international relation of " value between the two metals " ? — I cannot recall the resolutions which were come to, but my general impression from reading the evidence was that it was the refusal on the part of England to entertain the proposal at all which made it impossible for the proposal to be adopted. 5769. Well then, at the Conference of 1881, no resolution whatever was proposed ? — It was well understood, at least I gathered so from the report, that the English commissioners were instructed to entertain no proposal. 5770. Apart from that, there has not been any thing like a consensus of opinion on the part of foreign nations in favour of the adoption of bimetallism, as shown at the conferences ? — I am not able to say that there has been ; but still I should have been in- clined to think that at the present time the United States, France, and Germany, if England agreed, would also be willing to agree, but I have no special infor- mation. 5771. Do you not think that it is rather for foreign countries, some of which have had experience of bi- metallism already, to raise this question,' than for England to come forward with offers of new arrangements ? — I do not know whether it is for England to take the lead in such a measure. I am not able to give an opinion merely on a question of policy. It would be quite enough, I should think, if England were to express no unwilUngness to entertain the proposal. 5772. {The Chairman.) You exclude from the volume of currency which would affect prices all gold, supposing that to be the standard, which is used for ornament or hoarding } — Yes. 5773. You include all the rest ? — Yes, I think so. 5774. Well, the gold that is not used for the pur- pose of ornament or for hoarding would be gold, either turned into coin or held as reserves by banks ^ Yes. 5775. Now, when this special demand for gold arose in Germany, can you tell us whether that diminished the coinage in gold-using countries or diminished the reserves.? — I have no information as xo the exact sources from which the supply of gold came for Germany. 5776. Supposing that gold went from France to Germany, and the gold that went from France to Germany were replaced in France, if not by coined silver by silver reserves, that would have no effect upon the volume of the currency, would it, at all ? — No, so far I should think there world be no effect on general prices. So far as that was concerned, it would be merely the substitution of one metal for the other between two countries. 5777. When the transaction was completed, Ger- many had so much less silver, so much more gold ; is there any evidence to show that, taking all the countries together, the volume of the currency in the sense in which you have explained it, that is, coinage and what was held in reserve, was less than it was before ? — That the volume of the currency was less ? 5778. Yes? — 1 am not able to give any statistics; that was my impression. 5779. It would not necessarily be less, would it .' — Not if the gold were drawn from silver-using countries. If the gold were drawn from bimetallic countries, which would take silver instead, then it would not necessarily be less. 5780. But it must have come in some such way must it not, unless you have had an actual diminution of the coins in use by some country, or an actual dimi- nution of the reserve ? — Well, I thought it might come, to a large extent indirectly from undeveloped countries because those countries were indebted to countries on this side. That was my impression, but then I am not able to quote definite evidence in support of that view ; but that is one way in which it seemed to me that the diminished gold might act upon prices. 5781. Or do you think it possible that, to a certain extent, it was got by diminished supply at the time, for the purposes of ornament? — I do not think it could be obtained in that way. 5782. Or hoarding ? — There again it possibly might come from hoards. I do not know whether the French peasants hoard gold as well as silvei*. 5783. So far as it came from hoards it would not affect the volume of the currency, in fact, so far as it came from hoards, it would be so much brought into currency, which did not form part of the currency be- fore ? — Yes ; but then it would displace silver, which would become a commodity. 5784. But that would leave things as they were ? It would so far leave things as they were. I am only able to give a theoretical opinion on the possible sources of the supply. I cannot say as to the facts where the supply really came from. The witness withdrew. Adjourned till Monday. MINUTES OF EVIDENCE. 293 Twenty-third Day. Monday, 23rd May 1887. PRESENT : The Right Hon. LORD HERSCHELL, the Chairman, presiding. Mr. D. M. Barboue, C.S.I. Mr. J. W. BiEOH. Mr. Henry Chaplin, M.P. Sir T. H. Farrbr, Baet. Mr. C. W. Feemantlb, O.B. Mr. Geo. H. Murray, Secretary, Mr. Henry Hucks Gibbs recalled and examined. 5785. (^Mr. Birch.) I believe that to carry out your bimetallic scheme you consider it imperative that there should be an accord of nations, and have stated in some of your writings on the subject that such a thing is clearly possible, and that all doubts raised by people of the contrary opinion have no foundation ? — ^I never like to say that other people's opinions have no foundation whatever, but I think that whatever the foundation, the superstructure they build is incorrect, for I have no doubt whatever that such an arrangement could be made. 5786. I do not know if you have read an article on "Coin and Coinage," by Rice Vaughan, 1675, published in " Select Tracts on Money." I was struck by a paragraph which bears on this subject, and I wish to ask what you have to say with regard to it. He says : " Amongst all the remedies pro- " pounded against the alterations of moneys there is " none more specious than this, nor more frequent in " mention, both in provisional edicts, which are made " for the reformation of moneys, and in considerations " held for the purpose, for it is said to advance it. " That if. we contract with other nations for a certain " and stable standard of moneys which may be equal, '• then we shall avoid all the inconveniences that do " grow by the raising of moneys, because we shall " never raise them ; and we shall avoid all the incon- " veniences that do grow by the not raising of moneys, " because other nations shall not raise theirs. Besides " for this remedy there is alleged the example of " former ages, wherein it appears that in many " treaties with foreign nations our kings did contract " for the mutual standard of their moneys. But " however the propositions be, specious and frequent, " yet, of all other remedies, if it be thoroughly « examined, it will appear the most diflcult, or rather " impossible to be effected." He then gives certain reasons, and goes on: "But suppose it was possible, " to draw all those countries to a certain contract, " 'what would be the use of it ? I did, in a former « chapter, observe that most countries, and particularly « Prance and the Low Countries, do seldom or never " raise their moneys ; but when people by custom « and general use have raised the money beforehand « beyond the publick declaration, and the State is « forced to follow the people, whom, in this case they » do not master, to what end is it then to contrac. « with those nations for that which is not in their " power to observe ? And that which is alledged for " the course of contracting, with forrein nations, out « of the example of former times, doth clearly con- <- V nee the vanity of this proposition, for it is mamfest, " Is I have showed in former chapters, that notwi h- «' standing these contracts, the money was continually stanaing i^^«»^ "^ , '„ p_j{,ice Vaughan's article " from time to time raisea . ""^^ & has I think, merely a literary interest The state of 'things, politically and <^^'^^V^^\''.'1Z^X different now from what it «.as in 1675, that rt is impossible to cite then-existing difficulties as apph- Mr. H. H. Gibbs. cable to our present question. He and his contempo- raries would have thought the making and mainte- 23 May 1887. nance of a postal convention, a copyright convention, an extradition treaty, a zoUverein, quite as impossible or fruitless as a treaty against "raising of moneys;" yet aU these things have been done, and done success- fully, in our own time. But even the contract which he thought it so impossible to maintain would be easier to maintain now, though still most difficult. You have not, I think, rightly apprehended what that contract was, and how totally different it was from that which I propose. Tour extract relates not to the , question of a fixed ratio between gold or silver at all, but to the fixed standard of the metals which were used as monies, that is to say, that the alloy should be so much or so much, and the weight of the coins so much or so much, not that this or that metal should be used. That is the meaning. It was recognised at that time, and always understood when monies were talked of, that the two precious metals were the monies that they meant, not the particular metal gold, or the par- ticular metal silver, though silver in one country, per- haps, and gold in another, was the metal ordinarily used. Vaughan is speaking of the foreign coins, which, as you know, were commonly current in England, and it was obviously important to Englishmen that they should be of the weight and fineness recognised by law ; whereas it was notorious that both here and abroad coins were frequently deficient in one or the other' or both. "Raising of monies" was causing them to pass for a higher value than their true con- tents indicated. I have known war made, even in modern states, for this teterrima causa. My remark on it is that one could quite well understand that by cupidity and bad faith, which were not infrequent in Governments in those times, an attempt should be made in many cases to over-value their coins, that is to say, to diminish, in the case of such and such a coin, its true weight and iineness ; but it does not seem to me to affect the proposal that I have made, that is, that there should be a definite ratio agreed upon by all of the principal commercial nations between gold and silver. What has troubled people m former times has been the badness of coinage rather than the difficulty of an agreed ratio, the coins have been clipped, good coins have been issued, and the bad coins have remained and the good ones have left the country; but none of those evils would happen in the case of an agreement for a certain ratio. I see nothing there that at all militates against what I have said before viz., first that the other nations would be willing to make such an agreement ; secondly, that there would be no inducement to thetn to break that agreement, the only possible inducement being that of self-interest ; and I have shown that self-interest would cause themr to keep to it rather than to break it ; whereas it is obvious that self-interest, or what they deemed to be self-interest, induced kings in those days to " raise " their coins, and thus put moiiey into their pockets 294 tlOYAL COMMISSION ON GOLD AND SILVER: Mr. H. H. Gibhs. 23 May 1887. They could make their coins what they would, but they cannot make gold other than gold, nor silver other than silver. 5787. Then what have you to say with regard to Professor Stanley Jevons, when he makes the following observations. He says: — "The perpetual mainte- " nance of this supposed convention is the only safe- " guard against the most serious inconvenience to " some of the parties to it. The convention would " resemble a chain, the breaking of each link of " which would throw an increased strain upon the " other links. There exist, indeed, a good many " international conventions, relating to postal inter- " course, extradition of criminals, copyright, and so " forth ; but in none of these cases would the break- " ing or suspension of the convention result in any " ruinous consequences. There would be suspension " of benefits rather than occasion of evil. But should " war break out among some of the countries involved " in the monetary convention, the probable effect " would be to throw the mass of silver coin upon " neutral nations. This might be done without any " express breach of the convention, simply by the " issue of paper money, a measure which we cannot " pretend to consider unlikely, seeing that the chief " difficulties of the present monetary situation arise out " of efforts for the withdrawal of recent paper money " issues " ? — This last suggestion as to paper money is perfectly true, and I have met the objection long ago. There is no doubt, in the first place, that anybody could withdraw from the convention ; in the second place, that a state of war might make it necessary for one or more, not to withdraw from the convention (there would be no longer for the time any question of convention with such a nation or nations) but to issue paper money as they have done heretofore. Then the question is, what would be the effect on themselves and what would be the effect upon other nations, and in what would the case differ from the present state of things that we now have. The effect upon themselves would be that it would put them for the time, in fact though not in law, clean outside of the convention, as if it had for them never existed. It would do no more harm to themselves then than it would now. The effect upon other nations would be, not as Jevons says, that silver only would be thrown upon other nations, but that whatever coin, gold or silver, or silver and gold, they were using, would be thrown upon the other bimetallic and monometallic nations. What would be the difference between such a state of things, and the same course of action in the present monetary status ? If France and Germany went to war and chose to depart from their present system, it might be that they would go to an incon- vertible paper currency. The gold that is used in their money would be thrown upon the gold-using nations ; if it is a harm to the gold-using nations to have the gold thrown upon them, the result of "which would be nothing but an increase in price, that harm would be suffered. The silver would go to silver-using nations if any existed ; that is to say, it would go back to Mexico or be thrown upon India ; one does not know where it would go ; but the gold would go to the gold-using nations and the silver would go to the silver-using nations. I do not see myself that any great harm would happen, but most certainly no greater harm would happen under a bimetallic con- vention than under a monometallic system, but rather less. So much for that. When Jevons speaks of the strain that would be put upon the others, no doubt there would be a strain if all nations but one retired from a bi-metallic convention, one nation or group of nations ; that we know by experience already. We have seen that France and the Latin Union were left alone in their bimetallic condition, in the face of gold and silver-using nations. As I have said before, when I was examined on this subject, I do not think, and very many people in France did not think, that any harm would have been suffered by them ; but, at all events, they were afraid of it and they gave it up. But that is the case of one nation left alone. To make Jevons' fear at all germane to the matter, you must have all nations withdrawing but one: because, if France for 70 years, and with a most extraordinary difference in the production of gold and silver, could maintain a bimetallic law, much more than could two nations, and if two nations could do it, very much more could three, and still more could four, in greater proportion. 5788. I believe you have something to say with regard to the disposition of the Netherlands to join a convention ? — I knew nothing before about the Netherlands ; I knew what was the disposition of the United States ; I could form a very good idea of what was the disposition of France, and of the Latin Union, except Switzerland of whose present disposition I know nothing, and of Germany too ; but I happened to meet Mr. Piersou the other day, the Governor of the Bank of the Netherlands, and Professor of political economy there (whom I have already quoted), and he tells me that the opinion is very strong in the Netherlands, and very widely spread, in favour of the bimetallic agreement. I saw also, a few days ago, a charter which has been granted to the Bank of Amsterdam by the King, and there the charter reserves to the Government the power of enforcing upon the Bank of Amsterdam the taking of gold and silver at a mint price, if a bimetallic agreement should be entered into, and if such enforcement should be made upon the chief banks of the other nations, parties to the agreement ; so that it seems it is not only desired by the people, but in contemplation by the Grovernment of that country. 5789. {The Chairman.) You have spoken of the tendency of the depreciation of silver in relation to gold to stimulate production in the silver-using country, as, for example, in the case of wheat from India. Suppose' you had a fixed relation between silver and gold, that stimulus would still exist in the case of a wheat-producing country, with a depreciated currency ? — With a paper currency you would say. 5790. With a paper currency; I was thinking of Chili ? — Certainly it would, and since I spoke of that, I learn that, much to the displeasure of some interests in that country, the Government of Chili has passed a law for the gradual redemption of their paper money and resumption of cash payments, calling iu and destroying' ^100,000 a month from the 1st of flanuary last, till the issue be reduced to ^18,000,000. In 1887-88 ,^1,200,000 will be spent in silver, and ^1,500,000 in following years, to be deposited in the mint against legal tender notes. The Act was passed March 14, 1887. 5791. You said in your evidence, in answer to question 3054, with reference to the risk of fluctuation being guarded against by arrangements made by the merchants with an exchange bank, that the ar- rangement made by the merchant with the banker only transfers the risk ; some one must suffer. Well, suppose that the banker could arrange at the same time, or knows that he could arrange at the same time, a reverse transaction; in that case nobody need suffer ? — I must again say that I am talking of what I do not personally know. The point arose out of questions relating to India, with which country I have little commerce. In the trade of Chili, which has also a depreciated currency, and with which I am familiar, the same operations would also be possible if the banks there were exchange banks, but as a matter of fact they are not, and the merchants have to bear each his own risk, guarding himself as best he can. In the case supposed by you, if or when it occurs, the banker need not suffer. 5792. Nobody need suffer in that case ? — No ; that does not follow, because the risk must be there, and must be paid for, in meal or in malt. 5793. But surely, supposing that I know that A has to pay 1,000^. in gold in London on a particular day, and has to arrange for that, and B has to I'eceive '1,000/. in gold in London on a particular day — the MINUTES OP EVIDENCE. 295 same day — and has to arrange fov tbat, it does not matter whether gold goes up in relation to silver or goes down in relation to silver, tlie transaction will be precisely ihe same. I do not quite see in that case where any risk exists ?— The risk to the merchant may be compared to that of the perils of the sea, which you do not anniliilate by opening a policy of insurance. The banker makes an arrangement with him and charges him so much for it. At the same time, according to your supposition, the banker makes an arrangement with another merchant, on whom a Hke risk presses, and frees him, as he freed the other, from the risk of fall or rise in the exchange, taking the two risks upon himself, and exacting a com- pensatory turn in the exchange from both ; and that is how the banker lives. But you think that he has cancelled the risks, and runs none ? 5794. The only risk to the bank mii;ht possibly be, in tliat case, the solvency of the person who had agreed to make the bank the future payment? — It would be so in that one case, but the rate may fluctuate every moment. 5795. How, in that case, is there any risk of jBuctuation ? The same sum has to be received and paid in the same metal on the same day ? — ^Business could not really be done in that way. The bank must be paid for relieving the merchants of their risk. 5796. Yes, but is not the one risk exactly a set-ofF against the other ? Are there not two contrary risks which exactly balance one another ? — There are in the care yon suppose ; but then as between A and the bank, and B and the bank in each ease a risk has to be got rid of and paid for; they put that risk upon the shoulders of the bank, and the bank may be willing to take it, but if it does it must certainly be paid. 5797. But do they put any risk upon the shoulders of the bank ? — ^What is to them a risk. 5798. Do they put any risk upon the shoulders of the bank if the risks are equal and opposite ? — What to them is a risk, and, except in your supposed case, is also a risk to the bank. 5799. Yes ; but then you said that some one must suffer. I cannot quite see how anyone suffers there ? — Yes they do, because they have to pay a premium to the bank for taking upon itself what, by your present example, indeed, is no risk to the bank, but which is in any case a risk to the person paying the bank, for which he has compounded. 5800. Your expression was " that is only trans- ferring the risk; someone must suffer." Of course I understand your view, that however small the risk, or even if the risk is nothing, the banker will charge something for being at the trouble of the transaction ; but I did not quite see how any risk was transferred if the bank can so arrange as that it has two reverse operations at the same time ?— If there were no risk the banker would charge, as you now say, some slight commission for the trouble of the transaction. In point of fact, the bank charges a very considerable sum, because, to each person who has to come to the bank there is a certain but an undefined risk, and the bank either will or will not take that risk and arrange it. But at the moment of its making the arrangement with the first man it has taken his risk on its shoulders, and if exchange goes against it, it makes a real loss. In the meanwhile it may possibly have made an exactly opposite arrangement with another man, but it may not. The exchange may have altered in half an hour, and the transaction may leave a loss in both cases Sometimes the bank will not take the risk at all from either, as I think I mentioned in one of my answers When I gave the answer first, I told you, or I told the Commission at the time, what the amount of exchange was that the Indian bank charged ; when I spoke of it again a few days afterwards I had to say that at that date the bank would not take the risk on any account whatever. 5801. I was not in the least questioning that in many cases there was risk, and the bank would take O 24358. that risk, and would charge for it ; but what I did not quite understand was your view that in all cases, in the case of cvei'y transaction, there must he risk. It struck iue that there -were some cases where there would be no risk ? — There are some oases in which, by the good management of the bank or the fortuitous demand and supply ou both sides, the bank itself may on balance have incurred no risk, but the merchants A and C have both of them incurred a risk upon their shoulders whicli they have been able to transfer to the bank. Those two risks, by your hypothesis, have neutralised one another ; but that would show no gain to the bank when it came to make up its acccounts at the end of the year, for whereas it had often made a loss, and whereas it had often made a gain, that time there would indeed be no direci loss, but there would be no gain. Business, as I said, could not be carried on in that way. An equal transaction such as you imagine, thougli showing no loss in itself, is a dead loss to the bank. Take the case supposed in Q. 5793. The bank, it is true, pays and receives R. 10,000 and gives and takes a bill for 1,OOOA Why should it do so ? It is there for the very purpose of making gains in such transactions and to take contrary risks, balancing one another would be to stultify itself and starve its business. What really happens is that it takes a risk from the first merchant, and charges such an exchange as it hopes will give it a good profit. Its risk is that the exchange, which varies every hour, may fall away from it, and that future transactions may reduce the other to the blank you suggest, or to a loss. You must bear in mind also that as to the merchant's risks, he may expect to arrange with the bank but may not be able to do so. The exchange may vary while he is thinking about it. 5802. Yes, but if, as a rule, owing to the course of trade between the two countries, the bank can arrange counter transactions, so that there is only a compara- tively small balance left over in relation to the total of transactions, the risk undertaken by the bank would he on the whole small ? — But the profit gained by the bank is, on the whole, considerable enough for the bank to live by it, and it must, as you say, be com- mensurate with the risk. 6803. That would depend on the charge they make, and I do not quite see if the risk is small why compe- tition in that as in other things should not make the charge small also ? — You see small is a relative term. Whatever it is, it is that which measures the risk, and, as I said before, the banks live by it. If the risk were small, competition would regulate their compensation for it. as it does now. But their com- pensation is sometimes very large, therefore so must the risk be. I am speaking now of what I do not practically know, because I am not an Indian mer- chant, nor am I in the sense of residing in South America and doing the business myself as a South American merchant ; but from what I hear from my partners it is a really definite and certain risk (^though its amount is indefinite and uncertain) which is incurred by the merchant and borne by him. In the case of India there is the same risk which is or may be taken over by the banker, and the profit of the banker exists in the clever management of that branch of his business. The bank receives a rate of exchange from this man and a rate of exchange from that man, on both of which he hopes to make a profit, and by the manipulation of those two customers, whether it is on the one side or on the other, it minimises its own risk ; but risk there certainly is, for the exchange is constantly varying, and those exact compensatory transactions which you imagine and which would annul both risk and profit can seldom exist, and then only by accident. My point is that, if there is a risk in a paper-using country where (barring further excessive issues) the exchange depends on the more or less demand for bills, much more must there be a risk in a silver-using country where the exchange is liable to sudden fluctuations caused by the fall or rise in the gold price of the metal. 5804. There is one answer you gave that I should Qq Mr. H. H. Gibbs. 2.T May 1887. 296 ROYAL COMMISSION ON GOLD AND SILVER : J «^%;7 like to ask you a question upon. You were speaking, JI. H. Gibbs. .^ question 3069, of the stimulus given to the growth 23 May 1887. ^^ wheat owing to a decrease in the initial cost. You ______ " say that " so much has it done so that I may safely " say that if the exchange" rate rises to 36c?. or iOd. no wheat would be gro-nn for export. Now, I do not quite understand why you fix that price ? — Tasked my partner, Mr. Low, whose paper you have before you — I asked Jiim what sort of rate would make a sufficient alteration to stop the growth of wheat for export, and he said, " I should think 36 or 37 would quite " suffice ; I do not think there would be another acre " grown." 5805. That would depend, would it not, upon the condition of things in other wheat-exporting countries, because the theory is that the fall in exchange stimulates the growth of wheat, and at the same time produces a fall in prices in the country to which the wheat is exported ? — l''es ; but it is not the fall in exchange which has any direct effect on the prices on this side. Prices are lowered both by the temporary lessening of the initial cost of production which enables the recipient of the wheat to sell cheaper, and by the increase of production which breaks down the price by competition. 5806. Well, would not the contrary transaction — a rise in the exchange — have a contrary effect and produce a rise in prices, and if there was a rise in prices would it not become profitable to you to export wheat produced at a greater cost ? — If there was a rise in prices, the rise in prices would take place because of the non-competition. If India and Chili ceased to send wheat to this country, of course the natural con- sequence would be that there would be a rise in prices in this country, and a point might be reached when again, notwithstanding the rise in sterling value of the cost of production, it might be profitable to grow wheat there ; if, for example, it got up to 60*. again. 5807. If the proportion of wheat exported from Chili as compared with the wheat exported from India and elsewhere was large, that would have a tendency, would it not, to bring prices up, and therefore, to make production in Chili profitable, at a cost of pro- duction which would not make it profitable before ? — You mean, I think, if I understand you, this : if the production of Chili were sufficient to make an im- portant difference to the grower of wheat in England, or to the grower of wheat in other countries, then the price here would so rise that the Chilian would be again able to resume the growth of wheat. Yes, I suppose it would be so. It is therefore extremely difficult to fix a particular exchange that would make a diflference. 5808. There is a question I should like to ask you upon your answer to question 3080. The question is this : " Let us consider the case of a silver-using " country which is isolated, and not trading with a " gold -using country at all. There, if the currency " depreciates, the manufacturers are stimulated " ? — " Yes." Why is that the case if it is not trading with a gold-using country ? — There I am talking the language of other people rather than ray own, but I imagine it to be this, that the Indian sending goods to China knows exactly that the value of the silver in China will be to him the same as the value of the silver that he has got in India, it will differ only by the fluctuations of exchange consequent on supply and demand. If he sells for a certain number of grains of silver he will get that silver in his own country, which will buy him the commodities that he desires. If, on the other hand, he has to deal with a gold-using country, there is no fixed relation between the two metals. 5809. Has that answer relation to a silver-using country trading with a silver-using country ? — Yes, I mean that. 5810. It speaks of its being isolated ; I suppose it meant to refer to its internal trade ? — I do not know why the Chairman used the word " isolated " ; if he meant to refer to the internal trade of the country, I misunderstood his question. If it had no trade with gold-usitig countries there would be no stimulus caused by the fall of silver in terms of gold. 5811. Supposing it is a silver-using country trading with a silver-using country, the stimulus given arises from a totally different cause and is of a totally different character from the stimulus you have spoken of to a silver-using country trading with a gold-using country ? — Certainly. I should say it is not a stimulus at all ; It is a different thing altogether fronj that that we spoke of just now. 5812. I do not see quite why it is a stimulus at all if it is a silver-using country trading with a silver- using country. Whatever depreciation there is, is a depreciation in both alike ? — Yes, it is exactly the same, in both. 5813. Why is there more stimulus than if both of them stood still .' — It is exactly the same as England dealing with Australia. You send your goods there and you know you will get so many shillings, that is to say, so many twentieths of a gold piece, and the currency being the same you know what you have got. I have said that I think the word "stimulated " in Q. 3080 was incorrect. 6814. If there is a depreciation it will be in both alike ? Why should that give more stimulus than if both had remained without any stimulus at all ? — I do not think it does ; except as compared with the dealing between countries that have not identity of money. I cannot see myself that it is a stimulus in any other sense than that. They are able to deal with more ease of mind. Their trade is diverted to the silver-using country, because they know what they can do with it, whereas they are afraid of dealing, as I think I have before said, with the country having a different money. 5815. I do not think that is clearly brought out by the answer. I understand you to be speaking of the comparison between a silver-using country dealing with a silver-using country, and dealing with a gold- using country ? — Yes. 5816. With reference to that point, that high prices have a tendency to stimulate trade, and low prices to depress it, is not that likely to be very temporary. If high prices stimulate trade, are not they likely to lead very rapidly to over-production, which will cause a reaction? — Certainly they are likely to produce a reaction if trade is stimulated to the ])oint of rash speculation ; and therefore it is that I do not speak of high prices as being in themselves a good. All that I have said really comes to this, that a condition of continual falling of prices is depressing to the trader and depressing to trade. 5817. Of course a large business at small profits might be more profitable than a small business at large profits ? — Certainly, small profits will do just as much as large. 5818. And low prices may bring into the marlcet so many additional consumers as to make the total trade done larger in volume and as profitable to those engaged in the enterprise .? — It might ; but there again if you mean altogether low prices it comes to the same thing ; it is the falling condition of trade which is hurtful. I speak historically rather than theoreti- cally there ; as a matter of fact we know it has been so, we know that a period of falling prices has been usually coincident with short supplies of the measure of value, and with depressed trade. 5819. In questions 3508 and 3509 you are asked: " Is not the distinction really to be found in this " that in the case in which there is a forced cur- " rency running side by side with gold, gold is " wanted by those who have to make foreign pay- " ments, whereas in a truly bimetallic country it is a " matter of perfect indifference to the inhabitants of " the country, whether they take gold or silver for " their purpose." And your answer is " Yes." Well, that would not be so, would it, unless the country in which the payments have to be made is bimetallic and at the same ratio as the country which has to make them ? — Certainly, but that I have fully MINU PES or EVIDENCE. 297 gone into afterwards. (Q. 4588.) They must be of the same ratio or else it would seem very greatly to import to the remitter whether he remitted one metal or the other. 5820. I should like to ask you one or two questions about the demand for gold arising from Germany changing her monetary system. Do you take the same view as Mr. Nicholson that the gold which one has to look to in the country that has a gold standard as increasing the volume of the currency is only that "which is coined or which goes into bank reserves, and therefore is in the same position as gold actually coined, excluding, I mean, gold that is hoarded or which is used for the purposes of the arts ? — I think I have expressed in a former answer that you may consider all those things, the hoarding, the use in the arts, as in some sort a relegation of the gold to the mines, the diiference being that the original mine is difficult to be worked ; the mine of hoarded money is easy to be worked, and in proportion to the ease in ■which the gold or silver in hoards or in the arts is attainable, so is that indirectly effective in the question of price, but that I think which really is the main regulator of price is the quantity of gold or silver presently coined or coinable. 5821. Therefore, so far as the gold which was required by Germany and by Italy came out of hoards, that would make no difference with reference to the volume of the currency ? — I should think not. 5822. So far as it was diverted from use for the purposes of the arts also, it would make no difference ? — In perhaps a diffei'ing degree it would be so. There has been, I think, as matter of fact, no such diversion ; one can see no evidence of it. 5833. Then, if after Germany had supplied itself with gold, the total currency of the world, whether in gold or silver, was as great as before, you would not expect that to produce any effect upon prices, would you ? — Yes, I should, in gold-using countries ; because the price is the relation of the mass of gold to the mass of commodities measured by the gold. 5824. Not as to the gold, because Germany and France were still using silver ; therefore, I say if the total volume of gold, plus silver, that was either in the form of coinage or in the form of gold or silver in the bank reserves, was as great as before, you ■would not expect any change in prices, although the distribution of the gold and silver amongst the civilised countries might be different to what it was before ? — If the only change that took place was that Germany and Italy used gold, whereas it had theretofore used silver, and the gold, though taken away fi-om its occupation in other countries, was replaced by silver which was to do the work which the gold did there before, there would be, I suppose, no change in prices on that account ; but in point of fact that was not so, because, in the iirst place, Italy— that was not a very great quantity, but in Italy it replaced paper. It was the converse of that which Mr. Birch asked me about just now, that is to say, a nation that should leave oft the use of the metallic currency and take to paper, whereas this left off the use of paper or dimin^hed the use of paper and took to a gold currency. Ihen again, silver did not take the place in the other countries of that quantity of gold that had been taken away from them. Silver, to the extent that I mentioned in an answer to one of Mr. Birch's questions before, lies unused in many parts. The mints of Germany and France are now closed to silver, which, if opened agl, would put more into the category of coin or "S Buf did not a large quantity of the gold goTom France to Germany, in 1873, at the time ff the demonetization of silver by Germany ?-At the +;mp of the demonetization, yes. -j ui 5826 And in France was not that, to a considerable extent; rfplaced by silver ?-I take it, it must have been so. I have not before me the figures of the re- Xcement, but I think it must have been. As to the Movement of the gold, in part it was a movement ^irlct of gold, but a great deal of it was done by bills, of course, and by claims of France upon other Mr. countries which they had to satisfy to Germany by H- ^- G'bbs. delegation from France. gg JWfeTTgST. 5827. Of course that would make no difference in ^ the volume of the currency? — That would make no difference at all, but so far as it was the actual move- ment of gold, that must have caused a contraction of the currency in France, and that contraction of the currency would doubtless have been filled up by silver coming in, so long as the mint was open. 5828. And so far as it was filled up by silver coming in it would make no difference ? — Not at that time. France would feel the contraction of the gold measure as much as we should, except so far as silver would Bupply its place. When the mint was closed to silver the gold would alone bear whatever fluctuation might happen. But at first it would make no difference to France. 5829. Or to the total currency of the world ? — Not so far as silver was used. Silver was used in France instead of being used in Germany, that was all. So far as it went, a great deal was still used in Germany, but so far as it was a meie exchange of the yellow metal for the white metal, of course it made no difference. 5830. But where did the gold go from to Germany ? — A great deal of it was taken out of our vaults here, but that must only have been because England owed it in some way or other, It caused a great multitude of fluctuations of the rate of discount of the Bank of England, of which I spoke last time. 5831. Is there any reason to suppose that our currency, including in that the coinage and the reserves, is less than it was ? — ^It is very difficult to answer, but it is said that it is ; that is to say, it is said that there is less gold in this country than there was ; as to the gold in the Bank of England, one knows perfectly well how that is. I think in 1876 there was 30,000,000/. odd of gold ; now there are 23,000,000/. ; but the slackness of trade has no doubt diminished the necessity for the use of the metal ; that is, they have reacted upon one another. 5832. I was rather looking upon the effect in and subsequent to 1873, to see if one could ascertain whether the total currency of the world had become diminished, or whether the distribution of the different precious metals had really been altered ? — I think, taking into account the increase of population, and the increase of commodities, which, after all, fills the other scale, that the active money metal of the world has been diminished. Silver, as I said in former answers, lies unused, but it is very unlikely that the silver portion of the world's currency should have diminished. I do not see how it touches the matter before us to ascertain whether both the measures of value in the world have lessened in quantity. My contention is that gold is lessened in quantity for the work it has to do, and that, as gold is alone our money, that is what touches us nearly. 6833. {Sir T. Farrer.) But the quantity visible in the reserves of the banks of the world has, on the whole, largely increased ? — No, I gave you the figures. It was 30,000,000/. odd in gold, in my time, when I was Governor of the Bank of England ; it is now 23,000,000/. 5834. {Mr. Birch.) I think the gold in the Bank of England has not increased ? — No, not at all. 5835. If you take the Bank of France, the gold in the Bank of France in 1873 was 27,000,000/. ster- ling; it is now 52,000,000/. sterling? — Yes, but you must remember that the Bank of France was not everything in France, as much as it now is. I wish to iexplain how that is, so far as I know. I am not so well acquainted with those matters, but I am told that the Bank of France has very much more in the last decade gathered to itself the gold of the country ; and the other banks in Prance, owing to the use of cheques and so forth, do not keep the same amount of gold. I do not give that at all of my own knowledge. 5836. In silver she held, in 1873, 6,000,000/. ; she now holds 45,000,000/. ?— Yes. Qq2 298 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. H. Gibbs. 23 May 1887. 5837. And the whole of that is issued; it is represented by paper ; it circulates exactly the game ? — Yes, that is what I argued ; it is absolutely in use, that is, and had been in great measure lam told with- drawn from the provinces. 5838. But surely you are aware that there is any amount of silver now in France ? — No doubt there is, if you say so, but that is in people's pockets ; but what I mean is that in banks and in the tills of merchants and in the tills of traders, I am told that there is not nearly the same store of gold and silver as there used to be. 5839. (Mr. Barbour.) You think the tendency of the modern system has been to accumulate money in the banks ; consequently you may see more in the banks, but ir. does not follow that there is more in the country ? — In the chief banks the tendency, I think, has been to accumulate. 5840. And I think there has been a tendency to use notes more largely ? — Abroad, certainly. 5841. And, I suppose, that would be a reagon for more gold appearing in the banks ? — As Mr. Birch says, the silver is represented by notes, which may be taid to be actually the specie current in the form of paper. 5842. {Mr. Birch.) You were talking about notes just now. Supposing that France and the Latin Union came to some arrangement for the issue of notes, internationally between those countries, would you advocate our entering into the union ? — Certainly not, unless based upon the precious metals ; and I do not i^L'c my way to any international arrangement for so basing them. In any case I am not at all inclined to enter into any arrangement for an inconvertible currency, such as that indicated. 5842a. Not even if there were a complete accord of nations ?■ — ^Inconvertible currency would obviously not bo affected by any possible accord of nations ; it is a wholly different matter, because, if you have an inconvertible currency, unless you have an absolute accord between all nations whatever, and with every- body to whom you may have to remit, you would not at all regulate the value of the metal which you would have to remit to such a country as was excluded. It would not help you in the matter of remitting^ to China. 5843. But supposing you had accord as far as Europe is concerned ; and, say, that a note of the Bank of France, for instance, was equivalent here to so many pounds sterling, and a note for so many pounds sterling was equivalent to a note for so many francs in Fiance, they might be interchangeable on a basis if yon secured the accord of nations ? — You mean upon specie, do you not ? 5844. I mean a pound sterling in paper should be rG('ognised for so many francs in France, and a note of the Bank of France should be worth so many pounds iu English notes here ? — But it must be either con- vertible or inconvertible. 5845. Well, inconvertible, or whatever you like to call it, a certain arrangement has been made by each countrj', and those notes are circulated freely in each country ? — My answer is, that if they were to be inconvertible notes it would be absolutely impracti- , cable, and bad policy if practicable. 5846. Naturally notes would be a much more con- venient mode of discharging international obligations than specie, and it is conceivable that France, Ger- many, and other great nations of Europe might combine to say that in each country their notes should be reciprocally current at such and such a ratio. Would you advocate that England should enter into such a combination for tlio general benefit ? — What I desire is an agreement between nations that the metals which are recognised in all the civilised countries of the world as money, should be used as money in those agreeing nations. There can be no question of 7atio between inconvertible notes nor between two premises lo pay the same thing. The idea of ratio is lost, though it is conceivable that a nominal par of exchange should be established even between inconvertible notes issued by two countries. But if behind your question there is the meaning which your use of the word ratio implies, that the contracting countries should mutually recognise the two metals, at a fixed ratio, as the basis for their interchangeable notes, then the plan would have its advantages ; but the world is not ripe for it, and, I doubt, never will be. It would be an international development of Ricardo's plan of deposit of bullion on which notes should be issued. But international confidence is not sufficiently developed to allow of notes issued on deposits in a foreign country becoming legal tender in neighbouring nations. Imagine Ger- man and French notes legal tender in England, and a war breaking out between those nations. I fear there might be a possibility of either nation, under stress of war, laying, at least temporarily, hands on the specie. 5847. {Sir T. Farrer.) I think you said in one of your former answers that the present state of things makes it dangerous for gold-using nations to speculate in silver-using countries. You have, I think, some particular instances that you wish to mention r — Yes ; I stated before that, as a general rule, it was dangerous to attempt industrial enterprises in silver-using coun- tries (except on a gold contract), but I had no parti- cular instance to give you. Now I will mention that the Mexican Railway report is just published, and the loss on the difference .between the price of silver as it was computed — it is only a computed price like that of the 2s. to the rupee ; it is 4«. to the dollar — the loss is something between 90,000/. and 100,000Z., that is, more than 46,000/. for the last half-year. 6848. The loss to whom ? — The loss to the enter- prisers ; to those people who sent their money there to make the railway. 5849. The loss to English shareholders ? — The loss to English shareholders. 5850. Who have to be paid in gold ? — Of course they are paid in gold, when they are paid anything at all. 5851. But the earnings are in silver, and it is the turning of that silver into gold that causes their loss ? ■^The silver is remitted hither and sold, and that is the loss. 5852. {The Chairman.) If the depreciation of silver has stimulated production there, may not that more than have compensated the railway company for the loss in exchange ? — No, I think not ; very far from it. Of course it would have some effect, and that effect is now beginning to be felt. The downward traffic of that railway, that is to say, the traffic in the goods pro- duced in the country, is very much larger, but not as yet for export in any quantity. Very little wheat has been exported. Some sugar has been exported, and some other commodities; but the shareholders have' had no compensation hitherto ; the compensation maj' be in the happy future. 5853. But what I do not quite understand is this ; if production is stimulated, then more, probably, is carried by the railway ? — It is so ; it is beginning in this year. 5854. You mean that it has not gone on to an extent sufficient to neutralise the fall ? — It has only just begun this year, and there is no hope whatever that the stimulus can act so strongly and so long as to make the freight on the additional produce, whatever it may be that is attributable to this cause, anything more than a crumb against the whole loaf lost in exchange. The total increase in the freights of local produce carried by the railway in the last half year has been 10,900Z. gross, say 5,000/. net, of which in- crease by far the greater part is due to the now settled condition of Mexico. What is that to a net loss of upwards of 46,000/. .^ 5855. Have silver prices risen in Mexico ? — Not much ; much the same as in India. 5856. {Sir T. Farrer.) But if gold is appreciated in this country the gold that is received here by the shareholders is worth more than it was? — Yes; to the extent that the gold that is received is worth MINUTES OF EVIDENCE. 299 more, it is to the good of the recipients, but it is a very trifling benefit, and is nothing appreciable in comparison to a loss of 90,000^. or 100,000/. a year. Of course it is a very small compensation, a com- pensation that none of them perceive. 5857. Then you mean t!,at the gold prices of the things that they buy in this country, compared with what they rectlv.', liave not fallen in proportion at all to the fall of the gold price of silver? — Certainly not; they may have fallen, but fallen from other causes, which causes would have benefited the share- holders all the more if their earnings had not been so mulcted by the fall of silver. That which would have been for their good, whether silver had fallen or no, cannot be counted as a compensation for the fall ; but they have not fallen in that degree. 5858. That would depend very much upon what sort of things these i)articular people want to buy ? — Oh, yes, but they are the ordinary things ; they want to buy what everybody else does; they want food, and coals, and coats, and horses, and chariots, and other things. I am sure your own experience will not tell you that you buy all these things retail at very much less than you used to do. 5859. But the general statement of those who complain of the appreciation of gold has been that the prices of goods, and the price of silver, have fallen pretty well together ? — Wholesale things ? 5860. Wholesale ? — Yes, they have fallen together ; it may be because silver is a commodity like others, and silver has been affected in the way that others have been affected. It is impossible to say that one commodity shall have fallen exactly in the sam.e way as any other, because there are many circumstances that affect the several commodities in different ways. 5861. Then, if the people who ought to have received this gold have not received what in com- modities was of as much value as it ought to have been, it would have been for one of two reasons, either because the particular things which they wanted to buy have not fallen as much as silver has fallen, or because the profit has remained with the retailer by the way ? — Some of it. But there is yet another very important thing. You must consider that whereas you speak of the gold which these people have received as having purchased more commodities than it did before, the fact is that some of them got none at all. The ordinary shareholders are all left with- out anything at all ; it has gone to the debenture holders and to some of the preference. It is very little consolation to a shareholder who has received not a penny of dividends, to persuade himself that the sovereigns received by his creditors have a little more purchasing power than they had. It is a very common story now-a-days ; the mortgagee devours the rents of the estate. 5862. I should like to ask you one general question. You were a member of the Commission on the Depression of Trade ? — Yes. 5863. And that Commission came to the conclusion which I think is a conclusion come to by all the economists in all countries that have written upon the subject, that a good deal of the complaints we hear from traders and manufacturers arises from the fact that wages have taken a larger share of the whole production of industry than they did in former times ? — Yes, but I should put it in rather a different way, a way which accords with all that I have said here, and which, I think, we found pretty well established before the Commission, that the wages are now taking a greater per-centage of the profits than they were before, because the fall in prices has not reached wages ; has not reached individual wages. 5864. But are not the opinions of all the greatest economists and, I think, the evidence that was taken before your Commission, to the effect that long before the fall of prices began there was a process under which the wage earner obtained a larger share of the whole produce of industry than he did before ?— Yes. he did ; the pendulum was swinging that way. accelerated by -Yes, 5865. And that progress has been the fall in prices ? — I do not see how. _58(i6. Because wages have not fallen as fast as prices? — Yes; that is, the increase of the per-centage of their wages on their employers' profits has been increased by the fall in prices, because the other end of the scale has been touched, by the lessening of the profits; but that has neither accelerated nor positively increased the rise of the wages of the people. 5867. But, on the whole, independently of the fall of prices, one of the most striking phenomena in the progress of industry during the last 50 years has been that the wage earner has obtained a larger share of the products of industry and the capitalist less ?— The pendulum has swung up in this way, but the counter swing is now in progress^ 5868. Perhaps ; but is there not apparent a secular progress independently of the rise and fall in prices. Does it not seem as if the wage earner was constantly receiving a larger and larger share of the products of industry ?— Yes ; and this was the cause, as I think I drew out from a witness at the Trade Commission. The conscience of the people was awakened in that respect ; the wage earner was in evil case, and it became a necessity, _ not having anything to do with the fall or rise of prices, but owing to the greater knowledge of the condition of the labourer, produced by the greater practical nearness of the great towns arising from the existence of railroads, all men had the opportunity of ascertaining what was happening, and it thus became necessary to alter and improve the condition of the labourer. But this does not date from 1873, but from long before, as you say. 5869. And that is a secular change which has been taking place all over the civilised world, has it not ? I do not know whether you have consulted M. Leroy Beaulieu's and M. Chevallier's works in France, Mr. Atkinson's " Distribution of Products " in Ame- rica, and Mr. Giffen's and Professor Leone Levi's essays in this country. They all agree in this that there has been a secular change going on by reason of which the wage earner has been receiving a larger and a larger share of the whole products of industry ? — Yes. 5870. I was going to ask you whether you do not think that some of the complaints that we have had about depression arise from the fact that the capitahst does not receive under that secular change as large a share of the products as he formerly did ? — I think it is certainly the case that the labourer received higher wages, but as you have justly said, that secular change began long ago, and cannot have had much to do with the complaints of the capitalist, who was him- self also doing very well while the condition of the labourers was improving, but who in the last 10 or 12 years has found the new causes of complaint on which I have been insisting, and the consequence of this is that there is less disposition to put capital into industrial undertakings, and that consequently it will be so much the worse for the wage earner. 5871. The change may go too far ? — Of com'se it will be much the worse for the wage earner when it comes to that. 5872. {Mr. Chaplin.) I just want to ask one question about the price of wheat. Assuming the Indian exporter to get 21. a quarter, or something like that for his wheat, before the price of silver had fallen, how many rupees could he get at that time for his 21. ? — He could get some 20 rupees. I am not so famihar with the exchange as to do that sum imme- diately, but he would get them at the rate of Is. I0\d., or something more perhaps. 5873. In round numbers nearly 2s. ? — You call it 2s. for the purpose of calculation. 5874. He would get 20 rupees in round numbers? — ifou may call it so. It would be really 214-, at Is. \Q\d. 5875. Now to-day he sells his quarter of -frheat for 30s. ; how many rupees will he get for that 30s. Mr. W. H. G ibbs. 23 May 1887. may 300 ROYAL COJIMIPSION ON GOLD AND SILVER: Mi: H. H. Gibhs. 23 May 1887. uow, assuming that tlie rupee is now worth 1*. 4|0'^01 ?3Si^SSS^^Sg3SSS^SaSS = aSg3'Si5§S?Sft§.SSS» ■'Eijjsnv (SlTp«-«CO'Xi««,cncOI»I 0Oeqr-(iH(MrorHrHt>«O(Mr-raiHr-l01«>"*0J-«CD0SW«« 'S «'* 051O •Biesn'a i>j>iocq xa *>»>ooeoi> iqos«»co «i:d»q MSO«CM«"«»OCO«W(M«W iH(NCO«'-3i"*iO»0-*"i?i60-*CO'^ ■in«nu9Q 1 1* * 1' ' * 1 1 looj^oot-oisjH^' ' ^sq' Si' OS •S9!('B!(g ps^raa ■*O5M00«(N lOeOr-lrHr-ieO^ **^??P?''^. r-t**Ot-»0(»IN*»0S(SIWc» M a i o PS 1 •snSjaiaAOg imoj, Tomes put in by Sir Hector Hay. See Questi (a) GOLD (IN £ MILLIONS) "Br[Ba:j9tiy 1 1 1 * ^' ^WMAH«rtCJlcaeqcqNrH^«M«m^««co-^^MJ5^^% /^TitM I«ioa jit- rH 00^«OSe0'*loeqt» CO i-H -^w 'fooOlTflOS»^HCSICOOoi-.t*04W-w' rHt^fflOSracO^* -^rtOl 1 ■^ [ | AhNW d •siiodxa N^H*^'*'b"MiH^^ ' 1'** |'*'';h;h^' II* 1' •sjjodxa •siiJoatni 00«CONOSiHOSlO»O00rH000CI«>Oe0. eq 'SlJr^OS-* td O 1? O 1 t i ■moi ■SBUjnnoo x^mo ta>OiauiUiioui>ouiiOiau>iauiUiiaioui>au>iQui>OfDtOfDXr~oDQoai »H r-< tH r-t •BISBtl'a •BDuamy mtiog pnu 00IX9K ^oi«csmoocoooooQOi>«io»o cqioiou5eej>j>i>r^ HrHrHrHr-(i-l r-lr-(rHiHTHi-(iHHrKHW^^^W •saws vnwa. rH l"i ^^ ^H ^H ^H ?H l"H rH ^H ^4 ^H "mv^sny OOi00003ArHCOcoeOI>eQfoCDao eOU3cqi>iaGqio«oioaoa> o^o3g3fHOOQOsoigooscoooOTqso>t»ojt»ooi>i>i>« H 00 ICi O 05 00 ffi © OS « W CO CO GQ -^ I ' I I I I I I • • I I rHrHrHNiiar-l r-l' iH iH ^ t» 00 ^ -^ eo in eq 00 CO CD 00 ffi -^ w H rt « cq H * eo eq CO -^ M I I I I I I I I ^Qoeqiaco oi -^ -^ ta I I i°?*r*.?'®'^'^" iHrH eO 10USW5» OS00-00OlOS»O00i>Oa00 OOlOt-COt-OOlO'^ t- iH W CO i> l> N CO ■ M iH ■^ -^ ^ cq ^ '^ lO CO Oil S> )1Q 60 ^ lb ^ " * A^ ' ' CD CO ffl CO io o cq * I • ■S3f)«4g pajiufl^ ooi>£^ eoocQio la us at i-ii»cq|csios ^ ^ ^ ei ^ oot-eojoo wiot'-t-oo HeQcoiaiaiAxo loioioious DQ o l-l l-l (-1 •BtpUI siO3oao)0O(Mi>coi> cao'^cDaseDcQcooota t>i> -^oscococococo -*cscoi-i lOiaiOr-JI^^^COO iO'i*OSr-IO"*eD^'-Tfl£>. rHrH'^M-^CTOeoi-O ■^{KIJr--*CD ■ijnijl iB^o^ t-fHei«0"«-^cDBq aqiHe01>CO'*OS l>»QffIcO'*OSOOrHtDeO 1*7^°°. ?* *• lO 00 oo la CO 00 ffl ■« ■^ooeo »oc(ii> cot* osr-( lo ooco cd - iojeO'JiWQOsi>ooo oqaotH-*cDcoo»o»nos CO lO CO "^ iH lib CD" 00 t- CI jp.'^&a ooioi-tco cDeocqoocooa'^uaoBA us CD CO CO i> CO O O 04 OS -^If 03 tH rH iH iH iH iH OS r-l rH l> OS Jt- i> CO 1> CX) 00 OS OS 'S£^0(iinx I> 00 •# CO f* OS 00 CO -^ O CD r-t 00 J> 1> CD lO CO lO IQ i> r-f CO iO CO oot-oooi^'cDO ^A^MGqoego^-^ocD coos osos os rHrH tH rHf-'r-iiHi— IrHHCTrHT-t 'inoiL •s9u:jiitioo joq^o •^umcu^ "B0U9iny qi^tlOg pU'B OOIXQJff •S9^'b:jS p9*T"fl. iHrHT-li-! MlMCqeilOO cOr-tOS^W^rtOOOOW OOOOQOOOCOOOOOQOOO QOOaOSOOOO OS OS rH QO'j>OOCOaO'*'*rHOO>OJ OOlOCOCOCO O O O rH (M CM 04 l>JC*Jr-t-I>I>l> cOCDCDCDCOCOCOeOeDCO MCq««fliOiOiOiO«l racow. OJ ;h H A^'^^ ^-Ah ;h;h ;h^IHWM;h;h;h;h;h wnrHrHrHHrHrHr-lfHi rHrHrHrH ^^^^OlOlOlOW COWWCDCOOOOOOJWOD WMMMWrHW CO ■*! ^ CO' I> CO. ' CO CO CO CO CO to ia Si m lacsioos cqiQioioio I I I I I I I I I t* tsu oi iy* ^ ^ on 00 100SOOOOC410 X^c<]03^ffid9'«ieo co^ioiocot-osi^ lO OS CO CD CO .to OS I> l> 00 OS CO OD 00 -■,w^^laeo^>ooes^ t^e'cO'^lSCDt^ ''^SwCiraini&inlrscD BsococDCOCOM soir- *>fc*>-'>*r*^fe;£:-5roo oooooooooo '* 1881 110,313 53,550 158,301 28,609 45,900 396,673 102,168 1882 112,914 59,670 172,291 32,892 45,900 423,667 111,822 1883 110,850 76,500 166,719 35,259 45,000 434,328 116,923 1884 117,750 67,500 176,130 37,218 45,000 443,598 115,148 L1885 — — 178,704 40,032 (48,960) i / — .mm c APPENDIX, 313 o a O i OJ < =« fl Si a o 03 ^ CD -§.. a> p A D p *^ Z. to oB ■>« *a -a H K 13^ H 5 ■a 00 ,?, (/J « 1^ 'o t;-s § •9| 09 'O ■- ^ V ■^ „ a « i< O •5 1=^ H h ■2^ ^ ^S -s 8 p S cS !U o £ rSH a.» .3 .^ o ■^ o o «5 o o I I I O '^. 1 ■s £ S S S M 3 o « rH r-l -.f P-l CO (S A O g' la I-H *0 ,-t CT .-H rH r-« F« to rH to i-H rH rH C4 rH r-l No returns. 1861 + 1,022 +218 -215 J 1862 + 3,806 + 155 -1,597 +234§ + 2,598 1863 +2,588 + 827 -899 Not distinguished. - 1864 + 1,698 +527t -513 + 368§ +2,080 1865 + 863 +234t -194 +228 + 1,131 1866 +390 + 205$ -4,817 + 1,042 -3,180 1867 +261 +35 -5,295 + 1,032 -3,967 1868 + 829 +81 -4,405 + 1,092 -2,403 1869 + 1,670 + 158t -2,937 + 1,066§ -43 1870 -88 + 23t -3,696 + 818§ -2,943 1871 -2,812 - X -1,242 +417 -3,637 1872 -23 -52 -1,190 + 520 -745 1873 -187 Not distinguished. -42 + 826 1874 -347 -1 -901 + 1,390 + 141 1875 + 750 + 341$ -251 + 1,224 + 2,064 1876 + 1,234 + l,336t -335 + 1,571 + 3,806 1877 + 2,048 + 178$ + 143 +2,979 + 5,348 1878 + 1,620 + 106$ -1,714 +3,242 + 3,254 1879 + 178 + 140 -1,808 + 1,461 -29 1880 + 1,102 + 66 -2,616 + 1,259 -189 1881 + 951 + 106 -123 +647 + 1,581 1882 +402 +173$ -1,505 + 820 -110 1883 + 861 + 216 -1,247 + 1,375 H 1,205 1884 + 761 + 50 -527 + 1,821 + 2,105 1885 + 374 -1,011 + 2,943 * From 1858 to 1866 years ended 30tb April. From 1867 years ended 31st March. f Tears ended 30th June. + 17 ti, onrs the imnorts of silver from China into France are not separately stated, but they are believed to have been smlu The'excess^ven in le table may therefore require a sHght correction. c rm, <,=.„* imnorts from the United States in 1862 and 1864 includes the excess of imports from the United States into JapanTandln 1869 and'^lSTO the excess of imports into Singapore. Note.— Foreign moneys have been converted at the following rates : —francs at the rate of 25, rupees at the rate of 10, and dollars at the rate of 4^ to the & sterling. 316 ROYAL COMMISSION ON GOLD AND SILVER; (G.) — Statement showing the Value of Siltee Oee, or Okb of which the greater part in Value is Silvee, imported into the United Kingdom in each Year from 1855 to 1885 inclusive. {See Question 653.) Year. Value. Year. Value. Year. Value. 1855 £ 564,580 1866 £ 275,599 1876 £' 499,775 1856 354,970 1867 165,687 1877 562,537 1857 299,511 1868 147,690 1878 529,785 1858 209,154 ' 1869 178,398 1879 724,515 1859 342,637 1870 299,726 1880 633,360 1860 382,806 1871 953,956 1881 688,176 1861 289,373 1872 2,188,010 1882 750,079 1862 331,564 1873 1,020,593 1883 1,030,542 1863 272,826- 1874 769,355 1884 1,089,768 1864 251,568 1875 545,164 1885 1,085,227 1865 382,391 .'5- (H.) — Table showing the (Average) Pee-centage of Yeaelt Peicbs to the Mean Price of Staple Articles in the New York Market from 1825 to 1880, and indicating the Annual Variations in the Purchasing Value of Money measured by the Prices of the Commodities named. Taken from the Ninth Report of the Director of the Mint, United States (see Question 743). Year. Per-centage to Mean of Staple Articles. Year. Peij-centage to Mean of Staple Articles. Year. Per-centage to Mean of Staple Articles. Year. Per-oentage to Mean of Staple Articles; 1825 104-4 1839 lp8-8 1853 99-4 ^ 1867 113-0 1826 102-2 1840 95-3 1854 107-0 1868 107-6 . 1827 101'2 1841 92-6 1855 m-i 1869 108-2 1823 98-9 1842 : 81-0 1856 112-2 1870 118-1 1829 96-6 1843 ^0-0 1857 119-8 1871 108-1 1830 92-6 1844 82-7 1858 99-7 1872 112-6 1831 97-4 1845 86-3 1859 100-6 1873 107-6 1832 99-0 1846 .85-7 1860 100-3 1874 106-8 1833 96-1 1847 92-6 1861 98-0 1875 98-3 ! i - 18.34 88-6 1848 82-8 1862 111-6 1876 94-2 1835 99-1 1849 83-5 1863 119-4 1877 98-0 1836 109-6 1850 88-9 1864 110-1 1878 88-0 1837 100-2 1851 89-3 1865 123-0 1879 94-7 1838 101-0 1852 91-9 1866 119-1 1880 90-3 APPEN DIX. 317 APPENDIX It. Papers put in hy Mr. A. Samrbeck. See Question 904. (A.) The CouESB of Peicbs of Commodities in England, from the Statistical Societt's Jouknal. SuMMABT or Index Numbees. Groups of Aeticlbs, 1867-77 = 100. Vege- table Food (Corn, &o.). Animal Food (Meat, &c.). Sugar, Coffee, and Tea. Total Food. Minerals. Textiles. Sundry Mate- rials. Total Mate- rials. Grand Total of 45 com- modities. Silver.* Average Index Nos. of Prices for 10 Years. 1846 106 81 98 95 92 77 86 85 89 97-5 1837-46 93 1847 129 88 87 105 94 78 86 86 95 98-1 1838-47 93 1848 92 83 69 84 78 64 77 73 78 97-8 1839-48 91 1849 79 71 77 76 77 67 75 73 74 98-2 1840-49 88 1850 74 67 87 75 77 78 80 78 77 98-7 1841-50 86 1851 73 68 84 74 75 75 79 76 75 99-9 1842-51 83 1852 80 69 75 75 80 78 84 81 78 99-9 1843-52 82 1853 100 82 87 91 105 87 101 97 95 101-2 1844-53 83 1854 120 87 85 101 115 88 109 104 102 101-1 1845-54 85 1855 120 87 89 101 109 84 109 101 101 100-7 1846-55 86 1856 109 88 97 99 110 89 109 102 101 101-0 1847-56 88 1857 105 89 119 102 108 92 119 107 105 101-5 1848-57 89 1858 87 83 97 88 96 84 102 94 91 101-0 1849-58 90 1859_ 85 85 102 89 98 88 107 98 94 102-0 1850-59 92 1860 99 91 107 98 97 90 Hi 100 99 101-4 1851-60 94 1861 102 91 96 97 91 92 109 99 98 99-9 1852-61 96 1862 98 86 98 94 91 123 106 107 101 100-9 1853-62 99 1863 87 85 99 89 93 149 101 115 103 101-1 1854-63 100 1864 79 89 106 88 96 162 98 119 105 100-9 1855-64 100 1865 84 97 97 91 91 134 97 108 101 100-3 1856-65 100 1866 95 96 94 95 91 130 99 107 102 100-5 185^-66 100 1867 115 89 94 101 87 110 100 100 100 99-7 1858-67 99 1868 113 88 96 100 ; 85 106 102 99 99 99-6 1859-68 100 1869 91 96 98 94 89 109 100' 100 98 99-6 1860-69 101 1870 88 98 95 93 : 89 106 99 99 96 99-6 1861-70 100 1871 94 100 100 98 93 103 105 101 100 99-7 1862-71 100 1872. 101 101 104 102 127 114 108 115 109 99-2 1863-72 101 1873 106 109 106 107 141 103 106 114 111 97-4 1864-73 102 1874 105 103 105 104 116 92 96 100 102 95-8 1865-74 102 1875 93 108 100 100 101 8,8 92 93 96 93-3 1866-75 101 1876 92 108 98 99 90 85 95 91 95 86-7 1867-76 101 1877 100 101 103 101 84 85 94 89 94 90-2 1868-7* 100 1878 95 101 90 96 74 78 88 81 87 86-4 1869-78 99 1879 87 94 87 90 73 74 85 78 83 84-2 1870-79 97 1880 89 101 88 94 79 81 89 84 88 85-9 1871-80 96 1881 84 101 84 91 77 77 86: 80 85 85-0 1872-81 95 1882 84 104 76 89 79 73 85 80 84 84-9 1873-82 93 1883 1884 1885 82 103 77 89 76 70 84 77 82 83-1 1874-83 90 71 97 63 79 68 68. 81 73 76 83'3 1875-84 87 68 88 63 74 66 65 76 70 72 79-9 1876-85 1877-86 85 82 Table op Avbeage of Index NUMBEBS (PbE-CBNTAGI ss), 1867-77 = 100. Periods. Com, &c. Meat and Butter. Sugar, j Coffee, and Tea. Total 1 Food. Minerals Textiles. Sundry Materials. Total Materials. Grand Total. Silver.* 1818-27 109 90 78. 80 79 89 100 99 - J 88 151 127 HI 96 128 97 105 94 ^ 106 92 112 91 Ill 93 98t 98t 1828-37 95 122 87 99 93 82 93 90 93 98 1838-47 102 88 93 80 94 89 89 100 1848-57 95 100 92 94 117 103 105 99 100-9 1858-66 91 100 100 100 100 LOO 100 100 96-4 1867-77 too 79 - 88 74 73 84 78 82 84-1 1878-85 1885 82 68 63 74 r 66 65 76 70 72 79-9 99 97 100 104 103 102 100 99 1853-77 100 93 72 78 77 77 72 79 76 76-4 99 1848-52 80 * Sliver compared -with 60 • 84t ton. lb. ton. lb. Average s. & d. & - cwt. s. » ,j ton. £ - tun. „ - ton. „ - qtr. s. - gall. d. - ton. «. cwt. s. - lb. „ load. „ 54 4^1 37 25 331 108 lOi 53 45* 58} 51i 51 69i 117 23i 29i 76 58 11| 171 64 8 87 96 112 24 20| io| ?^ 49 38 36 2ll io| 19* 22 3 15| 48| 49 401 53 33 60 15 6i 66 67 54i 56 46 39 26 32i 117 10 59 50 63 55 52 74 125 23 24 28i 87 64 17} 69 8J 75 81 105 201 22 12i 9 6i 47 43 35 19 % 19| 23 9 7 16 45 45 39 50 30 60 12* 92 14 60 54 32f 35 29 30 201 23 75 7 52 44 56 47 45 68 111 isn iliJ 17- 60 39 6 12 42 4-2- 43 47 87 11| 16* 9 5| 4i 34| 35 29 12 16i 6; 9| ■} l> 8|1 64/ 15 38 ■) 30* J 30 39 22 \ 44 ]■ 6f -55 10* 48 1 45 ]■ 60' 62, 63 77 79 71 64 70 881 88 89 85 87 92 89' 59 62 J 65 64 60 59 57 83 57 75 72 62 63 73 ■ 82 63 73 1 50 J 55 95] 94J 76 77 78 73 55 60 75 72 81 61 1 87 1.89 61 }" -62 61 95 3,234 71'9 45 '33 » 20-48 25-60 7-81 18-05 2-45 39-95 17-31 19-74 20-74 18-42 3-06 9-92 16-02 4-16 3-07 1-71 54-83 35-59 3-80 2*05 3-34 25-38 2-09 9-50 1-75 1-16 0-94 4-53 87 '86 ■05 2-16 14-01 439-72 71-2 74-30 * 26-60 32-40 11 28-20 3-50 45-40 19-90 22-40 23-30 30-20 4*70 15-50 26-70 7-30 3-70 3 74-10 57-40 5-20 2-50t 5-30 41-60 3-80 lot 3 -sot 1-50 1-20 6 -sot 3-40 3-lOt 1-40 3 17-30t 617-40 100 Included with wheat. f Imports only. J Exports of Alkali. Oh APPENDIX. 319 (C.) Sundry Articles, Food and Raw Materials. (Prices marked thus* are from market quotations ; all other prices are from the Board of Trade Returns. Prices. Average, 1867-77. 1885. Index Nos., 1885. 1867-77 = 100. Value of Imports or Exports. 1885, Actual Mill. £ and dec. 1885, altered to the Level of 1867-77. Beer and ale, exported Bones, except whalebone Brimstone Bristles Caoutchouc - - . Cheese - - - . Cocoa Currants Cutch Cochineal ' - Drugs, bark, Peruvian ,; sulphate of quinine „ opium Dyewood, logwood, Jamaica Eggs Peathers, ornamental Pish, imported „ herrings, exported Guano Gutta-percha - - . Hair, goats' Hops Lard Oil, cocoa-nut „ rapeseed „ sperm ,, train - . - „ turpentine - Oil-seed cake Onions . . - Oranges Quicksilver - . - Saisins - - - Kags and paper-making f rags - materials - - [.esparto, &c. Kosiu ... Salt, exported . . - Saltpetre Seeds, clover and grass „ cotton „ rape Silk, knabs or husks, and waste Shellac - . - - Shumach Skins, goat . - - - „ seal Spelter Spices, cinnamon „ pepper - „ other sorts Spirits, brandy „ rum - „ other sorts Teeth, elephants', &c. Tobacco, unmanufactured Valonia Wine - Wood, staves „ mahogany Teast, dried brl. ton owt. lb. ewt. lb. d. ewt. s. ton £ ewt. „ oz. s. lb. „ ton £ doz. d. lb. ewt. brl. ton ewt. lb. ewt. s. d. - ton tun ton bush. s. bottle ewt. ton )j ewt. ton ewt. ton qtr. ewt. »j ton each ton lb. gall. ewt. lb. ton gall. load ton ewt. s. & d. s. d. & d. 61 articles, Total Average 79-07 6-42 6-73 37-08 9-82 2-93 6-65 24-92 21-55 13-34 10-90t 7-50* 20-64t 5-36* 8-92 48-96t 25-48 28-69 11-41 8-35 32-60 4-50 .')5-70 40-25 39 * 92-60 35-22 30-18 9-18 4 -431 9-12 11-41* 34-51 17-13 7-46 8-66 12-95 22-60 51-78 8-56 2-65 15-19 110 * 16-07 30-30 8-26 27-02 21-80* 24-61 5-20 6-25 7-05 2-16 1-69 38-12 8-27 18-30 6-97 8-26 9-24 2-35 75-34 5-92 5-09 33-92 11 2-22 8-43 25-85 21-42 6 6-83 3-25* 12-85 4-87* 8-42 39-78 26-24 24-55 9-70 6-45 15-91 3-75 36-88 29-78 25-75* 47-62 26-52 25-16 7-18 2-78 6-80 6 * 32-68 13-16 5-98 4-83 14-59 16-82 46-67 6-85 1-62 12-73 73 * 14-61 22-29 15-84 29-12 14 * 8-82 7-35 5-29 8-93 1-59 1-82 50-18 7-92 15-77 7-01 4-32 8-70 2-79 95 92 76 92 112 76 127 104 100 45 63 43 62 91 94 81 103 86 85 77 49 84 66 74 66 51 •75 83 78 63 75 58 95 77 80 56 113 74 90 80 61 84 66 91 73 192 108 64 36 141 84 127 74 108 132 96 86 101 52 94 119 5175 84-8 1-65 0-44 •0-18 0-42 1-98 4-07 0-82 1-46 0-56 0-09 0-87 9 0-46 0-53 2-93 1-.50 2 2-02 0-25 0-35 0-95 1 1-61 0-28 0-37 0-08 0-45 0-39 2-03 0-49 1-48 0-33 0-97 0-47 1-79 0-32 0-67 0-27 0-74 1-85 0-88 0-68 0-38 16 53 46 03 85 0-06 0-97 0-45 1-24 0-55 0-35 0-50 3-85 0-47 5-13 0-54 0-49 0-82 59-51 85-7 1-74 0-48 0-24 0-46 1-77 5-35 0-65 1-40 0-56 0-20 1-38 ? 0-74 0-58 3-11 1-85 1-94 2-35 0-29 0-45 1-94 1-19 2-15 0-37 0-56 0-16 0-60 0-47 2-60 0-78 1-97 0-62 1-02 0-61 2-24 0-57 0-60 0-36 0-82 2-31 1-44 0-81 0-57 0-18 0-73 0-17 0-69 0-54 0-98 0-74 0-32 0-38 4-01 0-55 5-08 1-04 0-52 0-69 69-44 100 f Average of seven years, 1871-77 only. o 24358. T t 320 BOYAL COMMISSION ON GOLD AND SILVER: (D.) Mancfactceed and Partly Manupactubed Articles Exported according to Board op Trade Returns. Prices. Average, 1867-77. 1885. Index Nos., 1885. 1867-77 = 100. Values of Exports. 1885, Actual Mill £ and dec. 1885, altered to the Level of 1867-77. Alkali - - - - cwt. s. Arms, fire-arms - - - - each „ „ gunpowder - - lb. d. Bags, empty - - - - doz. s. Bleaching materials - - cwt. „ Books, printed - - - „ ^ Cement - - - - „ s. Candles - - - - doz. lbs. „ Cordage and twine ... cwt. „ Cotton yarn - - lb. d. „ piece goods, plain - - yard „ „ „ printed - „ „ „ stockings and socks - - doz. prs. s. „ thread for sewing - - lb. d. Glass, plate - - sq. foot s. „ flint - - - - cwt. „ „ common bottles - - - „ „ „ other sorts - - - „ „ Hats of all sorts - - doz. „ Leather, boots and shoes . - - doz. prs. „ Linen, linen yam - lb. d. ,, jute yarn - - „ „ „ manufactures, white or plain - yard „ „ ,, printed „ „ sail-cloth „ „ „ „ thread'for sewing - lb. „ „ jute manufactures yard d. Metals, iron, bar, angle, bolt, and rod ton & „ „ railroad - - .. ,. „ „ wire - - - „ „ „ ., sheets and plates - - „ „ „ galvanised - „ „ „ „ hoops - „ „ ,, ,, tinned plates - „ „ „ „ cast or wrought - - >, „ „ „ steel, unwronght - - „ „ „ „ manufactures of steel „ „ „ copper, yellow metal - cwt. „ „ „ of other sorts - - ,> » „ brass of all sorts - - - ton „ „ lead, pig, sheet, and pipe - - ,> „ „ zinc, wrought and un\^•rought „ ,, Oil and floor cloth - - sq. yard d. Paper - ... cwt. & Silk piece goods ... yard ». Soap - ... cwt. „ Woollen and worsted yarn - - lb. d. „ cloths, &c. . - yard „ „ flannels, &c. „ „ stuffis, &c. - - „ „ „ carpets, &c. - - „ 51 articles, Total Average 9-25 30-46 6-03 7-70 9-78* 11-14 2 •59 8 -22 56 -54 17 •46 3 40 4 77 6 81 41 •28 2 36 55 14 10 29 28 71 30 03 63 26 15 93 3 85 7- 40 8- 31 13- 74 29- 80 3- 69 9-27 9-46 18^89 13^66 22-93 10^58 25-91 16-09 33-59 63-27 3-70 4-56 5-11 21-31 21-72 15-40* 2-94 3-52 26-12 35-67 38-32 18-03 12-61 36-62 5-87 29-92 5-98 4-37 6-73 9-64 2 -20 6 -14 43 '31 11 58 2 33 3 47 6 37 74 1 27 42 51 9 57 16 65 21 34 58 09 14 26 2 13 6 35 6- 87 10 83 30- 63 2- 13 6-13 5-47 12-51 8-13 13-41 6-69 14-84 11-53 16-99 31-43 2-32 2-92 3-96 12-25 13-28 13-03 1-95 3 72 23 50 24 19 40 23 13 08 9 35 25 74 68 98 99 57 69 87 84 75 76 66 68 73 88 91 54 77 93 58 71 92 89 55 86 83 79 103 58 66 57 66 60 59 63 57 72 51 49 63 64 77 58 61 85 66 106t 90 68 105t 7a 74 70 3,751 73-6 1-96 0-38 0-32 C-78 0-51 1-14 0-8. 0-20 0-38 11-87 30-57 17-71 0-52 2-37 0-25 0-28 0-35 0-09 1-11 1-63 0-99 0-27 3-65 0-21 0-18 0-34 1-90 1-62 3-90 0-69 0-91 1-76 0-55 4-43 4-01 1-03 0-41 0-97 1-23 0-36 0-47 0-10 0-61 1-43 1-12 0-47 4-38 7-70 0-94 7-74 1-19 128-79 70-5 3 -11 •39 -32 1 -37 -74 1 •31 •96 -27 •50 18 44 •96 24-53 •59 2 60 46 37 38 13 1 56 1 77 1 11 49 4 24 25 23 33 3 28 2 43 6- 84 l- 03 1- 52 2- 98 0- 87 7- 77 5- 57 2- 05 0- 83 1- 54 1- 92 0- 47 0- 81 0- 16 0-72 2-14 1-06 0-52 6-44 7-33 1-31 10-46 1-70 182-72 100 * Average of 1871-77 only. t Higher average, probably on account of changes in the classification ; prices have certainly fallen. APPENDIX. 321 (E.) Summary of Eesults, The fonowing statement gives the result of the three tables (B, C, and D). As regards the value of sundry small articles^ and of manufactured goods, the home pro- duction of the former, and the home consumption of the latter has not been included, as no sufficient data are available. The sum of 80,000,OOOZ. has, however, been added for beer, spirits, and other articles, which are presumed to have fallen on the average only to a moderate extent, say 5 per cent., and it may fairly be assumed that any articles not comprised in these lists have, on the average, followed very much the same course as those given. It will be seen that the average decline of all the 157 descriptions of commodities according to index numbers! s 22^ per cent, as compared with the average of 1867-77 ; but allowing for quantities according to the importance of each article, it amounts to 26 per cent., which is only 2 per cent, less than that of the 45 principal commodities treated in the general tables. According to Index Nos. According to Quantities. Total Index Nos., 1885. Average. 1867-77 = 100. Value on the Basis of the Average Prices of 1867-77, Mill. £ and dec. Value, 1885. Mill. £ and dec. Ratio, 1885. 1867-77 = , 100. 45 principal articles 61 sundry articles - - - Beer, spirits, &c. - - . 51 manufactured and partly manufactured articles. 3,234 5,175 3,751 71-9 84-8 73-6 617-4 69-4 84-2 182-7 439-7 .59-5 80 128-8 71-2 85-7 95- 70-5 157 articles .... 12,160 77-5 953-7 708 74-2 Average' decline in 1885 as compared with 1867-77. — 22-5 7„ ■ — — 25-8 % The index number for the 45 principal commodities in 1886 is only 69 (1867-77 =: 100), and the ratio according to quantities only 68-1. The index number for silver is 74" 6, or 26 ' 4 per cent, below the former normal point. Taking all the above 157 articles together and allowing for quantities the fall in 1886 as compared with 1867-77 will amount to- 29 per cent. Tt 2 322 ROYAL COMMISSION ON GOLD AND SILVER : APPENDIX V. Paper's put in by Mr. Barbour. (A.) See Question 1136. The silver remittances from treasuries in the plains to Simla and Kasauli (a sub-treasury of Simla) during the last 25 years have been as follows : — Rs. 1861-62 1862-63 1863-64 1864-65 1865-66 1866-67 1867-68 1868-69 1869-70 1870-71 1871-72 1872-73 1873-74 1874-75, 1875-76 1876-77 1877-78 1878-79 1879-80 1880-81 1881-82 1882-83 1883-84 1884-85 1885-86 Total - 12,10,000 - 18,34,500 - 20,70,000 . 26,65,000 - 25,04,000 - 16,88,400 - 27,35,500 - 23,82,000 - 21,77,000 - 24,15,950 - 19,75,200 - 22,62,000 - 19,67,000 - 19,12,000 - 27,97,000 - 24,72,000 36,23,000 - 44,10,000 - 37,90,000 - 32,93,000 - 32,00,100 32,88,200 - 41,15,000 - 31,48,000 ■ 24,68,000 ■ 6,64,02,860 The amount of silver brought to Simla, otherwise than in remittances on account of Government, may be neg- lected. European and native bankers and traders replenish their resources when necessary by currency notes, which the Simla Treasury is always prepared to cash. The amount of silver brought by visitors is insignificant. Remittances of coin to the plains are never made, either by Government, or bankers, or merchants. Remittances are made either by currency notes or by treasury bills on Bombay, Calcutta, Umballa, Lahore, and Delhi, which the treasury is always prepared to grant. The currency notes supplied to the Simla Treasury during the last three years have been — Rs. 1883-84 .... 8,3t,000 1884-85 - . - 13,45,000 1885-86 .... 15,41,000 The treasury bills issued by the Simla Treasury during the last three years have been — Rs. 1883-84 . - - 7,80,700 1884-85 ... - 14,75,400 1885-86 .... 19,69,500 The aggregate of these notes and bills represent remit- tances on account of banking, trading, &c. made to the plains. A portion of the silver sent to Simla by Government eventually returns to the plains. The Simla market is supplied with cattle, grain, and miscellaneous supplies largely from the plains. A large portion of these supplies is brought by itinerant dealers, who take back cash with them for fresh purchases in the villages where currency notes would not be accepted. I have not been able to pro- cure any satisfactory information from the Simla octroi returns, as it is impossible to make any accurate distribu- tion of the amount of business done by large dealers, who would not remit cash, and by itinerant traders with small capital, who would take back cash. Most of the grain supply of Simla is brought up by zamindars from Ludhiana and Ferozepore, who take back coin. The retail grain dealers are mostly Hoshiarpore and Kangra men, who come to Simla for the season, and are believed to take back their profits in coin. The cost of carriage of supplies is also considerable, and nearly all of it is taken back in cash. So are the savings of carpenters, masons, and domestic ser. vants from the plains. Looking to the class of people who take back coin, and to the fact that it is certainly not taken in large quantities at a time, I do not think that it can exceed one third of the amount sent to Simla by Govern- ment, or about 11 lakhs yearly. Applying this to the results of the past six years, it may be taken that the pre- sent annual absorption of silver by the 1880--81 - 3293000 ^^^ population is about 22,00,000 a 1881-82 - 3?!oo!ooo year. This result is the more curious 1S8M1 " iiffi'"™ when it is considered how sparse the 1884-85 ' siMfiW ^'^^ population is, and that the Thibet 1886-86 24!e8'ooo traders ordinarily take back grain and 3)19612000 '^°* silver. 1 think that the hill popu. ' — lation is acquiring wealth rapidly. It 66,04000 is certain that many of the hill Rajas, 6)1,30,08,000 notably those of Rampore, Busahir, and Bilaspore, have accumulated large 21,68,000 stores of silver; and it cannot have escaped observation how the fact of growing wealth is reflected in the amount of silver and gold ornaments now worn by hill women. It is nearly 10 years since I first came to Simla, and the change in this respect in that period is sufficiently striking. (Signed) E. J. Sinkinson, Simla, Accountant General, Punjab. 2nd October 1886. (B.) See Question 1145. Letter on the subject qp thb- Hoard of the Maharajah of Bdrdwan. Bun Abash, Burdwan, My Dear , 16th September 1886. In reply to your letter of day before yesterday's date, I have the pleasur&to send the following information that I have been able to procure. It is vei-y difficult to answer all the questions satisfactorily. Through fear that the Marhattas might take away what- ever they found in the house, and that the householders would have nothing to fall back upon, it was thought necessary in those days to keep a large amount of savings under ground for the time of need. Besides, in the time of the Mogul Emperors, the country was not so safe as it is now-a.days under the British rule, and there was no other way of investment than buying landed property, pre- cious metals, jewels, &e. So they used to have large sums in cash, and also because the people of those days did not have the same confidence in the Government of the country as they have now ; they preferred keeping their savings in hard cash within easy reach, and in the shape of precioiis stones and metals. Ladies of the Hindoo household were, as a rule, unedu. cated in those days (and the majority of them are still no better), and for their benefit it was not thought proper to invest in securities, as when there was no male member in a family, it would be hard for the uneducated ladies to deal with the securities or other investments which might necessitate their appearing in court and undergoing some expenses to get their just dues from the court, in addition to the degradation they would have to submit to. Another reason why people (especially poorer people, who cannot save more than 100 or 200 rupees, and have some ornaments) like to leave for their wives and families behind them hard cash and ornaments, is that they cannot afford to have iron safes or strong boxes to keep their money in in the shape of currency and promissory notes. They generally put their things within brass lotas or Bahugunas, and then bury them under ground somewhere in the room they sleep in ; as a rule they prefer the ground below their beds for that purpose. With reference to the description of the several treasure houses in the estate, their dimension, and their contents. There are three rooms which are known by the name of Toshakhana — (a.) One large room measuring about 48 feet in length, 14' 6" in breadth, and 13' 9" in height, where gold and silver ornaments and ornaments set with precious stones are kept. These articles are kept in almirahs and boxes of all descriptions, and also some gold plates and cups, Thalees and Katorahs as well as washing bowls, jugs, &c. APPENDIX. 323 (h. There is another room where silver Thalees and Katoraks, Rakabees, aterdan, golappas, nemokdan, glass cups,* gharras, lotas, washing sets and all other things for ordinary use are kept, the room measuring L-17-9, B.15.6, H-13-9. ~ ^ (o.) There is a third room where silver plates and dishes, forks, spoons, silver-handled table knives, tea sets, &c., are kept (English dinner and breakfast sets), measur- ing about L-15, B-10-6, H-13-9. The rooms mai'ked (a), (6) are under lock, and the doors of the rooms having been bricked up, and^we having no list to show what they contain, I cannot give an idea as to the value of the contents. Of the contents of the latter room we have made an inventory, and they would come up to about 80,695 tolahs of silver, valued at Rs. 80,696. There are four other rooms : — (a.) One of these has been lately fitted up since the estate came under the court, and contains gold and silver ornaments, and ornaments set with precious stones, gold ornaments and throne, &c., would come up to about 10, 142 tolahs valued at Rs. 1,62,278 (at the rate of 16 rupees per tolah). The room is about L-6-6, B-12.9, H-12-3. (b.) The second and the third rooms (known as the under roker room or reserve treasury. One for the zamiu'dari property and another for Debutter) are the treasury where current collection of the estate is kept as well as the Government securities and debentures (the size of the zaraindari treasury is L-22-9, B-12-9, H-12-3, and that of the Debutter treasury is L-6-9, B.16, H-12-3). (c.) The fourth room measures about L-22-6, B-15, H-12-3, where there are two large sized vaults prepared for hoarding the current silver coin, and since the year (1267, B.C.) some money was from time to time put in and taken out by the Maharajah Mahtab Chund Bahadoor, for the expenses of emergent and extra- ordinary nature, such as the late Maharajah Aftab Chund Bahadoor's marriage, Lala Bun Behari Kapur's marriage, and buying landed properties. When he died about one lakh was left in one of the vaults. In the time of Maharajah Aftab Chund Bahadoor that sum was taken out and placed at the reserve treasury, so there is no money in them now. There is one small vault in the room supposed to have contained some 9,990 or 10,000 gold mohurs of all descriptions, one kind known as Joypoori, another Moorshidabadi, and sovereigns worth in all about Rs. 1,60,000. The accumulation of these coins was begun by the Mahafajah Tage Chund Bahadoor, and continued up to thi time of the Maharajah Mahtab Chund, who made this vault and kept them in it ; this room has also been locked, and the door is bricked up ; this room is known as the Kona Hawze. All these above treasure rooms are situated in the apartment kno^vn as " Raj Mohal," at present occupied by the Maha- ranee. (d.) There is one toshakhana situated in another apart- ment called " Rung Mohal," where ornaments belong- ing to different gods of the family are kept, and silver Thalees, sapaias. Sfc, for the religious purpose, the value jof which is not known to us, as it is one of those rooms that have been locked up and sealed, (e.) Bara Hawze, or the room which contains several vaults, IS situated in the apartment called Jattrakhanda, measuring about L. 32, B. 25, H. 12-9. As this room is locked up and its doors are bricked up, and I do not remember how many vaults there are in the room, and how much money in silver they contain, I am sorry \ cannot give you any information on these heads. The amount known to have been drawn from these ■vaults during the times of the Maharajahs Mahtab Chund and Aftab'Chund Bahadoors is about Rs. 23,00,000 and -out of this sum about Rs. 10,75,000 has been invested in landed properties, Rs. 6,00,000 in Government securities, and Rs. 200,000 in Himalayan Railway Debentures. It is believed that these silver coins were hoarded by the Maharajah Tej Chund Bahadoor and his wife Maharanee Komul Coomari, Thacoranee, after him year after year, beginning from (121 1, Bengali era) that is from the time when the puttoni system was first introduced. According to the custom of the Burdwan Raj family the custody of these valuables was left to the Maharanee for the time being, but the vaults were never opened except in the presence of the Maharajah. When any sum was drawn out, only some relations and trustworthy servants were admitted into the room and vault. Treasurers and Dewans used to be present outside the room or apartment, where the sum drawn was sent out (female guards being placed in the passage) for the pur- pose of weighing, counting, and bagging it before it was sent to the Mint. A part of the above-mentioned gold coins and all the silver coins bear as date the 19th year of Shaha Alum's reign. They were all coined at Moorshedabad. I hope, in conclusion, that though I have not followed the question in due order, I have given exhaustive answers to them, all which I hope you vwll find useful, in spite of the rambling way in which they have been put. Yours sincerely. (C.) See Question 1147. Extract prom a Report of 5th October 1886 BY Pandit Salig Ram, op the Postal Depart- ment. A very remarkable case of this gold-hunggr came to my notice in the course of my inquiries in ^ ^j, # # * district, and I think I may safely mention it here, as there seems to be no fear of this memorandum being ever j)ub- lished. I was told on the most reliable authority that His Highness the # * - # of ^ ^ # # * has set apart a very large sum of money (in silver) for conversion into gold, and that every month between 4i t and 45 thousand rupees' worth of gold mohurs are purchased by agents in Calcutta, Bombay, and certain other places, and sent to the # # # # That this has been going on for some years. A certain proportion of this gold comes by post. But parcels are very seldom addressed to the ^ ^ ^ ^ or directed to # ^j, ^ # ^ . The * * # # treasurer is a native banker of ^jj, ^ ^j: ^ ^^ #, and the parcels usually come to his address sA ^ * * * *• The gold received is taken to * * j^: *, and there deposited in a strong treasure vault or room specially set apart for it. If inquiries are made at ^ * * *, the above statement will probably be contradicted, but I have not the least doubt of its correctness. Who can say that the ^ ^ ,jj; ^ example is not being followed by rich men all over the country ? If inquiry wei-e made, it will most probably be found that this is really the case ; but the mischief which such an inquiry will cause, by exciting distrust and suspicion of the real intentions of the Govern- ment, will be serious, and should not, I think, be risked without urgent reasons, and then only with great caution . (D.) See Question 1150. Statement showing the Amount of Native Coins and Ornaments tendered for coinage in the Bom- bay Mint from 1854-65. ♦Silver Tessels shaped like ordinary drinking glasses appear to be -raeant. Years. Native Coins. Ornaments. Total. Rs. Rs. Rs. 1854-55 15,81,000 4,69,000 30,50,000 18.'i5-56 10,58,000 2,31,000 12,89,000 1856-57 3,13,000 2,23,000 5,36,000 1867-58 2,02,000 50,000 2,52,000 1858-59 4,48,000 15,000 4,63,000 1859-60 2,25,000 2,24,000 4,49,000 1860-61 1,27,000 2,49,000 3,76,000 1861-62 1,53,000 12,22,000 13,75,000 1862-63 49,000 47,000 96,000 1863-64 37,000 1,63,000 2,00,000 1864-65 2,000 — 2,000 1865-66 74,000 — " 74,000 1866-67 3,36,000 — 3,36,000 1867-68 19,75,000 1,53,000 21,28,000 1868-69 19,23,000 1,65,000 20,88,000 1869-70 20,18,000 1,76,000 21,94,000 1870-71 20,74,000 72,000 21,46,000 1871-72 10,88,000 12,50,000 23,38,000 1872-73 15,73,000 28,80,000 44,53,000 1873-74 23,96,000 12,17,000 36,13,000 1874-75 7,90,000 3,63,000 11,53,000 1875-76 7,10,000 76,000 7,85,000 1876-77 20,000 8,52,000 8,72,000 1877-78 — 1,24,00,000 1,24,00,000 1878-79 67.00,000 1,16,00,000 1,83,00,000 1879-80 45,00,000 92,00,000 1,37,00.000 1880-81 25,50,000 10,00,000 35,50|000 1881-82 1,00,000 4,00,000 5,00,000 1882-83 15,50,000 50,000 16,00,000 1883-84 1,25,000 50,000 1,7.5,000 1884-85 16,25,000 18,75,000 35,00,000 1885-86 2,00,000 3,25,000 5,25,000 324 KOYAL COMMISSION ON GOLD AND SILVER : (E.) /See Quostion 1162. Pay of Postal Runnees in India from 1855 to 1885. Names of Lines. 1855. 1860. 1865. 1870. 1875. 1880. 1885. 1886. Bengal. Es. a. Es. a. Es. a. Es. a. E&. a. Es n. Es. a. Es. a. Balasore to Cuttaek 4 4 3 5 5 {I 5 5 3 4 4 " V / 8 5 5 6 Dacca to Cbittagong Cuttaek to Augool (or Sum- balpur). I'urulia (Manbhoom) to Chyebassa. Gya to Nowada Mozufferpur to Purneah - Itivnchi to Palamow 4 5 4 3 2 4 3 4 4 3 4 4 5 4 4 3 8 4 5 5 4 4 3 8 4 5 5 4 4 3 8 4 6 5 4 8 5 5 6 5 4 8 5 5 OuDH AND North- Western Provinces. Lucknow to Sitapur Bndaon to Bareilly Etawah to Manipuri Moradabad to Bijnur - 4 3 4 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 •4 5 4 4 4 4 4 4 4 4 4 0, Punjab. Delhi (to all places) .lullundur to Hoshiarpur Kohat to Bunnoo or Edward- esabad. Dehra Ghazi Khan to Dehra Ismail Khan. 4 4 4 8 4 8 4 4 4 8 4 4 4 4 8 4 5 4 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 » 5 ft 5 5 SiND. Hyderabad to Mohad Khans Tando. Jernick to Tatta 5 5 5 7 4 8 7 6 7 6 7 7 7 7 7 Bombay. Eatnagiri to Vingorla Hubli to Harrihar Dhulia to Shirpur 5 5 5 4 5 6 6 6 8 8 8 7 7 7 7 7 7 6 7 6 Central Provinces. Jubbulpur to Mandla 5 — 5 — 5 5 5 8 5 8 Madras. Calicut to Telliohery Vizagapatam to Berhampur Ganjam. 4 4 3 12 5 5 7 6 r 7 1. 6 6 7 6 6 7 6 6 7 6 6 Mysore. Bangalore to Mysore 4 4 4 5 6 6 — Moiety pay. 2 4 Average (annas) - 4-05 4-56 4-95 5-17 5'14 5' 24 5-42 5-38 (Signed) W. ALPIN, OfficiWing Comptroller, Post Office. UMBERS ,)and the Price of Silver. Index 184-5-50 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 Price OF Silver 3600 3500 3400 3300 8200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 G2?per(r; Gl 60 59 58 57 56 55 54 53 52 51 50 is 4-7 46 ^'" k \ \ \ \ R \ \ \ \ \ / 1 \ f \ \ V \ 1 -\ \ \ .^ -^ \ \ 1 1 1 \ \ It / s \ \ ^ \ \ > \ '■ ■' A \ ' -^, > /\ v \ yV 1 V' > \ \ \ \ / V > \ \ \ \ k \ \ \ \ \ V \cono ndsL so c/ ^the gola I fh/> vrvEnglcutd rise and. fall together. APPENDIX. 325 APPENDIX VI. MEMOEAsptiM by Professor Roberts Austen, F.R.S., Chemist to the Royal Mint, on the Cost of Produclion of Silvei'. There is some conflict of opinion as to the exact in- fluence on the price of silver of the actual outlay involved in obtaining it from the earth, in the metallurgical opera- tions incidental to its extraction from the ore, and in placing it upon the market. M. Cernuschi indeed says "that the cost of production " does not determine the value of gold and silver ; that " value is determined by two elements — the employment and the quantity." On the other hand, the late Mr. Bage- hot* maintains ''that the value of gold and silver is deter- " mined by the cost of production, jtist like that of all " other things ; that in their case, as in all other cases, " what is more cheaply produced than usual would be " more plentifully produced than usual, and that the pur- " chasing power in consequence will be no doubt less." He elsewhere observes,t in discussing the Report of the Select Committee on the Depreciation of Silver (1876), that the price at which silver will settle down will in part '' be determined by the cost in the least good mine " which pays to keep at work." The difficulties of an inquiry as to the actual cost of production are considerable, and arise from — (1.) Varying conditions in different localities. (2.) Irregularity and incompleteness of returns, and the indifference or reluctance of proprietors to publish ful statements as to cost. It is, moreover, very difficult to estimate the amount that should be added to the actual cost of mining and milling in consideration of the price paid for and capital invested in mining property. The question as to whether the search for silver and its actual production does or does not afford a remunerative return for the capital expended on it has not been con- sidered here. An attempt has simply been made to point out what are the several metallurgical processes by which silver is extracted, to collect such statements as are pub- lished dealing with cost of production, and to state the results for each of the principal processes ; it being neces- sarily assumed that the data so collected admit of applica- tion to the total amounts of silver estimated to be produced by each of the respective processes. Sufficient allowance has, it is believed, been made for the cost of mining and transport. The uncertainty attending any generalization as to the precious metals is indicated by the fact that, in 1875, the Director of the United States Mint, after a most careful examination of all the conditions likely to arise, gave it as his opinion that the " total production of all the mines on " the Comstock may safely be estimated at not less than " 50,000,000 dollars per annum, about 45 per cent, of " which will be gold." In 1884, however, when I visited the district, the mining and milling works were suspended. In the report to which reference has just been made the late Dr. Linderman observed of the mining and metallurgy of California, "The business is one of uncertainty and " hazard, and, taking one year with another, the expenses " no doubt equal, if they do not exceed, the production." In previous official investigations but little attention appears to have been paid to the influence of the cost of production on the market price of silver ; thus, the evi- dence upon this point given before the Select Committee on the Depreciation of Silver (1876) is practically limited to the statement of Mr. Pixley's beliefj that silver is got out in certain mines in Mexico "at about Is. 6d. an ounce," and to the expression of Mr. Bagehot's opinion, already quoted, as to the price being regulated by the cost of production under the most difficult circumstances.^ The following table gives the total production of silver in the world for 1883, that being the latest year for which complete returns are available : — Table I. United States of America - Mexico .... Germany - . - . Austria ... Spain .... Argentine Republic - - - Colombia - . . - Bolivia . . . . Chile . . . . Other countries producing less than 300,000 ounces - Total - Ounces. 35,737,908 22,872,732 7,417,642 1,568,562 2,395,481 325,045 587,873 12,376,860 4,119,125 953,505 88,354,733 Table II. gives the estimated amount of the silver ex- tracted by each of the principal methods. The approxi- mate cost of the mining and metallurgical operations involved will be given subsequently. Table II. Section. Method by which the Silver was obtained. Weight in .Ounces. I. II. III. IV. Eeiining of native gold > Desilverization o£ lead - Desilverization of copper and cupri- ferous products. Treatment of silver ores ♦ Total 608,000 30,726,000 7,200,000 49,920,733 88,354,733 * " Economist," March 4, 1876. t "Economist," July IS, 1876. . t Report from Select Committee on Depreciation of ■question 213 ; see also question 230. § Ibid., question 1436. The metallurgical processes involved in the extraction of silver from its ores, although very complex, neverthe- less admit of being classified in the four sections shown in the preceding table. The amounts into which the whole annual production is divided, as given in the third column, can only claim to be rough approximations. The reasons for the adoption of the figures given in this column will now be considered in some detail. Section I. Such silver as forms a natural alloy with gold being extracted in conjunction with that metal, and the deposit in which both metals occur being worked for gold, the extraction of the silver entails, practically, no expense over and above that which is involved in the extraction of the gold, as the silver is obtained incidentally. It would usually be necessary to purify the gold to convert it into ingots of the standard fineness met with in the market, and the cost of such parting and refining is the utmost metallurgical cost involved in the production of the silver. As this amount has to be distributed between the silver and the gold it is safe to assert that the extraction of one ounce of silver contained in gold does not exceed the cost of parting. The average official charges of the American mints for part- ing and refining silver and gold of the average standard of native gold is about 24d per ounce. The quantity of silver present in native gold varies considerably ; but it has been estimated by King * that the mean fineness of the native gold of the United States is 876 parts in 1,000, and this may be taken as the average fineness for native gold gene- rally. The alloying element is, in nearly every instance, silver, with but small quantities of copper and other metals, and these may be disregarded. Every 1,000 parts of native gold yield, therefore, 124 parts of silver. The total quantity of gold produced throughout the world in 1883 is estimated at 4,548,550 ounces,t of which 1,451,250, or nearly one-third, were produced in the United States. Nine per cent, was J derived from the refining of lead. Allowing an additional 1 per cent, to have been derived from cupriferous and other materials treated otherwise Silver, 1876, • Bpwie--Practical Treatise on Hydraulic Mining, p. 291. 1 M?"e™'l Resources of the United States for 188S-81, p. 320 t Ibid., p. 413, 326 EOYAL COMMISSION ON GOLD AND SILVER : than by lead, but by processes not involving the use of mercury, there remains 90 per cent, as native gold* in one form or another. Assuming this to have been originally of the fineness above stated, it would have yielded as a bye-product 161,960 ounces of silver ; calculating the total production of gold in the world on the same basis, the amount of silver obtained from it would be 507,618 Section II. A large proportion of the silver produced in the world is derived from association with lead ores, from which it is extracted by suitable treatment. Certain argentiferous materials are also melted with lead ores, the precious metal being in all cases collected in the lead so produced. The reduction of the silver occurring in lead ores will be effected without any extra' cost beyond that requisite for the lead itself, provided that the state in which the silver is present does not necessitate any modification of the treatment demanded for the extraction of the lead alone, and this also holds good with respect to such silver ores as are added to the furnace charge, except that in this case it may be necessary to use more flux, and, conse- quently, more fuel and labour will be required. With these exceptions, the sole cost of the extraction of the silver from these argentiferous" ores is connected with its separa- tion from the lead produced. This is done either by crystallismg out lead poor in silver from a richer alloy — the Patfinson process — or by the use of zinc — ^the Parkes process — or by these processes jointly. The cost of re- fining and desilverising the ton of argentiferous lead at Chicago in 1883 was, in the case of the Horn Silver Mining Company's lead, about 8 dollars per ton.f If, therefore, the lead be the main object of the smelting, and the silver merely a valuable bye-product, the amount of silver which must necessarily be present in the lead to pay for the cost of extraction must be of the value above stated, as in the case of the galena produced in the United Kingdom, which averages about 8'5 oz. silver per ton of lead. J When, however, as is usually- the case, the production of lead is not the main, but rather a secondary, consideration, the above data are not applicable. This is more especially true with regard to those countries where the mines are situated far from the market or from deposits of fuel, with inefficient means of transport, and where labour and other expenses are high. Lead, in countries such as these, would not, by itself, pay to produce, and consequently ceases to be the main object of the mining and smelting operations, for the lead becomes the bye-product which serves primarily as a vehicle for the collection of the precious metals in the ores. These considerations are specially applicable as regards the American continent. At the date of publication of the " Mineral Resources of the United States for 1883-84," of the total quantity of argentiferous lead which had been desilverised in 1884, 119,965 tons, returns had been received which related to 117,608 tons. From this quantity had been obtained 21,506,248 ounces of silver and 146,830 ounces of gold. A certain proportion of this was derived from silver ol'es worked by lead smelters, but it is estimated § that fully 19,000,000 ounces of silver and 125,000 ounces of gold were obtained from the lead ores produced in the Rocky Mountain states and territories. Owing to the small number of mines which are directly connected with smelting works, and to the want of published information as to cost, it is difficult to estimate the expense of mining and reducing these silver-lead ores, but in the report already referred to, two instances are given which would appear to be fairly typical. In the first ease, that of the Horn Silver Mining Company, Utah,|| the ore produced was comparatively rich, and the cost of production' was about 100 dollars per ton of argentiferous lead. The detailed cost was as follows :— Dollars. Cost of mining - 17-25 , , smelting - - 48-43 desilverizing - 7-95 „ freight - 18-00 91-63 It would probably be safer to take the cost of the ton of argentiferous lead at 100 dollars. From a comparison of such other statements as to cost of production as occur in these reports, it would appear * This includes all ores treated by mercury, t Mineral Resources of the United States for 1883-84, p. 417. t Kiniug and Mineral Statistics of the United Kicgdom f or 1889. p. 79. § p. 413 of the Report, H Ibid., p. 417. that the cost of mining and smelting the ton of ore did not, on the whole, differ greatly from that of the Horn Silver Company. The ore produced, is, however, frequently much poorer, and in the case of the Eureka Consolidated Mining Company* the average amount of lead n the ore is about 10 per cent. At this mine and works the total cost per ton of argentiferous lead is as follows : — Dollars. Cost of mining „ 61-00 )) smelting - . 138-20 desilverization and 3i freight - 59-37 Total 248 '57 Taking into consideration the poorness of the ore and the heavy cost for freight, it would appear that this expenditure of 250 dollars per ton is rarely exceeded. It would further seem fair to assume that the mean cost of extraction in the United States would be shown approximately by taking the mean ofthe costs at the two works ^ =176 dollars. The price of lead at Chicago in October last was 4' 10 dollars per cwt., 82 dollars per ton, while silver sold at 98 cents the ounce. The cost of working the ton of argentiferous lead being taken at the above mean, 175 dollars, it is possible to calculate the amount of silver the lead should contain in order to meet this cost, and it -will be found that each ton weight of argentiferous lead must contain 95 ounces of silver ; the gross value ■mil then be made up of — Dollars. Value of silver ,, „ lead Total 174-8 Thus, to admit of its being smelted, the ore should, on the mean, be of such a richness as to yield a lead contain- ing 95 ounces of silver. To 117,608 tons of refined lead there were, however, 21,505,248 ounces of silver and 146,830 ounces of gold, so that each ton of argentiferous lead produced in the United States contained nearly 183 ounces of silver and 1 J ounce of gold. Taking the relative weight of silver as 20 times that of gold — the present market value — the ton of argentiferous lead contained on the average over 200 ounces of silver. It need only have contained 95 ounces to cover the svorking expenses, so that, as regards argentiferous lead, the price of silver might have been less than half the market price and yet have entailed no loss on the working. The 4,000 tons of lead produced in Mexico, South America, and Australasia may be fairly considered as having been of the average richness of the lead produced in the United States, and the cost of production may, without prejudice to the conclusions arrived at, be assumed to be the same. The present cost of desilverizing the ton of rich lead at Freiberg amounts, as shown by results recently obtained,t to about 25s. per ton, or about \d. per ounce of silver pro- duced. Including the cost of refining, the expense of de- silverization would still be well below lid. Nearly the whole of the silver produced in Europe is, obtained from the smelting either of lead or of copper. Of the former metal the production is about 337,000 tons; and of the latter about 77,000 tons.J It is evident, there- fore, that the larger proportion of the silver produced must be due to the smelting of lead ores, and of such ores, &c. as are added to the lead smelting charge. With regard to the amount of silver produced in the treatment of copper ores, the quantity produced at Mansfeld,§ in Prussia, in 1884 from ores which yielded 12,774 tons of copper was 74,132 kilogrammes, about 186 ounces to the ton, and as the copper obtained at these works contains an unusually large proportion of silver, it is probable that the total quan- tity of silver found to be worth extracting from copper ores in Europe does not exceed twice the production of the Mansfeld works, say, 150,000 kilogrammes. Of this quan- tity probably some 10,000 kilogrammes were produced from copper ores treated in connexion with lead ores. The total quantity of silver produced in Europe amounted to about 388,000 kilogrammes. Subtracting from this the quantity estimated to be produced from copper ores by methods other than those connected with the use of lead, the quan- • p. 418 ofthe Report. ^ . „ t Jahrbuch fur das Berg-und Hiittenwesen in Konigreiche Sachsen aul das Jahr, 1886, pp. 133-146. „ , ,rr ± Von Ehrenwerth, Stahl und Eisen. Vol. VI., p. 7B2. § Zeitschrift fur das Berg-, Hiitten und Sahnenwesen im Preussiscb e n Staate, 1885, p. 190. AFPENDTX. 327 tity is obtained which is produced in the smelting of this latter metal, 238,000 kilogrammes. As to the relative cost of production in Europe and in the United States, it is evident that, owing to much cheaper labour, nearness to the market, and greater facilities for transport, the cost of production in Europe would be much less than it is in America, were it not that the mines, as a rule, are deeper and less rich. The lead ore produced in Europe is, as compared with that of the United States, comparatively poor in silver. In the United Kingdom the lead ores contain on the average about 8"5 ounces of silver to the ton of lead. In Spain* 331,164 tons of lead ore, of little value as regards silver, and 26,047 tons of argen- tiferous lead ore properly so called were produced. The quantity of silver contained in this latter may be estimated from the fact that the desilverization of 3,687 tons of lead save 4,102 kilogrammes of silver, about 36 ounces to the ton. Some rich ore is, however, exported. In Italyt 31,191 kilogrammes of silver were produced from the desilverization of 15,000 tons of argentiferous lead, about 67 ounces to the ton. As in these two countries only native ores are treated the results are typical of at least a portion of the lead ores of the Continent. In Germany and Austria the lead ores are usually comparatively rich in silver, but foreign ores are also imported, and as the compositions of these are not stated, the results of the treatment of the native ores are not directly obtainable. Thus, although the European lead ores aie poorer in silver than those of the United States, cheaper labour and transport, and greater facilities for smelting, render it pro- bable that while the cost of production may be considerably less than in the United States, it cannot well exceed it. The cost of production' of the ounce of silver obtained from the desilverization of lead ores is therefore about 2s., and the total amount of silver produced from the smelting of lead ores is about : — Ounces. United States - - 21,890,000 Europe- - - - 8,036,000 Elsewhere - - - 800,000 Total 30,726,000 Section III. Argentiferous Copper Ores. — The amount of silver present in copper ores is much less than in lead ores, and in the latter the precious metal is frequently the main object of the smelting, while in copper ores it is usually a valuable bye-product. The quantity of silver present in copper ores varies greatly, and no statistics relating to the average amount are obtainable. That the amount derived from this source is comparatively small is evidenced by the fact that the cost of extraction of the silver from copper is much greater than from lead, and the quantity of copper produced annually is relatively small. The greater cost of extraction is forcibly sho^Ti in the case of the Oker Works, Germany. J The copper produced at these works is, by a metallurgical process, divided into two approximately equal portions, one of which contains 21 ounces of silver to the ton of copper, and the other 53 ounces. The first portion does not pay to treat, while the latter does. The cost of extraction of the silver may be taken to lie between the two, possibly a mean, 37 ounces, or, at 4s. per ounce, 71- 8s. per ton of copper. This is, moreover, the cost per ton of copper at the Mans- feld Works § and by the electrolytic process the expense will probably be about the same. || Other methods of treat- iftent of argentiferous copper ores are more expensive, and the increased cost of labour, &c. in America and elsewhere would cause the mean cost of extraction to be higher than the above estimates. It is not probable, however, that it would be greater than 60 ounces, lOl. With regard to the richness in silver of the matenals treated the silver obtained at Mansfeld is, as already stated,'about 186 ounces per ton of copper ; at Oker the quantity present was 53 ounces, and "bottoms, which are worth desilverizing in other parts of the world, generally contain at least this amount. The mean amount of silver present in the ton of copper desilverized may be taken to be somewhere between the 50 and the 186 ounces m the cases mentioned, probably nearer the former than, the latter, and 100 ounces per ton may be taken as a maximum. The cost of extraction of the silver present m copper ores must, when these latter are treated together with lead ores. be but small, as the additional cost of smelting would hi so, as would also be the extra cost connected with the purification, &c. of the lead. The cost of the silver produced by wet methods is somewhat more diflScult to determine, but it is stated* that the cost of recovering the precious metals by the Claudet process is about 8d. per ton. The ores treated by this'process in the United Kingdom in 1885 containedf a little over two grains of gold and about three- quarters of an ounce of silver per ton of ore. Gold being of the value of about 2d. per grain, the cost of extraction of the three-quarters of an ounce of silver also present was about 4d., or at the rate of 5d. per ounce. The 328,000 ounces of silver obtained in this manner in Great Britain were mainly a bye-produot, costing about 5d. per ounce to produce. This is not true, however, as regards silver obtained by other methods, but if the cost of production of the ounce of silver obtained by wet processes generally be placed at Is., this is probably a high estimate. As regards the cost of desilverization of the copper, or of the " regulus," produced during the smelting of copper by the dry way, this has already been estimated at one-half the value of the silver produced, or about 2s. per ounce. Next, as to the quantity of copper desilverized. The total quantity of copper produced in 1885 amounted to about 222,000 tons, j Of this quantity, 14,880 tons were produced in Great Britain from ores which had been treated, with a view to desilverization, by the Claudet process, the quantity of silver obtained being 328,000 ounces. Allowing an equal quantity of silver and copper to have been produced elsewhere by this and other wet processes (giving a total of, say, 650,000 ounces), and placing the amount desilverized by lead at 10,000 tons of copper, containing 50 ounces of silver per ton (producing 500,000 ounces), there remain about 222,000-40,000, or 182,000 tons, as the quantity of copper produced by the ordinary dry smelting processes. Now, considering the comparative poorness in silver of copper ores as compared with lead ores, and the necessity for an average contents of 50 ounces of silver per ton of copper, as previously estimated, to pay for the extraction, it is safe to assume, without prejudice to the filial conclu- sions, that of this quantity not more than one-third was actually desilverized. Supposing this amount to have been of the average richness estimated (100 ounces of silver per ton of copper 182,000 giving g X 100 or about 6,060,000 ounces of silver), the silver produced from copper ores and the cost in accordance with the data above given will be as follows : — Annual Pro- duction of Silver. Cost per Ounce. From Copper oi-es desilverized by wet processes exclusively. Prom Copper ores desilverized by lead. From Copper ores desilverized during the ordinary smelting ol Copper. Ounces. 630,000 500,000 6,060,000 ) 1 2 Total 7,200,000 Mean 1 11 Section IV. Silver Ores. — These ores are of very varied composition, and when not treated in connexion with the smelting of lead or of copper are treated either by amalgamation or by wet methods. By far the greater quantity of the silver is obtained by the former of these, and as wet methods are, on the wTiole, not more expensive than amalgamation,§ they need not be separately considered. The quantity of silver thus produced is found by subtracting the silver obtained by the processes already considered from the total produc- tion, which will give 49,920,733 ounces. This amount is mainly produced on the American continent. The ores treated, are mostly true silver ores, but in some cases other metals are present in such quantities as, in conjiinction with a low yield of silver, to render their mining and metal- lurgical treatment possible, provided local conditions are favourable. The silver ores occurring in the State of Cali- fornia are both surface ores and ores obtained by deep mining. The cost of mining and milling the former is • Estadestica Minera de Espana, 1884, p. 38. tAnnalidi Agricoltura 1886, p. Ix. ii Precious Metals In the United States, 1884, p. 601. 6 Precious Metals in the United btates, 1883, p. im. II Fontaine: Electrolyse, p. 268. o 24358. ■ 1886, p. 74. » Precious Metals in the United States, 1883, p. 789. t Mineral Statistics of the United Kingdom for 1886, i Estimated by H. E. Merton & Co., London. § See Stetefeldt : Comparison of amalgamation with Eussell's lixivia- tion process. Precious Metals in the United States, 188S, p. 745. Uu 328 EOTAL COMMISSION ON GOLD AND SILVER: about 6^ dollars per ton.* A good example of the cost of deep mining is given in the case of the " Bonanza King "t Mine, which is situated near the highest peak of the Provi- dence Mountains. The mine is 520 feet deep, and the ore has to be hauled for a distance of two miles. The cost of mining, hauling, and milling the tonof ore was 25 '7 dollars, and it yielded silver to the value of 1 79 dollars. The value of the silver ore treated in California varies from 50 to 500 dollars per ton, a great portion yielding in the mill over 100 dollars per ton.J As a considerable proportion was pro- duced at a cost of only 6'5 dollars per ton, it is not, pro- bable that the mean cost of extraction exceeded that at the " Bonanza King," say, 25 dollars per ton. . Comparing these results with the numerous other in- stances mentioned throughout the annual reports of the Director of the United States Mint on the Production of the Precious Metals, 1883 and 1884, it would appear to be reasonable to accept these statements as giving appifoxi- mately the average richness of the ore Ireated, and the cost of mining and milling. The cost of the ounce of silver so produced was therefore about Is., corresponding to an expenditure of 25 dollars to obtain 100 dollars worth of silver. In Mexico and South America cheaper labour tends to compensate for less efficient methods. Those in most general use are the Patio and Cazo processes. The cost of treatment by the Patio process has been variously esti- mated § at from 16 to 27 dollars per ton of ore, and by the Cazo at about 7 or 10|| dollars. Adding to this the cost of mining, say, 7 dollars, the total cost per ton varies from about 14 to 35 dollars. The ore treated contains from a few ounces to several thousand ounces, per ton, and it seems probable that 25 dollars per ton may be taken to be the average expenses, and, from a comparison of various estin]ates,ir it seems probable that 70 dollars for yield, or somewhat less than the average of the United States, is not far from the truth. The final conclusions as to the actual cost of production by each of the principal methods of extracting silver would, therefore, appear to be as follows, the figures relating to the amounts produced being, for the sake of clearness, repeated from Table II. : — Section. Fine Silver, in ounces. Cost per ounce of fine Silver. I. 508,000 s. d. ik II. 30,736,000 2 III. 7,200,000 1 11 IV. 49,920,733 1 5 Total 88,354,765 Mean 1 8 The mean cost of production of the ounce of fine silver was, therefore, about Is. id., corresponding to Is. &\d. per ounce standard. General Conclu.sions. It was stated at the outset of ihis inquiry that it was necessary to regard the data collected as to cost of produc- tion as applicable to the total amounts of silver estimated to be produced by each of the respective processes. It will therefore be well to examine the foregoing results as a whole with a view to determine what degree of confidence may be placed in the general conclusions. Section I, With regard to Section I., it may be safely assumed .that the cost of . extracting the whole of the 508,000 ounces of silver from native gold is not inaccurately represented by the 2id. per ounce assigned to it. The amount so extracted constitutes, however, a very small proportion, of the total production of silver. * Precious Metals in the United States, 188S, p. 731. t Ibid., p. 730. t Ibid., p. 730. 5 T. Egleston. The Patio and Cazo processes for amaleamatine silver ores (1884,), p. 46. II Ibid., pp. 57 and 61. t S$e also Percy's Metallurgy, Silver and Sold C1880), p. 680, Section II. Section II., on the other hand, includes one third of the total amount, and it is not possible to obtain direct evidence as to the cost of production of the whole of these 30,726,000 ozs. It will be observed that the evidence mainly rests on the statements as to cost of production at two works in the United States. These produce between them one six- teenth of the total amount of silver classified imder this section, and there seems no reason to doubt that they may be considered respectively to be typical of the maximum and minimum cost of production in the United States, which itself produces no less than two thirds of the total amount of silver comprised in this aeption. It may be added that the mean cost per ton of argentiferous lead, 175 dollars, is nearly three times the selUng price of the argenti- ferous lead extracted in the United Kingdom. Since the evidence was given, the report for the veal- 1886 of the Broken Hill Mine, Barrier Ranges, New So'uth Wales, a mine of very considerable importance, has been published. It states that during the year the smelting of 10,397 tons of ore yielded 1,991 tons of lead and 871,665 ozs. of silver, at a cost, including mining charges, of 41. 12s. Ohd. per ton of ore, or at the rate of Is. Id. per oz. of silver produced, if the lead be considered to be of no value. The cost of production will,_ it is stated, be consi- derably reduced.* Section III. The amount of silver produced annually in the treatment of copper ores is estimated at 7,200,000 ozs.; of this quan- tity, 6,050,000 ozs. were obtained during the ordinary smelting of copper ores, and 2,382,000 ozs. of this latter amount, or one third of the total, were produced at Mans- feld at a cost which is stated to be d^d. per ounce. Of the remainder, 328,000 ozs. were produced in Great Britain by the Claudet process, at a cost not exceeding 5d. per ounce. Silver in this section being mainly a bye-product, mining charges of the copper ore which originally contained it are disregarded. This leaves an amount of 4,490,000 ozs., or two thirds of the total production under this section, to be accounted for, and in the absence of more precise evidence it does not seem unreasonable to account for them in the manner set forth. Although it is probable that the evidence respecting this section is the least satisfactory, it may be observed that the amount in question is small when com- pared with the total annual production. Section IV. This section, deaUng with methods that involve the use of mercury, comprises more than half the total amount of silver produced annually. The figure, 25 dollars, which has been taken to represent the cost of mining, milling and transport of the silver contained in the ton of ore is supported by a considerable amount of evidence. As re- gards the United States of America, an eminent authority. Professor Egleston, of the School of Mines, Columbia College, New York, stated in 1879, that "the cost of " treatment to large mill companies at the Comstock Mill " would not usually be as high as 8 dollars; at the " Brunswick Mill the average for the year 1874 was 7 '76 " dollars;" he adds, however, that "the mill companies " rarely charge less than 12-5 dollars enlarge and long " contracts," and he points out that the mill companies almost always declare large dividends, while the mines are often not worked at a profit." Another writer, Mr. Rothwell,"state3 that the prices paid for milling Comstock ores have varied from 11 to 20 dollars per ton. "* The amounts to which Professor Egleston's figures refer are very large and apply to a considerable proportion of the ores treated by mercury in the United States of America; moreover, no evidence has appeared that would lead to the supposition that the cost of extraction has varied materially since the above figures were given. In. regard to the 22,900,000 ozs. produced in Mexico, the bulk of which involved the use of mercury, there is much reason to suppose that the cost of production is fairly stated at 25 dollars per ton of ore. Various authorities estimate the cost of the metallurgical ■ Money Market Eevifw, S&i May 1887. APPENDIX. 329 processes involved in the extraction of the silver in Mexico at from 11 to 21 dollars per ton of ore, not including the cost of mining. Mr. R. E. Chism* estimates ' the cost of treatment by the old Mexican process at about 27 dollars per ton of ore, which includes a charge for profit to the owneis of the works, but does not include superintendence or interest on cost of plant. In a recent paper C. A. Stetef eldt,t referring to the year 1883, gives the total cost of reduction of a poor or^ as 8' 12 dollars per ton. It is possible that the estimated' yield of 70 ozs. to the ton of ore in Mexico may be too high. If, however, a minimum estimate of 50 ozs. per ton be adopted, the mean cost of production under Section IV. would be in- creased to Is. 8c?. per oz. standard, but this may be taken as the Umit of error.- ' ' APPENDIX yil. Papees put in by Mr Birch with regard to the Currency and Circulation in Prance, Germany, Italy, Spain, Switzerland, and Belgium. See Question 1378. A. — Bank of France. Maximum and Minimum Amount of Gold and Silver held at various dates, with the Notes in Circiflation.' Amounts stated in millions of pounds sterling. Tear. Gold. Silver. Total BuUion. Notes in Circulation. Maximum. Minimum. Maximum. Minimum. Maximum. Minimum. Maximum. Minimum. 1868 - 35-1 26-5 19-1 12-4 52-6 39-1 63-1 44-9 1869 - 29-2 23-5 23-7 18-9 60-7 42-6 3 57-6 61-8 On the 13th September 1869 commenced the forced cur- rency of motes. - . : rSiege of Paris, September 1870 1870 - 29-6 17-3 23-2 2-8 62-7 20-2 ' 72-6 54-4 to March 187i: Durinf? ' these years notes of 25 fraraos and 20 francs were issued. 1871 - 23-7 14-4 5-3 1-4 27-7 15-9 94-4 68-7 In 1871 notes of 6 francs I were authorised. 1872 - 26-3 22- 5-8 3-2 31-7 25'2 107-1 88-5 By the Law of 16th July 1872 the maximum circulation of bank notes was raised to 128,000,000«.fromll2,000,OOOJ., at which it had been fixed on the 27th December 1871. In this year notes of 5 francs were issued. 1873 27-6 22-4 6- 5- 32-8 28-2 122-9 106-2 Demonetisftbion of silver by Germany. Last instalment of indemnity of 200,000,000?. paid. During this year notes of 187* 40-6 24-4 13-2 6- 63-2 30-4 116-6 98-6 20 francs and 6 francs were called in. 1875 - 47- 40-2 20-3 124 66-7 52-7 108-1 93-2 No notes of 25 francs were issued during this year. 1876 - 61-8 46-6 25-6 19-8 87-3 66-9 104-7 95- Latin Union wholly discon- tinues coinage of silver*. - 1877 - 62-S 48-2 34-7 25-5 91-3 82-8 109- 94-3 ■ 1878 - 48-1 40-1 42-4 34-4 87-3 78-7 101-9 88-1 International Monetary Con- ference at Paris. On the 3879 - 43-6 30-1 49- 42-2 90-1 78-8 93-1 84- 1st January 1878 the forced currency of bank notes ceased. 1880 33'1 21-5 5i-3 48-5 84-1 70-5 • 99-3 88-S In December 1880 it was deter- mined to issue notes o£ 60 francs. ,,. The Governor of thS BatlK'W 1881 - 26 '2 21-7 60- 43-6 75-9 70- 113- 95-9 France in bis report -for IBS! 1882 - 40'2 25-8 46-5 43-7 86-3 71-7 118-1 105-1 refers to the eflorts made to increase the stock of gold. 1883 - ■ - 40°6 87-9 43-7 40-1 83-3 78-6 123-9 111- and stated that -jt had been brought about in great 1884 - 42-5 37-8 41-4 39-6 83-7 77-4 126-6 112-6 measure by enlarged issue of - small notes. - ' -■•U. 1885 - 47- 39-7 41-2 41- 91-3 80-8 122-6 . 108-8 1886:, 46-6 45-7 43-5 43-1 90-2 88-8 118-2 Ul-8 February - 47-7 46- 43-7 43-3 91-4 89-3 118-9 112-8 March 60-6 47-7 44-1 43-7 94-8 91-6 115-8 111-4 April . 52-1 60-8 44-8 . 44-2 96-8 95- 114-9 111-2 May - 55-7 62-1 46-4 44-8 100-9 96-8 U6-3 107-5 June - 55-7 55-2 45-3 45- 101- 100- 3 113-5 no-2 July - 55-4 64-3 45-2 44-9 100-6 99-2 114-6 110-9 August 54-7 54-1 45-3 45-1 100- 99-2 114-1 107-1 September - 54-9 54-6 45-6 46-3 100-4 99-8 109-7 106-3 October 54-9 53-8 .45-6 45-4 100-4 99-4 110-1 106-4 November - 63-8 52-3 45-7 45-5 99'4 9S- 112-3 108-4 December - 62-3 49-9 45-8 45-7 97-9 95-7 111-8 108-2 * Mining and Scientific Press, March 17, 1888. t Trans. Ann. Inst. Min, Eng. xiii. (1884-5), p. 370. Uu 2 330 EOYAL COMMISSION ON GOLD AND SILVER; B. — Germany. Berlin, 4th November 1886. I BEG to answer your inquiries of the 26th ultimo as follows : — 1 and 2. Of the silver coin demonetized there has been sold on account of the empire 7>102,862 lbs. fine silver, and remains unsold 339,353 lbs. No sales have taken place since May 1879. 3 and 4. The extent and composition of the money in circulation and the momentary supply of bullion in Ger- many at the end of 1885 are taken about as follows : — £ Marks Gold coinage of the empire (exclusive of 120 million marks in the War Treasiuy), about - - - - - . - Bar gold and foreign coin in the Eeichs- bank ------ German and Austrian thalers (highest esti- mate) ------ Silver coins of the empire . - - Nickel and copper coin . - - Total - - - - Treasury notes of the Imperial Treasury Bank notes not covered 77,600,000 1,550,000,000 9,700,000 191,000,000 22,500,000 450,000,000 22,100,000 4*2,000,000 2,000,000 40,000,000 133,800,000 2,676,000,000 6,900,000 138,000,000 18,050,000 361,000,000 Total • 158,750,000 3,175,000,000 Or ces dernieres on pourrait les calculer environ a 140,000,000 lire sans tenir compte des sommes qui sont chez les instituts d'emission et chez le tr^sor, calculant I'impor- • tation egale a I'exportation. De teUe manifere le chiffre susdit serait de 743,165,416 lire. Quant a I'or et aux ^cus qui peuvent circuler entre les particuliers, les instituts de credit et les banques mineures, il nous manque, comme nous avons dej&. dit, des dates s CO S" 3" i I rH lO i-l qj CO Q<1 (M r-l S §8 ^ CO S ^ ^ rH O 25 031 p!j 00 QO O CO is «J oJ CO eg ?- 3 aa eft rt J3 I I m 00 CO GO 1 £1 ^ l-t ^03 00 o O Q R O R iJ O o E-l (Si .3 § I 3 S DO to ^ '3 © I ^ i I w (5 * S a P. I do p-g ■3 J) ^ I s -£ Cl .g a ■tt .9 .a i2 -4^ pj s pS cs § o 1 1 (Si M i§ CD iZi |2i ■j^ o "in. «£.--a pQ-rf si's 4= •o S S 0^ >- o 24358. Xx 336 EOYAL COMMISiilOS OK GOLD AND SILVER ; "& T-H CO ■«> CD i-H . CO o ,5 « e^ i « ^ rtS, i I 5 I i i I III V U3 S QD S iH .9 .9 .S .9 I I .9 to I I £ g O tj -• ■r-l "^O P,0 Pi O ffi- o « i S,S 8 s CJ U C w O APPENDIX.' 337 tS_( ia-!3 SrJ EHd .9 « s ^ a »" 00- i>- § - -j?,^.^ s" s" I s-.s oa rt " ISri wi IN M 00 =>. i> =0 t-l 1 f M N 00 " us^ O.S Sao- ■SgSa|sf^S 01 in *N. (N ? iH 43 oa g ■§, ^(2 CO O) . iH S 3 rH- I s g o5 CO ■s, •^1 2o f§ % iH ^ eq ^ I I lO ^ ^ a" 00 r-l S' I I p9 *" s s iH m « CO GO eo CO i-H 00 cq 00 eo iH g I ■J3 •a 1 1 1 H .s 1 i 8 ■ ■ 1 CI ?? 03 15 . . s 1 1 rt 'a 1 & p=l ! ■ i O 1 n .9 J 1 t o i « IE i .S 1 w- fl -S^ •6 a .1 1 1 o III 4 i i! m t, . ■Sjg §i' X x2 338 EOYAL COMMISSION ON GOLD AND SILVER B.— Table showing Progress of External Trade of India. (See Question 2600.) D — ^1'able showing Peh-centage of Indian Trade to the whole Trade of the United Kingdom. (See Question 2513.) Years. Average Rate of Exchange per Rupee. Imports into India. Exports from India. d. 1874-75 22 -156 100 100 1875-76 21-626 107 103 1876-77 20-508 103 108 1877-78 20-791 114 116 1878-79 19-794 104 108 1879-80 19-961 114 119 1880-81 19-956 147 132^ 1H81-82 19-895 136 145 1882-83 19-525 144 148 1883-84 19 -.536 153 156 1884-85 19-308 154 148 1885-86 18-254 154 149 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 Per cent. - 8-3 8-1 7-9 - 7-7 8-5 - 8-6 8-5 8-9 - 8-5 7-8 - 8-9 9-2 9-8 - 9-9 ■ 9-7 E. — Table showing Price of Silver and the Exports to India foom the United Kingdom. C. — Table showing Progress of the Trade of the United Kingdom with India. {See Question 2504.) Years. Average Rate of Exchange per Rupee. Imports into India. Exports from India. d. 1874-75 22-156 100 100 lOll 1875-76 21-626 96 1876-87 20-508 110 105 1877-78 20-791 132 110, 1878-79 19-794- 93 101 1879-80 19-961 108 99 1880-81 19-956 132 111 1881-82 19-895 127 1 125 1882-83 19-525 135 127 1883-84 19-536 145 132 1884-85 19-308 147 121 {See (Question 2518.) Gold Price Total Exports Exports of Cotton Manufactures. Years. of Silver in London. to India. Value. Quantity. Value. 1874 100 100 100 100 1875 98 101 99 98 1876 90 93 102 92 1877 94 105 106 95 1878 90 97 100 89 1879 88 89 103 87 1880 89 126 125 107 1881 89 121 132 110 1882 88 121 121 105 1883 87 132 126 105 1884 87 127 122 99 1885 83 122 121 92 1886 78 ? 134 96 F. — Table showing Monthly Exports of Silver to India in 1885 and 1886, with Value of Bills sold hy the Secretary of State, and of Exports of Cotton Manufactures to India from the United Kingdom. (See Question 2574.) 1885: 1886. Month. Sale of BiUs by Secretary of State. » Export of Silver to India. Value of Exports of Cotton. Sale of Bills by Secretary of State. Export of Silver to India. Value of Ex- ports of Cotton Manufactures to India. January February - March April - May June - July August September October November - December Rb. 1,94,77,800 2,05,10,900 2,24,05,999 1,28,52,200 38,01,000 37,94,300 49,21,859 28,40,000 }, 07,24,000 1,10,10,000 1,38,97;000 1,65,34,054 £ 367,708 620,400 853,882 639,7§0 859,000 449,800 756,100 824,454 446,800 341,000 505,599 444,150 S, 5,207,960 4,680,110 4>22,690 4,253,281 4,300,386 4,436,503 4,972,256 4,'84^,010 4,715,949 4,413,805 4j058,204 4,502,439 Rs. 1,41,05,157 2,07,96,000 2,31,33,400 1,27^66,000 21,70,500 56,23,450 67,14,800 1,76,68,500 1,81,12,500 92,98,800 1,06,01,000 1,83,58,000 £ 588,494 794,400 293,100 209,417 333,500 476,864 435,901 432,200 440,200 347,400 218,151 360,650 £ 4,769,012 4,544,604 5,161,373 4,389,450 4,501,201 4,967,138 4,774,880 '4,983,888 5,013,875 4,875,717 4,810,993 4,573,204 14,27,69,112 7,108,643 55,111,593 15,93,47,607 4,880,277 57,365,835 APPENDIX. 339 G. — Statement showing the Difference between the Sums in Rupees, at the Budget Rate of Exchange and at the Rate realised, needed to provide for the net Sterling Payments in England in eaohYearj and the Equivalent of that Difference in Sterling at the Rate realised. (See Question 2650.) Net Sterling Payments. Rupee s needed to provide for Net Sterling Payments. Additional Rupees needed, owing to Exchange falling below Year. - the Rate assumed in the On Old or I'ixea On New or Current Total. At Budget Rate of Exchange. At Rate realised. Budget J and their Equivalent in Sterling Contracts. Contracts. at Rate realised. Budget Rate Rate. Es. realised. Rs. Rs. £ £ & s. d. (a) s. d. (6) (6) - (a) & 1874-75 11,704,953 3,339,968 15,044,921 1 10-375 16,13,75,689 1 10-156 16,29,67,453 15,91,764 146,946 1875-76 12,181,735 3,286,398 15,468,133 1 9-875 16,97,07,516 1 9-626 17,16,65,433 19,57,917 176,425 1876-77 13,207,657 3,410,242 16,617,899 1 8-5 19,45,51,013 1 8-508 19,44,74,277 -76,736 -6,357 1877-78 12,508,179 3,602,727 16,110,906 1 9-23 18,21,29,884 1 8-791 18,59,72,934 38,43,050 332,920 1878-79 13,401,225 2,392,072 15,793,297 1 8-4 18,.'58,03,494 1 7-794 19,14,90,623 56,87,129 469,046 1879-80 11,108,243 2,772,188 13,880,431 1- 7 17,53,31,760 1 7-961 16,68,91,023 -S4A0,737 -702,023 1880-81 12,521,482 3,624,744 16,146,226 1 8 19,37,54,712 1 7-956 19,41,79,434 4,24,722 35,316 1881-82 13,084,682 3,062,781 16,147,463 1 8 19,37,69,556 1 7-895 19,47,87,038 10,17,482 84,345 1882-83 11,704,805 1,042,698 12,747,503 1 8 15,29,70,036 1 7-525 15,67,16,926 37,46,890 304,825 1883-84 13,081,813 2,985,134 16,066,947 1 7-5 19,77,47,040 1 7-536 19,73,84,138 -3,62,902 -29,340 (1884-85 13,787,159 1,735,736 15,.522,895 1 7-5 19,10,51,015 1 7-308 19,29,48,322 18,97,307 152,638 1885-86 11,321,979 -SHfige 11,009,983 1 7 13,90,73,469 1 6-254 14,47,56,107 56,82,638 432,212 H. — ^Table showing the Excess by fall in Exchange over that for the Year 1874-76, Year by Year, in Rupees, and in Sterling at average Rate of Exchange, on Old and New Contracts. (See Question 2650.) On Old or Fixed Contracts. On New or Current Contracts. Total. Average > Year. Rate obtained for Ttills liro In Sterling, at In Sterling, at In Sterling, at In Rupees. Average Rate of Exchange. In Rupees. Average Rate of Exchange. In Rupees. Average Rate of Exchange. S. d. Rs. £ Rs. £ Rs. £ 1875-76 1 9-626 32,39,711 291,925 8,74,012 78,756 41,13,723 370,681 1876-77 1 8-508 1,14,99,136 982,601 29,69,098 253,710 1,44,68,234 1,236,311 1877-78 t 8-791 88,96,278 770,677 25,62,392 221,978 1,14,58,670 992,655 . 1878-79 1 7-794 1,73,24,377 1,428,828 30,92,341 255,041 2,04,16,718 1,683,869 1880-81 1 7-961 1,32,34,559 1,100,729 33,02,835 274,700 1,65,37,394 1,375,429 1880-81 . 1 7-956 1,49,53,742 1,243,404 43,28,840 - 359,943 1,92,82,582 1,603,347 1881-82 1 7-895 1,61,06,643 1,335,174 37,70,143 312,529 1,98,76,786 1,647,703 1882-83 1 7-525 1,71,10,945 1,392,047 15,24,292 124,007 1,86,35,237 1,516,054 ' 1883-84 1 7-536 1,90,08,498 1,547,292 43,37,542 353,076 2,33,46,040 1,900,368 1884^85 1 7-308 2,20,29,963 1,772,311 27,73,464 223,125 2,48,03,427 1,995,436 1885-86 1 6-254 2,62,17,811 1,994,083 -7,22,474 -34,930 2,54,95,337 1,939,133 K. — Statement showing the net Expenditure of the Government of India from 1874-75 to 1886-87, caused by Famine, Afghan War, Military Preparations on the North- West Frontier, and Operations in Burma. (Question 2655.) Tears. 1874-75 1875-76 1876-77 1877-78 1878-79 1879-80 1880-81 1881-82 1882-83 i 883-84 1884-85 1885-86 (Revised Estimate) 1886-87 . (Budget) Famine Relief and Insurance. 2,248,683 602,030 2,145,517 5,347,634 313,547 104,059 34,840 1,567,886 1,495,972 1,522,813 1,548,357 1,500,000 1,600,000* Military Operations in Afghanistan. Military Preparations on the North-West Frontier. Military Operations in Burma. 692,391 4,800,429 7,539,091 -i,4S7,6S2 17,869 (Tens of Rupees.) 2,268,000 Total. ___ 2,248,683 — 602,030 — 2,145,517 — 5,347,634 — ■ 1,005,938 4,904,488 — 7,573,931 — 80,204 ■— 1,513,841 — 1,522,813 — 1,548,357 390,000 4,158,000 300,000 1,800,000 * Including 138,700 paid as interest to the Indian Midland Railway Company, and included in the Railway Revenue Account. 340 BOTAI^ COMMISSION ON GOLD AND SILVER: I 00 00 00 o ■a " 2 2 a S z, o I h4 CO o o o o o_o o ooooooooooo o o o o ooooooooooo o o o 15 D OO o cT q, o^ o^ o C3_ o^ o^ o^ o o^ o r-rj>r«)f-Horcooo5p-Hos(>r o„o^ oo^oo" o o if5 *>Jr^OlTlTtfOii-H,-(^ in o iO (M ,-llOQOU50000cO'<*,-Ht^ I>^»f5^ « Hoo CO oT TlT OiCDOeO'H'W'— 1»— 1 Iff i-T 3 U5 ■* .-H Tp ""* o o o ooooooooooo o o o Revised gtimate, .85-86. o o c ooooooooooo o o o co^of o CD o^ o_^ o^ o o^ o^ o^ q_ o^ o^ o^ r^wToTooi-H to CD (?J"coco "* o^o^ o_ to 00 CD (M • OOCTOCOCO^OOi-HOS .OS -t* cq OS 00^ O 00 00 »fs o^co o w eo I-H sD CD^iO^ r-i ooooooooooo o o o «SS r-i"or (?r oT lO uf CO Tj*" Oq" r-H" CO I-H f ooooooooooo o o o ift Tp ■^ q^o q^o o q^q^o o o o o o o •s •v oeooooooecToroo^orco CTQOr-t^tMi-HOSCTCDOO O4"C0 i-H*> CD CO o -* o" CO 00 o o o ooooooooooo OO o o o o ooooooooooo c o o od" CD iff CO of ct" ■^ rn" (N in - - O O " o o^ o^ ©^ o^ o„ o^ o^ o^ o^ o^ o o o^ o •^ ■^ °? o^oT I-H o>o>coeDxOffoocoooo> i^Tus" I-H 4. CO CO W3 00'^C0T-H(0 m ■* o 00 ,-1 oT r-_ 00 iO ;D Co" CO CT IN rH .H U3 ^ 1-H Til ■^ 1 1 I 1 1 1 1 o c o OOOOOOOOOOO o o o o o o OOOOOOOOOOO o o o 1 1 1 1 t 1 ■^ o o o O^ O^ O^ O^ O^ O^ O^ O O^ o^ o^ o_o_ o^ 00 CD C^ «r eO G^t^ t^^-^CO CO^CNtN o" mt^ cd' 1 CD CO 05 ■* COOOlOJThtN-^^OOiC?! t~ w ^ 1 1 1 B 1 1 o^-^^ «3 o^r^«3^co^i> 00^0^*0 '^ t* I-H «J "^ 00 ciToo CO* oTtC kffl'cO CO CT i-T u£ 1^ Ctf f-l w Tf fH ■* T(< 1 1 I 1 1 f 1 o o o ooooooooooo o o o I 1 I 1 1 1 o o o ooooooooooo o o o CO o o o 5 o o o o^ o o^ o^ q o-cs o„o„ o 00 Tf oT la CO «r m CD *o o" r-T Iff o CT o t^ w lO 1 1 1 I 1 1 1 S2 00 UIS CO eo eoi-HCTT(<.-HCO' t* I-H CD OS -^ Tj* 00CTt^CT»O«0F- Ol^O^ 1*^ r, A *v n n r. « 00 o oo" G>r 00 i> w:i CO CO CT '-' 59 " ct" 1 1 1 1 1 1 i-H « -* rH -* ■* I I I 1 1 ■ o o o ooooooooooo o o o o o o ooooooooooo o o o (N o o o o o o o o o^o o o o o o o o °f O 00 j>r -^"-^ o"'*" o" eo^-^tO^X:^ -*" t-T r^ I I I 1 1 1 ■ 1 - s 00 W N (M -^OOSeDCOTjftDCTWOO as CO CT to (N ■^ OS 00 CO CT CO 00^'—' lO CO «H r* OO^TJI ■^ co'oo' lO otT i>r (o" eo eo* (tT cfl' ss§§§§§is§§ g§ o o ""^ 4C ^ '~^ Ooooooooooo ■o®. o. 00 r^-^ o 00 oTct o «o uf o OcO'^COiOifSCQCOOOO'-' CT ■* OtT CT 00 CO o o o OOOOOOOOOOO o o o W oi « ^ -H^ t* OS tfS CT in t^ Cft^-* ■rcO CO CO CT ^ un rH ■* o o^ o q^ CD^ tq q^ q^ o CD^ o^ o o q_ o o^ o 1-H -^ ■* 1 CO co" o" orrH'CT"i>o^o>-rocreo'oo^c^ o o O W « CTiOfcfjieo'Tfieo-'i'co-TfC-'*- -(— o •o .-HTtlt^pHOr-COiOCTr-(|> cq irt CD CO ■ g" ^" 00 00 CO CO CO CT CT r-4 V 5^ r r 1 1 1 1 ■ 6 o c, OOOOOOOOOOG). o o 6. s o o CSOOOOOOOOOO o o o 1 1 1 1 1 1 1 C3,0 q^q^oq^q^q^q^o^q^oo o^o q^ 1 uf i> 00 ■HTr-Tio'cfecrTjro'trrr-r-^co^ «5 r^ OO o> r- ea o CT»OCTJ>.t|<0000W:5i-hOO O 05 o I I 1 r 1 !>. O^oo (?1^ os^Gsj^ci^q^i^ Qo^q^j>. CT --t j>. to CO CT^ 00 eoxr^ to 00 otT CO 03* (?r of i?r tOrt" Iff m ■* Tf -* • 1 1 1 1 1 1 o o o ooooooooooo o o o o o. o ooooooooooo o o o ■ 1 t 1 1 1 1 OS ■ o o o q^q^q^q^q^oq^o o o o o o^ o *r taao otT -^tSfO^f^katr^eotSui^' ^CO- otT t ot CO I>- o coococDcor-csieDwoo ■* 00 w 00^^ CO CO^ l> in Ol^ O « r-<^ 00 i~* ,-1 tr^ CO cq CO »> V 00 r-Tt-T Ttl oT t-T to CT (?r cT of »n 1-H* tH t-H o ■<* " ■* Tt« III 11 < 1 1 I 1 1 o o o ooooooooooo o o o o o o ooooooooooo o o o CO o^o_ o o q^o q^q^q^o q^o o q^ o^o o^ o(r.-r *> cDo^^v^aooust-^G'^ui lO oo" i>r I 1 1 1 1 1 00 I-H »0 IN CO ■^(Sr-HOOlOOSrHOTfOOJ:^ CO 05 CO O 03^ °1% OSiOOS00C0i-HTj<--CT CD CO o CT^ t-TotT csT CO CCVO CT CT^CT^CT CO ooooooooooo S8S8§.§S§-§§-g §§ o o cjoT CO t^ o § o o o OOOOOOOOOOO o o o ''V'^O^QO -^^i-H^OO^CT CT 1> ■"^^ ^ o o o OOOOOOOOOOO o o o *>• to CO oq'CT CT CT 5-" o" ** o^o o O O^ O^ ®, R.® C5^ o ®, <= *=!. o_,o^ o eg iC »o co'o ccToeTco CD g^ "^ CO ao xo ua o *o 1:^ N O I-H oaoOi-Hcocor-oOrHintooa ^ CO «s^-* « Oi^GSJ^OO^r^-^^OO^CT^ W CD CO .-1 CT^ 00 (D OtT 00 cd" «r If? ci" ©r r-T CT* , iK^i-T 00 I-H -* CO •-' - ■ ^ . CO CO < 1 I 1 1 ' o o o OOOOOOOOOOO o o o o o o OOOOOOOOOOO o o o < * 1 1 1 1 1 to o^o^ o^ o^ o^o o o^ o o q^o^ o^o^ o o^ o^ t>. m o ia oTfflTcO kOty iO l-TuTrT^ to" i-Teo iO 1 00 X o OOifSCOCTOOSCQp-Hi^lOCT i-i o o 00 00 o »0 CT 1-*^*-- T» 00 O CT r- c^on^ o OD J> *c o 00 CD «f CT CT .-H CT* o -"t Th I-H Tf ■* • 1 1 1 1 1 ' ' I 1 1 1 1 1 ' § g 1 1 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 III 1 1 1 1 1 i 1 1 1 ( ' -.„ ■ • I 1 1 1 I 1 1 1 1 1 1 I 1. 1 il 1 . 'i ■ £ 1 . 1 . I J - ^ ' . . . . 1 g^ ' ■ ' ' H - '■»> < 3 g ?« t' ' ' ' ' ' ^ P5 » ■'■'■■§ ■y 1 i 1 1 1 1 I 1 IV 1 1 1 1 ^ a .15 to 1 § ' "I'i' a ^ Si |.§|||i.^l 1 J. ^ -^ S an fZi ^ i ' • 1 ' i c a- «a's.,.|i1t.||-^ ^j H C BO 'r^ O 03 ixt tn r^ 3 &^ a w S a on S o) ■£: 1 "■ S^tT +J ^l^lllldllll flo a APPENDIX. 341 rt 00 pqS f^ « to « "S 00 .2 a I Qi w CO 00 1 CO 21 r, o o IH a 12; Of o o o o i-T CO ■* j> « I-T CO 04 o o o o o o cq -^ W CO (O r-T CO 09 o o o o QQi-T rH 1— I 4C U) o o o o *> o T* 00 o o o o >— I CO o o o o o^o ©To CO CO 00 o o o o o o^o oo r* CO 00 00 ^ o o o o o o^ *> 00 f-TirT o o o o o^o CT 00 00 U3 lO CO »0 CO lO ,-1 o o o o o o o o o o oTcT (N CO 00 O^ of CiT iO l-H o o o o o o^ co^cT 03 00 o o o o o o o o o o o o o o o tO-^^iS r-H O .-I IN 00 CO CO CO OS O CO CO O "^ I— t o o o o o o o o o o o o o o o O (N CO CO CM o o o o o o o o o o o^ q, o o^ o 00 oTotrccTcr (N CM OS CO O CD CO t* ■^ »0 o o o o o o o o o o o^ o, o^ o^ o^ ^ cq" 00 oC « CO 00 t* O CO «o t* l> •-< oo o o o o o o o o o o o o o o^o o ^ *>• o> "^ 0> CO CO *o lO o- o o o o o o o o o o o^o o o TjT .-T CO* -^ oT CO in t^ 04 -^ (M O O CO ^ CO O CO rH o o o o o o o o o o 00 I-T -^ CO CO CO CO CO »nt (?i CO CO oa U3 m CO OS CO »— < o o o o o o o o o o o o^ o o o CO lO -l> o» w J> o -^ w o i-t CO O -rh O lO o» O W CO CO -^ ■^ OJ 00 rH o o o o o o o o o o o^ c_ o^ o^ o^ rH* eo" ccT oT irf 00 O --« ** CO Tt< CO l> l> CO r-H -^eo o O ^ iO 1— I ,-H CO CO OJ^CQ CO co^uo CO OS CO rH o o o o o o o o o o o^ o^ o^ o^ o^ CO CO orr-r*> rH 00 CO in 1> « cq *o -^co^ o o o o o o o o o o o o o o o 00 00 i> r^ in rH UO O -^ CO J> rH M r^ o o o o o o o o o o o o o o^ o "«jt ^ 00 >— I r^ t- -^ CO CO -^ Tt< O (N *> rH o o o o o o o o o o lO i> OS O "^ CO rH CO O CD O ^ rH -rf oTeo o o o o o o o o o o o o o o o_ CO I— I rH OS CO ^ r- ^ 1-H OD 00 'O CO "^ '^ l-H I— I CO rH o o o o o o o o o o o o o o o oTco »fl co'co ' CO 00 -b* . t- r-H CO O l-H o 00 r^m of CO CD o o o o o o o o o o o o o o o O iO CO -^00 CT -^ »0 ^ -^ CO I O O CO o o o o o o o o o o o^ o^ o o o rn" O (N ^f rH lo u3 a> O) cq CO CO o o o o o o o o o o o o o^o q cd'o"rH*eo CO O CO rH lO ■rh iO rH CO q^rH^ ■^ oTco CO ^'^^eo "^ of 2 '^"^ I I r I I Q c o o o 2 o o o o S q, "^i. ^^ ®« ■*^ (O 'f' "^f OS 0> CO CO CO CT -^ t^ I I I I I I I I I I I I I I I * -^ o o o c - O o C) '■':; 'i ^„ q^ q, -:fi' cT c^ Tt** ::^ c>. j^- CO ^ O O rH CO -^ OO Ti^ ■ oTco o o o o o o o o o o o q,o o^<^^ 00 (M o ** o (M in J>. O rH CO O -* "^"^ f-^rH -^ OS I t I I I I I I I I I I I I I I I 1 I I I I I I I o o o g o o o o g g co" en o" 22 ?? CO « below - - - -> 6,416,000 1,767,000 1,988,000 Accounts, 1880-81. Revised Estimates, 1885-86. Budget, 1886-87. Excluded Ohaeqes. War or special military prepara- tions .... Construction of Railways, not pro- vided from Provineial Revenues, or from borrowed money, or ftom the grant for Famine Insurance - Famine Relief and Insurance 7,539,000 2,473,000 36,000 3,658,000* 600,000 1,600,000 300,000+ l,600.000t 10,047,000 4,658,000 1,800,000 Final Result— Surplus Deficit 3,631,000 2,891,000 182,000 • See paragraph 42 of the Financial Statement for 1886-87, where the cost of the War preparations in 1885-86 is stated at 2,057,100 in India, and 456,700 for Stores in England, to which must be added 143,900 tor Exchange. t See paragraph 26 of the Financial Statement, giving 300,000 as the Expenditure for the Army in Upper Burma. t The sum of 1,500,000?. includes 1,361,300 shown under Famine Relief and Insurance, and 138,700 paid as interest to the Indian Midland Railway Company and included in the Railway Revenue Accounts. When the Government of India at the end of 1877 made arrangements to meet the recurring expenditure on account of famine, the intention was to provide a surplus of 2,000,000 over the ordinary charges, of which 1,500,000 was to be devoted to the relief of or insurance against famine, and 600,000 was to meet contingencies. In the accounts of 1880-81 there was, over the ordinary charges, a surplus of' 6,416,000, of which 36,000 was required for the relief of famine, and the remainder was applied in diminution of the debt that had to be raised to meet the exceptional charges for War and Frontier Railways. In the Revised Estimates for 1885-86 there was, over the ordinary charges, a surplus of 1,767,000, instead of 2,000,000, to meet the charge for Famine Relief and Insurance and an allotment of 600,000 which in the Budget had been made from revenue for the construction of , railways. In the Budget for 1886-87 an ordinary surplus of 1,982,000 was provided, of which 1,500,000 was allotted to Famine Relief and Insurance (including 138,700 charged m the Railway Revenue Account for interest payable to the Indian Midland Railway -Company), and 300,000 was provided for the military operations in Burmah. APPENDIX. 343 The foUowing Table shows the heads under which has arisen the change in the financial position since 1880-81 : Net Revenue and Bxpedditure, excluding War, Construction 1886-86. Better +, or 'Wcrse -, than 1880-81. 1886-87. Better +, or Worse -, than 1880-81. of Railways, and Famine. J India. England. Exchange. Total. India. England. Exchange. Total. Net Reven-de. Land Revenue Opium .... Salt ..... Stamps - • . . Excise Provincial Rates Customs .... Assessed Taxes Other Heads + 879,300 -2,640,700 - 921,400 + 397,500 + 991,900 + 105,700 -l,324i600 - 35,200 + 60,600 - 4.60O - 1.700 - 16,900 900 - 200 - 1,600 600 - 8,900 300 300 + 879,300 -2,646,800 - 923,600 + 371,700 + 990.700 + 106.700 -1.324.500 - 36.200 + 60,100 + 1,042,300 -1,872,200 - 866,600 + 436,600 + 989,200 + 132,600 -1.300,900 + 861,900 + 202,100 - 1,600 - 20.300 1 + 100 600 - 10,900 .300 +1,042,300 -1,874,200 - 866,600 + 404,400 + 980,200 + 132,600 -1,300,900 + 861,900 + 201,900 Total -2,486,800 - 24,300 - 11,600 -2.622,600 - 366,000 - 21.700 - 11,700 - 399,400 Net Expbhdituee. Interest . ... Telegraph . Law and Justice Police .... Education Political Superannuation Railway Revenue Account Irrigation Buildings and Roads Army (ordinary) Other Heads + 694.900 - 61,700 - 219,500 - 236,400 - 224,300 - 642,600 + 25,600 +1,408.300 - 669.000 - 387.500 - 226,900 + 35,800 - 276,600 - 178,900 900 + 63,900 - 83,100 - 4ff9.600 + 64.300 + 14,600 + 846,400 - 160,100 - 328.200 - 62.900 400 + 7,300 - 173,200 - 667.200 + 10.900 - 3,800 - 185,200 _- 130,000 + 90,100 - 303,500 - 220.800 - 236.400 - 224,300 - 681.300 - 230,800 + 261.600 - 493,800 - 376.800 + 433.300 - 244.300 + 991,700 - 12,3,200 - 329.800 - 410.800 - 293,900 - 200,600 + 137,100 + 827.900 - 510,900 - 999,700 - 419.000 + 475,900 - 449,800 - 76.900 - 1.700 + 200 + 59.000 - 204,000 - 575,200' + 52,800 + 16,300 + 320,800 - 244,800 - 430,200 - 38,300 700 _ + 8,400 - 239,000 - 791.700' + 10.400 - 4.200 - 418.100 - 177.600 + 111,700 - 233,400 - 332.200 - 410,800 - 293,700 - 133,200 - 305,900 - 639,000 - 447.700 - 987.600 - 616.300 + 68.600 Total - 392,300 - 201,000 -1,632,700 -2.126.000 - 865.300 -1,103,300 -2.076,000 -4,034.600 Geahb Totai. -2.879.100 - 226,300 -1,544,200 -4.648,600 -1,221.300 -1,126,000 -2.087.700 -4.434.000 • Excluding Indian Midland Railway Interest, 104,000, and Exchange thereon. 34,700. These details may be summarised thus in groups : — Better +, or worse — , than 1880-81. 1886-86. 1886-87. (1.) Reduction of the duties on salt and customs (in 1882) (2.) Improvement ot revenue over expen- diture, excluding salt, customs, opium, income tar, army, famine, construction of railways, and fall in exchange - - - (3.) Ordinary army charges, and imposi- tion of income tax in 1886 (4) Diminution of opium revenue (6.) Increased charge for exchange, due to the change in the relative value of gold and silver -2,248,100 + 1,644,600 +433,300 -2,646,800 -1,731,600 -2,167,500 + 1,339,600 +380,800 -1,874,200 -2,122,700 -4,648,600 -4.434,000 The following remarks will explain these changes more fully:— (1.) As explained in Sir John Strachey's-work, the Government of India had, by the adoption of a series of measures, carried on for many years, of which the most important were the corrstruction of the Rajputana Railway, the acquisition of the Sambhur Salt Lake, the negotiation of treaties with numerous Native States, and the temporary increase of the salt duty in Southern India, been enabled to abolish the inland customs line and greatly reduce the duty on salt throughout Bengal and Northern India, and in 1882 they were able to complete the reforms by a further reduction in Bengal, so as to equalise the rate o 24358, throughout India, and then reduce it everywhere from 2f to 2 rupees a maund. For some years also measures had been taken to reduce the duty on imports of the coarser cotton manufactures, so as to remove all semblance of protection for the nascent industry in India, which was seen to be rapidly develoning, and which it was most important to place on an sound footing, dependent on its natural advantages and not fostered by any artificial stimulus. In 1882 it became practicable to sweep away the last remains of the import duty on cotton manufactures, and with it the duties on all goods imported into India except liquors, arms, salt, and opium. Besides these two great measures, the burden on the land was reduced in the North-West Provinces by the remission of the cess for the payment of the village officers, and in Oudh by the transfer of the cost of such officers from the landholders to the Government. The following was the financial effect as estimated in the budget for 1882-83 :— Surplus (after providing 1.600,0002. for famine relief and insurance) Remission of duty on salt ,. import duties (net) ,, Patwari cess in North-'West Provinces Total remission of taxation Increase ot expenditure hy payment of village officers in Oudh Surplus retained 3,171,000 £ 1,423,000 1,147.000 241.000 2,811,000 76,000 2,886,000 - 286.000 Yy 344 ROYAL COMMISSION OH GOLD AND SILVER : (2.) The increase since 1880-81 of the revenue from land, stamps, excise, provincial rates, assessed taxes (omitting the additional taxation in 1886), and minor heads, was : — The increase oi expenditure, excluding Army, construction of railways, and famine, was .... Showing a result worse by - But of the increased expenditure the fall in exchange aooountedTfor So that, apart from the fall in exchange, there would have been an improvement of In 1885-86. 2,372,300 2,669,800 187,000 1,731,500 1,544,500 And in 1886-87. 2,735,000 3,518,300 783,100 2,122,700 1,339,600 (The comparison is not quite accurate, as, on the one hand, the land revenue was exceptionally low in 1880-81, and, on the other hand, the net civil expenditure in Upper Burma is included in 1886-87.) (3.) The permanent increase of the Army charges in India is shown at paragraph 37 of the Financial Statement Besides a sum deferred to future years, estimated (paragraph 36) at 1,126,900 656,900 1,783,800 And, after adding the increased payments in England, with exchange, the total may be taken at about 2,000,000. This, however, is to a great extent met by the temporary saving effected through the alteration made in the system of payments to the Treasury for Non-Effective charges, by which, since the 1st of April 1884, India only pays the charge due to her during the year, instead of the capitalised value of such payments. The consequence is that, as com- pared with 1880-81, the ordinary Army charges were better by 433,300 in 1886-86, and worse by 516,300 in 1886-87, in which latter year the income tax was imposed to meet this charge, the improvement of revenue thereby being estimated at 897,100, giving a net result better by 380,800. (4.) The following are the figures connected with the opium revenue : Number of Chests sold in Bengal. Eevenuo. Charges. Net Besult. 1880-81 1885-86 1886-87 56,400 60,994 54,760 10,480,100 8,914,700 9,227,600 2,028,800 3,110,200 2,660,600 8,451,300 6,804,500 6,577,100 The reduction in the receipts is due partly to the necessity of diminishing the quantity offered for sale at Calcutta, owing to the amount in store having been seriously lessened in consequence of bad crops, and partly to much lower prices being realised at the sales. The increase of the expenditure arises from the fact that the two last crops were remarkably good. (5.) Exchange on expenditure in England is worse than in 1880-81 :— In 1885-86. In 1886-87. By But of this there is attributable to increase of sterling expenditure - 1,644,200 45,700 - 2,087,700 249,000 Leaving due in England to fall in exchange . . - . . To which must be added the addition made to the British soldier's pay in India ..... 1,498,600 233,000 1,838,700 284,000 Making a total of 1,731,500 2,122,700 India Office, 24th February 1887. H. Waterpibld. The foregoing memorandum has been shown to Sir John Strachey, who has returned it with the letter annexed : — My dear Waterfield, I understand your question to be as follows. At pp. 356 and 374 of the book on the Finances of India, ^vritten in 1881 by my brother and myself, some statements were made regarding the possibility of largely increasing the public income in the event of any serious financial emergency. You were asked by the Commission whether you agreed with those statements, and your reply was to the effect that the whole position had changed since they were made, and that they were not applicable to the existing condition of things. You ask me if you are not right in believing that this is my otvn opinion also. The answer is easy. Yes, I think that your Memorandum shows clearly that the conclusion stated by you is perfectly correct. Some of the expressions used in the first of the passages in question, at p. 356, are not very well chosen, but the general opinions of the authors of the book were given clearly enough at p. 374. Rfeading them with what goes before, they were to the effect that the then existing finan- cial position was very prosperous, that the main sources of revenue were improving in productiveness, and that, although no necessity of the kind was probable, there would be little difficulty in still further increasing the revenue by 2,000,000 a year. It was suggested that the greater part of such an additional sum might be raised by an income tax. Further, it was said that if, " in conse- quence of some great financial catastrophe," a much larger further increase to the revenue should become necessary, it could be provided without injury to the country, but only by what had before been called "heroic remedies." Obviously in making any such forecast of the future, the first essential fact to be considered was the existing finan- cial position. It would clearly make all the difference in the world, when the anticipated emergency arrived, whether there was a large surplus revenue to start with, or a deficit to be made good before dealing with the emergency itself. When this book was writtfiii, early in 1881, it was stated by the authors that there was an assured normal annual surplus of revenue over ordinary expenditure amounting to more than 4,000,000. I see from your memorandum that the actual surplus over ordinary charges in 1880-81 was 6,400,000. In considering what coiild be done to meet some serious emergency, it was assumed, first, that we had this surplus of at least 4,000,000 to draw upon ; and, second, that an additional 2,000,000 might in case of necessity, be raised. Thus, it was supposed that some 6,000,000 a year would be forthcoming before any ques- tion of resorting to " heroic remedies," would arise. The position is now totally different. Your memo- randum shows how the changes have come about. Not only has the whole of the surplus of 4,000,000 disap- peared, but the greater part of the additional taxation,, which in 1881 was thought immediately practicable, has already been imposed in the shape of an income tax, and although this yields much less than had been anticipated by the authors of the book, it would now be in the highest degree unwise to alter it. Thus, whereas in 1881 we had the means of meeting a very serious emergency without having recourse to any extraordinary measures, we have at the present time, as far as I can see, no such means left. There only remain the " heroic remedies," and I certainly should not now contemplate the adoption of such remedies so calmly as was possible under the very different political conditions of 1881. But I need say nothing on such questions, which the Commission will doubtless consider fall altogether out- side the sphere of this present inquiry. I should be sorry myself to give any opinions regarding them, imtil I knew the views of the Government of India. They alone have the means of arriving at a sound judgment, if it should unfortunately happen that extraordinary measures become necessary, and on them primarily the responsibility must rest for deciding what those measures should be. Your sincerely, John Strachey. 28th February 1887. APPENDIX. 345 P — Comparative Statistics of Jute and Cotton Mills, 1876-7—1884-6. (See Question 2776.) Years. Number of Mills. Number of Looms. Number of Spindles. Average Daily Number of Hands employed. Number of Mills. Number of Looms. Number of Spindles. Average Daily Number of Hands employed. 1876-77 47 9,139 1,110,112 — 18 3,049 22,610 — 1877-78 53 10,533 1,289,706 — 21 4,094 38,946 — 1878-79 58 12,983 1,436,464 — 21 4,645 65,882 — 1879-80 58 13,307 1,470,830 39,537 22 4,946 70,840 27,494 1880-81 58 13,283 1,471,730 47,955 21 5,065 69,978 35,235 1881-82 62 14,386 1,550,944 52,231 21 5,655 90,755 40,551 1882-83 62 15,116 1,654,108 53,634 20 5,633 95,737 42,797 1883-84 74 16,251 1,895,284 61,836 21 6,139 112,650 47,868 1884-85 81 16,455 2,037,055 61,596 22 6,926 131,740 51,902 Q. — Joint Stock Companies registered and working in British India, March 1885. Companies. I. Banking and Insurance Companies. II. Trading Companies - III. Mills and Presses IV. Planting Companies - V. Mining and Quarrying Asso- ciations. VI. Ice Manufacturing Com- panies. , VII. Sugar Manufacturing Com- panies. VIII. Breweries IX. Miscellaneous Companies No. Nominal Capital. 207 124 152 138 25 14 4 3 29 696 Es. 5,06,37,328 4,73,54,650 10,80,67,330 4,18,07,000 1,28,35,100 27,22,500 23,95,000 12,00,000 1,18,58,000 27,88,76,908 Paid-up Capital. Es. 2,91,61,661 2,87,92,321 8,98,21,282 3,39,21,436 1,06,27,387 18,03,362 18,51,825 11,00,000 92,79,171 20,63,58,445 Yy 2 346 EOYAL COMMISSION ON GOLD AND SILVER: APPENDIX IX. Papers put in by Mb. Robert Barclay. Table No. 1. Progress of Indian Mills during the past 22 Years. See Question 2301. Years ending 30th June Average Price of Silver. Number of Mills. Number of Spindles. Numbe^: of Looms. 1865 Bomb 1866 do. 1867 do. 1868 do. 1869 do. 1870 do. 1871 do. 1872 do. 1873 do. 1874 do. 1875 do. 1876 do. 1877 do. 1878 do. 1879 do. 1880 do. 1881 do. 1882 do. 1883 do. 1884 do. 1885 do. 1886 do. 61^ 61* 60J^ 601 60A 60| 60A 59i 58^ 56f 52} 54if 51 J 52i 5HJ 51f 50^ 50| 48f 45» TS 1886 Bombay as above Berar Central Provinces Hyderabad (Nizam's Territory) Central India Bengal Presidency North-West Provinces and Oudh Madras Presidency Travaucore Mysore Pondicherry Total India in 1886 - 13 18 13 13 13 14 14 15 18 19 36 39 41 42 42 42 42 49 51 60 68 70 70 1 2 2 1 6 3 7 1 1 1 95 285,524 309,911 313,597 318,184 321,414 343,460 358,436 367,036 450,156 524,530 886,098 963,983 1,043,944 1,104,846 1,147,310 1,154,184 1,158,510 1,237,536 1,345,042 1,524,499 1,650,036 1,698,797 1,698,797 16,380 47,040 35,172 26,036 227,916 80,352 95,728 11,120 23,020 •2,261,561 3,579 3,455 3,779 3,844 3,920 4,441 4,641 4,653 4,972 6,103 8,339 8,681 9,291 11,544 12,311 12,396 12,510 13,046 13,616 14,299 14,588 14,635 14,635 406 405 464 858 235 452 17,455 Table No. 2. Exports of Cotton Yarns and Goods from India. (Froni Indian Trade and Navigation Returns.') Ybar. Yarns shipped to China, Japan, &o. Goods shipped to Aden, Eastbbn Africa, China, &c. Quantity. Value. Yards. Value. 1876-77 1877-78 . . - - 1878-79 1879-80 1880-81 1881-82 1882-83 1883-84 1884-85 1885-86 Six months, 1st April toT 30th September 1886 - j Lbs. 7,926,710 15,600,201 21,333,508 25,862,474 26,901,346 30,786,304 45,223,000 49,876,606 65,897,183 78,238,471 47,922,360 £ 367,303 682,059 886,481 1,109,234 1,282,576 1,368,836 1,816,818 * 1,926,162 2,441,100 2,755,042 1,729,811 15,544,168 17,545,464 22,661,231 25,800,501 30,424,032 29,911,017 41,563,000 55,613,763 47,968,017 51,5.58,151 29,197,180 £ 373,657 372,304 420,150 444,309 540,711 556,409 686,319 861,935 818,667 813,007 470,584 APPENDIX. 347 Table No. 3 Cotton Exports from England to Countries indicated under the following headings. (^From the English Board of Trade Returns.') CmNA, Hong Kong, and Japan. Othbb Countkibs. Year. Yarns. Goods. Yarns. Goods. Quantities. Values. Quantities. Values. Quantities.- Values. Quantities. Values. 1876 1881 1882 1883 1884 1885 1886 X!bs. 29,838,495 47,479,200 34,391,500 38,499,800 38,856,100 33,061,100 26,930,400 £ 1,272,008 1,898,089 1,385,278 1,295,039 1,451,749 1,239,012 900,846 Yards. 491,559,690 587,177,400 455,034,800 415,956,400 440,642,700 569,339,400 490,451,500 5,751,583 6,773,730 5,230,688 4,631,978 4,694,429 5,786,566 4,953,705 Lbs. 11,642,600 10,632,100 9,424,400 9,581,700 £ 621,425 605,689 512,685 463,497 Yards. 173,128,700 151,875,700 147,289,100 152,471,300 £ 2,260,484 1,996,807 1,859,099 1,778,011 Table No. 4. Imports of Cotton Goods from England. {From Indian Trade and Navigation Returns.') Twelve Months, 1st April to Slst March Six Months, 1880-81. 1881-82. 1882-83. 1883-84. 1884-86. 1885-86. 30th Sept. 18S6. Manufactured grey piece goods imported into India from the United Kingdom. Manufactured bleaolied piece goods imported into India from the United Kingdom. Mannfactiu^d coloured, printed, or dyed goods imported into India from the United Kingdom. Yards. 1,170,563,819 286,358,911 318,051,BMi Yards. 1,098,468,695 269,804,109 254,842,804 Yards. 1,086,286,672 233,873,431 320,936,918 Yards. 1,079,938,866 342,376,839 299,636,491 Yards. 1,138,343,726 277,876,450 316,345,829 Yards. 1,105,844,908 279,123,208 355,846,715 Yards. 690,898,481 197,243,578 223,613,014 Total . . - - 1,773,964,274 1,623,116,608 1,640,595,021 1,781,862,195 1,731,565,005 1,740,818,831 1,111,755,038 Table No. 6. Total Exports from England. (From the English Board of Trade Returns.) Cotton Yakns. Cotton Goods. Year. Quantities. Increase + Decrease — Values. Increase + Decrease — Quantities. Increase + Decrease — Values. Increase + Decrease — Lbs. per Cent. £ per Cent. Yards. per Cent. £ per Cent. 1850 131,400,000 — 6,400,000 — 1,358,200,000 — 20,500,000 — 1860 197,300,000 + 50 9,900,000 + 60 2,776,200,000 -f 104 40,300,000 + 96^ 1870 187,700,000 - 5 14,800,000 + 50 3,252,800,000 + 17 52,500,000 + 30 1880 215,544,800 + 15 11,901,623 - 20 4,495,645,000 + 38 57,678,084 + 10 1881 254,939,900 + 18 13,165,053 + 10 4,777,273,300 + %\ 59,103,921 + H 1882 238,409,900 - 6* 12,867,113 - 2 4,348,764,300 - 9 55,459,093 - 6 1883 264,772,000 + 11 13,509,732 + - 5 4,538,888,500 + 4i 55,334,166 — 1884 271,077,900 + 2i 13,811,767 + 2| 4,417,481,000 - 2i 51,661,408 - 7 1885 245,809,900 - 9\ 11,865,294, - 14 4,374,516,500 - / 48,276,85.'! - 6* 1886 254,346,100 + 4 11,488,803 - 3* 4,850,030,200 + 11 50,170,634 + 4 348 EOYAL COMMISSION ON ©OLD AND SILVER: No. 6. Memorandum drawn up by E. A. Hague, Esq., Manchester. The following Oldham Mills have either been closed altogether by the Indian competition of the last few years or (where buildings and capital allowed) have been adapted for and changed to spin other counts. Mule Twist Yarn 16/24'. Number of Mill. Bemabeb. Spindles. 12,000 No. 1 . Sold out machinery. 10,000 „ 2 - Ditto. 6,000 „ s . Ditto. 40,000 „ 4 . Ditto. 18,000 „ 6 - Ditto. 40.000 >, * . One portion stopped. Other portion not reeling yarn. 80.000 „ 1 . N o-w making 30" and 40'. 60,000 „ 8 - Now making up to 40' for home use. Spinning 6" and 24" for doubling. Stopped for twelve m'onths past. 30,000 ., 9 - 11,000 „ 10 . 15,"00 „ 11 . Spinning 6/26" for doubling. 10,000 „ 12 - Ditto. 8,000 „ 13 . Ditto. 20,000 „ 14 Total Sp -, Spinning 20/34' for home u»e. 345,000 ind les in 14 mills of which 1 are entirely stopped. No doubt more e.'chaustive inquiry would add to this list, which, moreover, does not include other towns such as Heywood and Rochdale, where alrfo these counts were partially spun. I have a further list of 15 other mills hitherto spinning 4' and 14" now closed, some undoubtedly by the competi- tion of such mills as Nps. 9, 11, 12, and 13, which have been forced into adapting their machinery to spin lower Nos. than 16" though these counts were already adversely affected by hostile continental tariffs. There is no doubt also that spinners of 16/24' water twist have been almost equally disasterously affected, but . these spinners are so scattered about the country, from Rochdale to Wigan, that it is difficult, if not impossible to obtain reliable statistics. The largest exporters of yarn to China and Japan, from tables which they keep, estimate the falling ofE of the exports to these markets during last years (1886) at — 300 bales (of 400 lbs. each) weekly of 16/24" Water and 200 ,, ,, ,, „ Mule, from what they were four to five years ago, and there_ can be no doubt that practically this trade is being simply annihilated. Be it remembered that up to four to five years ago this was a growing trade despite the competition of the Bombay mills, and it would have continued to grow but for the exchange difficulty. Meantime, fostered by the quasi-protection of cheap silver these Indian mills enjoy a trade so profitable that in Bombay alone the mills have been doubled within 12 years and. from -eight, to. ten mills are now. in. process pt con- struction in India besides works for bleaching, dyeing, printing, &c. Good spinning mills in Bombay have earned a steady 10 per cent, and upwards since 1878. This same Indian competition has completely crippled Rossendale and the Todmorden Valley where coarse T. cloths, drills, sheetings, &o. &o. were largely manufactured for India and China. First they were mostly driven from the Bombay market, afterwards from Calcutta and Madras and now they have to meet the Indian goods in China and the East Coast of Africa, until it is probably true that half the manufacturers in these districts (of these goods, i.e.) have been ruined and their mills are empty where they could not be turned on to the manufacture of shirtings, &c. in competition with the Blackburn trade. True the distress in these districts was first caused by hostile conti- nental tariffs, but they would have suri-ived that but for the competition of the Indian mills. This double cause makes it impossible to estimate the effect of the fall in exchange with any approach to the clearness with which it can be traced in the spinning interest, but there is another branch of trade which has been simply extinguished by the same cause, viz., that of Ohudders and Goarse Dhooties made from about 20' yams. This trade was the offspring of that " opening up of India " by the construction of new roads and railways. It first sprang into existence some twelve to fourteen years ago, the demand being to replace the product of native hand-looms mostly from home-spun yams. The vastly superior quality of our own goods made from American cotton quickly brought them into favour and enabled us for long to withstand even the competition ot Bombay mills. But latterly the trade has graduaUy died out and last year we did not make a single piece. Table No. 7. — ■OoTTON Spinning, Manufacturing, and other Companies. Oldham and District. (^Tahenfrom "The Oldham Chronicle" of 5th February 1887.) Name of Company. Shares Paid on. Buyers . Sellers Div. £ s. £ s.d Abbey - 2 2 — — nil „ (pref.) - - - 4 4 4 76/0 14,16 d nil Albany 6 2 10 6/6 619 d nil Albert - ... S 2 15 22/0 17/0 d nil Albion - - - - 100 40 10/0 30/0 J) 2i istley .... 6 2 6 7/0 6/0 d nil Bankside 5 4 10 70/0 60/0 d nil JSelgian - 6 3 41/0 40/6 d nil Borough S 3 19/6 16/0 d nil Boundary 6 3 19/0 16/0 d nil Broajdway . Brookbottom 6 5 66/0 49/0 d nil 6 3 41/0 39/0 d nil Butler Green 26 26 60/0 45/0 d nil Cambridge - • . 6 4 40/0 32/Od nil Cavendish 5 2 10 8/0 6/0 d nil Central . - 6 3 6/0 7/ep nil Chaddertou 100 60 par 10/0 i) 4 Coldhurst 6 3 10 6/0 i/Od 4i Commercial 5 3 36/0 83/0 d nil Crawford 6 2 0/6 2/Op 2i Croft Bank 4 2 17/0 16/0 d nil Drompton - - 6 4 12 6 6/0 8/0 p 6i Dowry . 6 2 15 12/0 8/6 d nil Duchess - 6 2 10 0/3 1/Op nil ,Duke 5 2 10 1/9 2/3 p 4 TJukinfield Hall - 5 5 3B/0 30/0 d nil Equitable - 6 5 58/0 60/0 d nil ' ' „ (pref.) 6 6 18/0 16/0 d 10 rem - 100 40 20/0 d par 3J fiOTfleld 5 2 3/6 1/0 d 5 Gladstone 4 10 3 10 46/0 44/6 d nil Giodwick 6 4 45/0 41/6 d nil Granville - 100 40 60/0 3B/0d 3i Greenacres 5 4 28/0 26/0 d nil Green Lane (old) 60 50 £2 £6 p 5 „ (new) - , - 60 10 10/0 20/0 p 6 Grimshaw Lane 100 60 £3 £5 p nil Grosvenor - . - 5 2 15 40/0 35/0 d nil Guide Bridge . 6 2 10 10/0 8/6 d nil Harper Twist - - - Hathershaw 6 3 10 30/0 25/0 d nil 5 3 49/0 36/0 d nil Haugh 5 3 S/0 4/0 p 6f Henshaw Street . 6 4 15 7B/0 70/0 d nil Hey .... 5, 3 46/0 40/0 d nil Higginshaw Hollinwood - - 6 4 10 67/0 64/0 d nil 5 2 10 17/0 14/6 d nil Honeywell Hope - . . - Industry 5 6 12/0 11/0 d nil 5 3 16 64/0 46/0 d nil 6 4 6 76/0 71/0 d nil , (pref.) - - 1 10 13/0 9/0 d nil Ivy- - - 6 1 15 lO/O 9/0 d nil Junction - - - 100 50 20/0 40/Op 4 Lancashire 4 10 4 — - d nil -Lansdowne - . --. 4 10 2 20/0 19/0 d nil Leesbrook 6 1 IB 1/6 d par nil Lees Union 9 6 63/0 61/0 d nU Lime 20 16 70/0 60/0 d nU tivlngstone 6 2 27/0 24/0 d nil Longfield 6 6 84/0 78/0 d nil Xower iKlqor - - . . B 3 16 5/0 d SlOp 81 Mid. and T'ge (old) . (new) 10 10 40/0 80/0 d nil 6 5 36/0 20/0 d nil Tlloorfleld 6 4 12/0 9/0 d 2i .10 5 9 '^- 7/Op 5 Mossley 4 4 '50/Od nil New Earth - - . 4 S 10 44/0 41/0 d nil New Hey 6 2 10 2/6 6/Op 74 New Ladyhouse 6 4 par 1/Op 5 North Moor . B 3 1/0 d par 3i Oak 6 2 10 7/0 4/0 d 1^1 t)ldham and Lees - 6 2 10 1/0 d par nil Oldham Twist (old) 20 20 20/0 10/0 d nU (new) 20 10 20/0 10/0 d nil Olive .... 100 46 60/0 40/0 d nil Palm 100 40 30/0 d 10/0 5 Bark and Sandy Parkside 6 3 10 26/0 20/0 d nil 6 3 0/6 2/Op 8i nil Phoenix 6 2 10 49/B 40/0 d Prince of "Wales 6 3 34/0 30/0 d nil Quick Edge Bldgeflelcl . Bochdale 6 4 10 48/0 40/0 d nil 6 4 15 50/0 40/0 d nil 6 2 0/6 d 0/6 p nil loyton 6 3 5/0 6/0 p 6» Siaw - 5 3 10 14/6 12/0 d ml Sniloh ... 6 2 10 36/0 31/0 d nil Smallbrook 6 4 11/0 9/0 d nil Staly^bridge 5 2 3/0 1/0 d nil S^smley .... 6 S 10 60/0 54/0 d nil Stock Lane - 5 3 10 par yep 51 5 2 0/6 d 2/0 p nil Sun Will . 6 6 30/0 27/0 d nil Slwan 6 4 10 30/P 28/6 d nil Thomham- B 3 6 11/0 9/0 d ml Tonge Vale (A.) ' .. (B.) 6 BOO 20/0 16/0 d nil 6 2 16/0 12/0 d nil United - - 6 3 18/B 16/0 d nil ■Werneth 6 S 18/0 16/0 d nil ■VfestBnd 10 6 50/P 45/0 d nU Westwood Whitelanda Twist 6 3 0/pd 2/Op 3t 5 2 10 t 4/0 d nil Windsor ... 6 2 10 7/0 d nil T foodstock 6 4 10 mid 44/0 d nil APPENDIX. 349 APPENDIX X. Papers put in by Mr. H. H. Gibbs. (1.) Exchange v. Freights as a local influence on Eseports, (See question 3049.) When a country's exports possess an intrinsic value considerably higher than the charge for freight on them, their price in the currency cf that country will be affected far more by fluctuations of exchange than by fluctuations of freights. The reason is that exchange, when applied to first cost, influences the principal factor of the total coat, while an alteration in freights only affects a secondary factor in the total cost. Picking them out at random, one might say that coffee, wool, cotton, sugar, wheat, indigo, nitrate of soda, and copper, would all serve to prove the truth of the above statement, but it will suffice to give examples from the last two articles named, nitrate and copper. The currency price of nitrate in Valparaiso at the beginning of January 1886 was $3 15c. per quintal of 100 lbs. Spanish, current freight was 26g. 3d. per English ton of 22 quintals Spanish, and the exchange ruling was 26f rf. per dollar. The average rate of exchange during that year was 23'76d. per Chiban dollar, and the average rate of freight was 24^ shillings per English ton respectively, 9'9I per cent, and 5'16 per cent, lower than the above-mentioned January quotations. ' Supposing other conditions of the nitrate market to have remained the same during 1886, how would the said average declines of exchange and freights have respectively affected the currency price of $3 15c. with which the year started. As regards exchange, it is plain that an exporter could afford to increase his offer to buy by adding to the currency price the exact per-centage of the fall in exchange; there- fore he could in the present instance add 9'91 per cent., or say 31c. to the original price of $3 15c. But in consider- ing how the fall in freights will affect the question, we must bear in mind that the decline of 6"15 per cent, cannot be applied direct to the currency price at all, but that it must, in the first instance, be applied to the proportion of freight corresponding to the weight of nitrate represented by said currency price. This price is quoted per Spanish quintal, of which 22 go to the ton. Therefore, we must first divide 26s. 3d. (the original freight by 22, which gives l-^th shillings per quintal) or, at 26f rf. exchange, 59c. freight per Spanish quintal, on which a decline of 5' 15 per cent, is equal to a reduction of 3c. per quintal for freight, which 3c. may now be added on to the price which the exporter can bid for the nitrate. The calculation, therefore, stands aa follows : — Original price Add, for decline in exchange, 9'91 per cent, on $3' 15 - - - Add, for decline in freight, 6-15 per cent, on $'59 $ 3 c. 15 31 3 49 The above figures show that while the decline in ex- change would affect the currency price to the full extent of the per-centage of fall almost 10 per cent., the decline in freights though 5-15 per cent, (more than half that of exchange) would only affect the price to the extent of 1 per cent. The same result will appear in a still more marked degree if we take an illustration from copper. The currency price of Chilian bar copper at the beginning of January 1886 was $15'30 per Spanish quintal, and working on the same formula as the above for nitrate, we get the following figures : — Original price ... Add, for decline in exchange, 9'91 per cent, on $15"30 Add, for decline in freights, 5" 15 per cent, on $'59 $ 15-30 1-51 •03 16-84 Here again, exchange affects the price to the full 9-91 per cent., while the decline in freights, 5-15 per cent., as before, only affects the price to the extent of a, fifth of 1 per cent. Copper therefore, owing to its greater value, was much more affected by exchange than nitrate. This, however, is only a side issue, and the principal point made plain by the foregoing calculations is that the fall in 1886 of 9-91 per cent, in exchange and 5-15 per cant, in freights was equivalent to the following advances on the January cur- rency prices of nitrate and copper, viz. : — Nitrate, equivalent extra price for lower exchange . . . Nitrate, equivalent extra price for lower freight Total per quintal Copper, equivalent extra price for lower exchange ... Copper, equivalent extra price for lower freight Total per quintal $ 1-51 •03 1-54 which figures are an emphatic confirmation of the opinion expreaaed at starting, that exchange exercises a far greater influence than freights on the currency prices of relatively valuable produce. John Manley Lowe. London, February 23, 1887. (2.) Memorandum on the influence of the depreciated Currency in Chile on its Export Trade with the United Kingdom. (See question 3192). The prmcipal exports of Chile, — wheat, copper, silver, and nitrate, have all been benefited by the depreciation of the currency in that country. The best example is wheat, aa it has benefited more than the other three, and we will endeavour to show how it has been specially favoured by the decUning gold value of the national currency. To do this it wiU be necessary to study briefly the conditions under which it is cultivated. Roughly speaking, Chilian wheat is produced by unskilled, and, therefore, ill-remunerated labour. The land for the most part is owned by Chilians, the farms 350 ROYAL COMMISSION ON GOLD AND SILVER : are very large, the soil usually good, and the tillage super- ficial and inexpensive. The agricultural labourers are of mixed Spanish and Indian blood, and, though very strong and hardworking, are notoriously as ignorant and back- ward as any Roman Catholic peasantry in the world ; hence they are slow in understanding that a depreciated currency works against them in the matter of wages. But even if they were quicker in perceiving the effect of exchange on their wages, it would not make much difference, because they only receive the smaller part of their remuneration in actual money. A resident labourer on the estate will be allowed— A cottage, rent free. A piece of land, perhaps half an acre, rent free, and free use of his master's bullocks to plough it with. A daily ration of bread and beans, and from Td. to \Qd, per day in cash. Between his rations and the produce he gets off his patch of land he has sufficient food for his family ; he can grow his own tobacco, and he drinks wine or spirits made from farm produce, grapes, or maize. The only point where exchange touches him is in buying clothes ."but, owing to the generally mild climate, his wants in this respect are very moderate, and he spends next to nothing on imported goods. From the foregoing it will be seen that however much the currency may fall in its gold value, the Chilian agri- cultural labourer's subsistence is always secured to him, and that he is only harmed, and that to a small extent, by the shrinking of the money part of his remuneration. Computing the money value of his services at 2s. 6rf. per day, of which only lOrf. is paid in cash, and supposing the currency to have depreciated 50 per cent., it is clear that he is only affected to the extent of bd. per day, or less than 17 per cent, of his total earnings. Therefore, even supposing him to find this out imme- diately, and to have the means to enforce his claim (both of which suppositions are contrary to experience) his em- ployer will only have to increase his total wages 1 7 per cent, to redress his grievance. Now let us look at the farmer's side of the question, bearing in mind that he employs no skilled labour, uses no artificial manures, and that his labourers till the land with the cattle bred on the estate. We will assume his wheat, at 46rf. exchange to have been worth for export $4 per hectolitre of 166 lbs. Spanish, and that the gold value of the currency has gradually receded to 23d. per dollar. We will also assume that at Add. exchange his wheat was costing him $3 per hectolitre, of which the half for labour, and the rest for general farm expenses, freight by rail to the nearest port, and shipping expenses. In the first instance, with exchange at 46rf., he can sell his wheat at $4, equal to 15s. Ad., but in the second ex- change has receded to 23rf., while the price of wheat in Europe and other conditions have remained the same. The Valparaiso merchants can still afford to pay the equiva- lent of 15s. Ad. for the wheat, and competition will oblige them to do so. But 15s. Ad. at 23d. is equal to $8, or double the iirice which the farmer formerly got, so that his gross currency profit on an hectolitre of wheat will be $5, instead of $1, as in the first example considered. We have now only to examine what effect the lower exchange will have on his cost of production, which we have assumed to be $3 when exchange was 46rf. Proportion of wages to total cost of producing wheat, one-half of $3 1 50 Deduct, paid by free rations, &c. - 1 Payment of wages in actual money - 50 50 per cent, depreciation in ex- change, made good - - 25 Extra cost of bagging - - 10 Sundries, say - - - 5 Total extra expenditure, per hectolitre 40 which will leave the farmer with a nett profit of $4 60 c. at 23d., while he only made $1, when exchange was at 46rf. It is thus easy to understand how Chile has maintained its position as a wheat exporting country in spite of the collapse in the European price of wheat. When exchange stood at A6d. the European price of wheat was in the neighbourhood of 55s. per qr., while within the last two years it has touched 30s., and exchange has been below 23d. Thus, although wheat in Europe has fallen 46 per cent., the currency price in Chile has, as a rule maintained, and sometimes exceeded, its level in former years, in some measure owing to the steady decline in freights, but more particularly to the rapid depreciation of the currency of the country. The Chilian farmers have been doubly benefited by the fall in exchange, as it has not only tended to increase their incomes, but has at the same time reduced their debts. As a class they were heavily under advance to the various banking establishments in the country, but of late years they have been receiving extra profits arising from the lower exchange, and have been using these profits to pay off in dollars worth, perhaps 28c?. currency debts in- curred when the dollar was very likely worth 40(?. or more. It is easy to see what a stimulating effect this would have on their business, and how it would encourage them to increase their wheat acreage. Altogether, it may reasonably be inferred that if the price of wheat in Europe had been maintained, and Chilian currency had fallen to its present level (23rf. to 24rf.), exports would probably have been doubled long ere this, or conversely. If the price of wheat had receded to 30s., and Chilian exchange had remained steady at A&d., the export of wheat would have been seriously curtailed, if not rendered, altogether impossible. As it is, the fall in the European price of wheat has been more than counterbalanced by the depreciation in the Chilian Exchange ; no extreme effects have been felt either way, but the falling Exchange, assisted by the decline of freights, has enabled the Chilian farmer in many instances to do considerably better than he did formerly with a high price of wheat in Europe and a high exchange on the coast, and has therefore directly tended to protect and stimulate exports. What is true of wheat is also true, to a less extent, of copper and silver, and to a still less extent, of nitrate. In the production of copper and silver, skilled labour and im- ported coal, coke, &c. are used, and to a large extent increase the currency cost in direct ratio with the fall of exchange. In the production of nitrate, the currency wages paid to unskilled labour form a still less important item in the total cost, the bulk of which is on a sterling basis, and therefore not affected by fluctuations in exchange. Wheat therefore seems the best article to single out for the purpose of tracing the influence of a depreciated currency on Chilian exports. John M. Lowe. London, February 14, 1887. APPENDIX. 351 APPENDIX XI. Papers put in by Mr. A. D. Provand, M.P. (1.) Table showing Prices at Shanghai in each month, from March ;to August 1886, of six imported articles of Standard quality and also the Rate of Exchange for demand Bank Bills on London. {See Question 3312.) Kate of ezuhSiUge, per tael - Lead, L.B. brand, per pioul - Tin plate, 10x14, per box - Nail Rods (Dawes), per picul - stripes, H.H., per yard - Lone ells (scarlet) H.H., per piece - 8i lb. gray shirt- ings March 4/7 4-45 4-12i 2-00 0-484 5-124 1-73 April. 4/64 4-224 4-124 2-00 0-464 5-124 1-73 May, June. 4/64 4/6i 4-274 4-15 4-124 4-124 2-00 2-00 0-464 0-474 4-824 4-74 1-72 1-71 July. August. 4/41 4/2i 4-124 4-25 4-124 3-90 2-00 2-00 0-47 0-60 4-94 5-10 1-72 1-76 Note. — From March to August exchange fell eight per lower in August than they had been in March, notwith- cent. To meet this there was no corresponding advance in standing that the largest business during the year is done the prices of goods. Nearly all the six articles were actually during the months from March to August. (2.) Table showing Ebsults of 56 January 1886 and Teansactions completed with Shanghai between May 1887, (See question 3289.) 1. 2. 3. 4. 5. 6. 7. 8. 9. Dates. hi III " ® fi 9 i| a o-a S m 3 c 3-S mm ■IF- ill" |i|l-=i§ii 1^ |3|.|.s||| < gin §,1,1 a^ < 1386. January 13 s. d. 4 54 s. d. 4 64 1 64 per cent. 1886. April 27 s. d. i 6i d. +14 9| per cent. 19 4 5i 4 71 2 18 May 4 4 6i + f * - 26 4 6i 4 74 li 9 11 4 64 + 4 34 - February 2 4 5i 4 74 14 9i 18 4 5| * - — 9 4 64 4 7 If 114 25 4 64 +1 64 — 16 4 51 4 61 14 74 June 1 4 5f + i 11 — 23 4 51 4 6i 14 74 8 4 6 + f 24 — March 2 4 51 4 6i 14 74 „ 15 4 64 * - — 9 4 6f 4 6f 14 74 ,. 22 4 5f - 4 - 4 per cent. 16 4 51 4 6i 14 74 „ 29 4 6 - f - 1 23 4 5f 4 61 14 74 July 6 4 4f -14 - 24 J, 30 4 6i 4 6i 14 74 18 4 34 -24 - 4 J April 6 4 5f 4 6f 14 8 20 4 3f -2 - 31 , 13 4 54 4 ei 11 10 27 4 Sf -24 - 4 22 4 64 4 6f 14 8 August 6 4 2f -2i - 64 , 29 4 64 4 6i 14 8 12 1 34 -2f - 44 May 6 4 6 4 61 .11 9 19 4 2f -2f - 6 IS 4 6 4 64 14 84 26 4 3 -2 - 3J 20 4 4f 4 51 14 74 „ September 2 4 3 -If - 3 27 4 41 4 64 li 114 9 4 44 - 4 - 1 June 3 4 44 4 5f If 9 16 4 4f -4 - 4 10 4 41 4 6 If 9 23 4 4f ♦ - — 17 4 4f 4 5j 1 64 „ SO 4 6 •1- i 24 per cent. — 24 4 4f 4 6f ^ 6 October 7 4 64 + f 4 - o 24858. ^7 Zz 352 ROYAL COMMISSION' ON GCfLD AND SILVER: (2.) Table showing Eesults of 56 Transactions — continued, 3. 4. ,j ) ,,^ 5. ,;4v 6. 7. 8. Dates. •a?^; ^ to ^si ■l^"^ S PI o .a 5 a, ■^fl'3 «H1R 03 • pj ffl ^5 BO© o n c» £iCt)0gdg°a rs 01 t< o C0 7"\ S fig 1886. July 1 «. d. 8 43 IB 4 2 22 4 2 29 4 2 August B 4 04 12 4 01 19 4 Oi 26 4 01 September 2 4 1 9 4 li 16 1 11 2S 4 li 8C 4 2J October 6 4 24 12 4 8i 19 4 34 26 4 31 Novembor 2 4 4 9 4 4 . 16 4 '5 23 4 6 30 4 41. December 7 4 54 14 4 B4 21 4 44 5 28 1887. Januaiy 4 l 4 44 4 41 11 4 5i 18 4 54 2B 4 64 February 1 4 54 5. d, 4 5 4 4t 4 34 4 31 4 3i 4 2i 4 34 4 2i 4 8 4 3 4 44 4 4f 4 4t 4 5 4 S4 4 5f 4 6 4 54 4 6> 4 64 4 71 4 8 4 84 4 8 4 n 4 6| 4 64 4 6J 4 74 4 8 4 74 4 7J d. 1 « 14 1* II 24 2i 11 24 2 24 21 21 24 14 li 24 2f 21 24 2 24 24 24 2 • 6f per cent. ' 94 10 111 „ , 94 154 374 134 16 144 174 . ., 184 204 164 19 144 10 lis 144 16f 15f 19J 224 „ 18 174 16 134 14 Uf 164 134 101 October November 11 18 26 December 2 9 16 30 1887. January 6 13 18 February 1 S 15 22 March 1 8 IB April May 29 6 12 19 26 3 10 17 s. d. 4 6| 4 S 4 B4 4 64 .4 64 4 71 4 8 4 6f 4 64 4 6i 4 74 4 8 4 74 4 74 4 6f 4 64 4 B4 4 61 4 64 4 44 4 44 4 4 4 34 4 34 4 4 4 44 4 4 4 3t 4 4 +11 +2 +34 r+4l4. +44 + 61 +74 +74 +74 +6f +5 +4i +54 + 5 +54 +4i_ +3f +21 +24 +14 + f + 4 - 4 -14 -14 -1 -1 - I - I -14 -If -14 94 per cent. 13i 244 2Si 314 494 52 53i 62 49 35 334 364 „ 35 241 194 16i 10 24 11 4 percent. 14 14 21 34 2i The above table of 66 completed transactions with Shanghai during the past lj3 months shows hovir the expprt trade from the United Kii^gdom to China is affected by the fluctuations in the rate of exchange. Columns 1, 2, and 3 shor the position when each draft was sold ; the average valhe of the tael in column 1 is 4s. 4i%d., and as the average difference between the rates in columns 1 and 2 is \%d. j(column 3), this on 4s, A%d. for 105 days, the currency of the drafts_(see heading, column 5), is at the rate of lifter cent, per annum, which the merchant would have paid for the use of the money, assuming the rate did not alter during the 105 days. Column 4 shows that the rates at the different dates varied from 6J per cent, to 23^ per ceat. (the average of the 56 transactions being ll|j per cent., as stated ' above) ac- cording to the view the bank took of the future of the rate of exchange. ! Column 5 shows the due dates of payment in Shanghai of the various drafts. Column 6 shows the rates for telegraphic transfers in Shanghai on London on the dates as near as they can be ascertained when the bank was paid the drafts. Column 7 shows the differences between the telegraphic transfer rates when the drafts were sold to the bank (column 2) and when theji were paid to the bank (column 7) and the variations of e.\change were meantime so great that — I Column 8 shows that the merchants who sold at the rates in column 1 paid varying rates of interest (as Com- pared with those who did not sell) up to 52| per cent, per annum ; and Column 9 shows that those who sold at the rates in column 1 had the use of the money for the 106 days (for nothing where marked *) and made a profit besides varying from I per cent, to 6^ per cent, on the transactions noted in this column, the fall in exchange had been so great meantime. It follows from the above that the merchants who sold their drafts forward usually lost on the transactions, when exchange meanwhile advanced, and on the other hand the merchants who did not sell forward, but took^the rate ruling in Shanghai when the goods were sold, usually lost when exchange fell, and the conflicting interests of the two classes of merchants kept the rates for imports in Shanghai fairly steady. Cotton goods is the largest item of our exports to China, and while exchange fell 11 per cent, between January and August 1886, and rose as much between August 1886 and January 1887, the Manchester prices of cotton goods varied only about 3 per cent, during these 13 months.' The merchant's ventures were therefore chiefly in exchange and not in Manchester goods. The trade is keenly competed for. If a merchant was fortunate in selling drafts forward, or in not doing so, he would Ukely gain, but if not fortunate, loss was certain, and as loss might come by either a rise or a fall in exchange, instead of the merchant being described as an exporter of cotton goods to China, it would be a more accurate description to say he was a speculator in exchange with China by means of cotton goods. APPENDIX. 353 APPENDIX XIT. CoEEESPONDENCE between the Treasuet, the India Office, and the Government op India. The Secretary of the Treasury to the Chairman of the Gold and Silver Commission. Treasury Chambers, Sir, 25th November 1886. I AM directed by the Lords Commissioners of Her Majesty's Treasury to request you to lay before the Royal Commission on Gold and Silver the enclosed copy of a letter upon the silver question which has been addressed to them by the Secretary of State in Council of India. My Lords note the earnestness with which the Govern- ment of India urge upon the Secretary of State the difficulties of the situation. It is not necessary for them here to enter upon the discussions which have taken place between the Treasury and the Secretary of State on the silver question. The Treasury, however, while differing widely from the Secretary of State upon many points, has never questioned the inconvenience to which the fall and ' the fluctuations in the gold price of silver subject the Government of India, and my Lords would be ready to promote by legitimate means, not involving a charge on the taxpayer of the United Kingdom, an extended use of silver in this country. They can only assure the Royal Commission that any suggestion which may be made by a body so well qualified to express an opinion on the subject, will receive their most respectful attention. I am, &c. (Signed) W. L. Jackson. The Right Hon. A. J. Balfour, M.P., Chairman of the Gold and Silver Commission. Enclosure, India Office, Whitehall, S.W., Sir, 4th November. In January last, under the direction of the Secretary of State for India (then Lord Randolph Churchill) in Council, I had the honour to address you, for the infor- mation of the Lords Commissioners of Her Majesty's Treasury, on the subject of the serious difficulties which had been caused in the financial administration of India, by the continued fall in the price of silver in relation to gold, and the uncertainty that existed as to the future exchange value of the rupee. Subsequently a letter was forwarded to the Treasury, which had been received from the Government of India, stating at some length the grounds on which they con- sidered that it was desirable to endeavour to settle the silver question by international agreement. At the end of May Mr. Fowler, the Secretary of the Treasury, replied, on behalf of the Lords Commissioners, to the letter in which the Secretary of State in Council had called the attention of their Lordships to this subject. For reasons which were stated in my letter of the 7th July, the Secretary of State in Council while taking specific exception to certain statements contained in the Treasury letter, abstained from entering into a discussion on the subject, which, it was understood, was under the notice of the Royal Commission on the Depression of Trade, and expressed the hope that another opportunity might be afforded at an early date for the consideration of the question in which the Government of India had so great an interest. A copy of the correspondence between this Office and the Treasury having been sent to the Governor General of India in Council, the Government of India has addressed to the Secretary of State for India a letter replying to Mr. Fowler's letter of the 3Ist of May last, and I am now directed to forward a copy of this letter for the information of the Lords Commissioners of the Treasury, with the following remarks. Her Majesty's Government having resolved that it was expedient to refer the whole of the questions arising in connexion with the recent changes in the relative values of the precious metals to a Royal Commission, and such a Commission having now been appointed, the Secretary of State for India in Council considers that it wiU be desirable that copies of the correspondence that has been above re- ferred to should be laid before the Commission, and he will further be prepared to furnish it with any other in- fbrmaition on the subject of their inquiry which may be at his disposal. It would obviously be out of place at the present moment to attempt any discussion of the more technical points raised by the Government of India relative to the desired establishment of a fixed ratio between gold and silver for currency purposes, as these are among the chief subjects on which the opinion and advice of the Royal Commissioa have been asked, and that body will have to judge of the relative weight of the arguments addressed by the Gover- nor General of India in Council and of those to which they are designed to reply. Neither does it seem desirable to offer any comments on the question whether India has, in respect to its trade or otherwise economically, gained or lost by the effect of the recent fall in the value of silver in relation to gold. The facts bearing on this part of the subject are, however, of great interest ; they have received special attention in the Financial Department of the Government of India, and a copy of a note prepared by the Assistant Secretary in that department is annexed. Viscount Cross entirely concurs with the Government of India in the observations contained in paragraphs 15 and 16 of their letter so far as they relate to certain proposals affecting the Indian coinage made in 1878, which had not been renewed or even referred to on the present occasion. In addition to the general explanations afforded in para- graphs 17 to 22 relative to the growth of Indian expendi- ture, it may further be stated that much of the apparent growth of expenditure referred to in the Treasury letter is due to changes in the form of the Indian accounts and to the exhibition of charges on account of public works, afi'ecting alike both the receipts and expenditure which in former years had been excluded from the published state- ments. The Secretary of State for India in Council likewise desires especially to repudiate the idea apparently enter- tained in some quarters that the Government of India has been unduly influenced in its representations on this sub- ject by the personal interests of the English officials in India, otherwise than so far as every Government not only may, but is in duty bound to consider the welfare of its servants. In conclusion. Viscount Cross will only repeat the opinions expressed by Lord Randolph Churchill in January last, and, reiterated by the Government of India time after time, as to the difficulties and dangers to which India is exposed by the present state of the silver question. " Fur- " ther taxation appears at present inevitable " says the Viceroy in his last letter " and when we have again esta- " blished equilibrium there is no prospect that the settle- " ment will be final or even reasonably permanent," and he concludes by saying, " we do not, therefore, hesitate " emphatically to repeat that from the point of view of " Indian finance the position has become intolerable." I have, &c. , „ (Signed) J. A. Godley. The Secretary to the Treasury. No. 277 of 1886. Government of India. DEPARTMENT OF FINANCE AND COMMERCE. Accounts and Finance. To the Right Hon. Vlscount Cross, G.C.B., Her Majesty's Secretary of State for India. ^^ ^°w ' 1. , ^^'°^^' ^**i September 1886 T J We nave the honour to acknowledge receipt of l^ui ^Tqa^^'J'" ^^"^"i^ial Despatch No. 194, dated 8th July 1886, forwarding a copy of correspondence with the Treasury on the subject of the settlement of the exchange question by international agreement. Zz 2 354 KOYAL COMMISSION ON GOLD AND SILVER : 2. In our Despatch No. 45, dated 2nd February 1886, we pressed upon Lord Randolph Churchill the extreme importance in the interests of. our Government of settling the silver question by international agreement, and we observe with much satisfaction that in Mr. Godley's letter of 26th January 1886, addressed to the Lords Commis- sioners of Her Majesty's Treasury, the Secretary of State for India in Council stated that he could -not avoid " the conclusion that it is imperatively necessary to make every effort to find some remedial measure which will relieve the Government of India from the position in which it is now placed," and that "the comparative stability of the relative value of gold and silver " was " essential for the regular course of trade " and " of vital importance to India." The Lords; Commissioners of Her Majesty's Treasury replied, in Mr. Fowler's letter of 31st May 1886, to our proposals and to the communications made by the Secretary of State for India in Council, that they could take no measures for summoning, or co-operating in, a new Monetary Conference until they had previously determined what policy they should initiate, or could assent to ; that the whole question was understood to be under the consideration of the Royal Commission on the Depression of Trade ; and that there was nothing in the correspondence and information before the Lords Commissioners which should induce them to depart from the instructions given to the Representative of England at the Monetary Conference of 1881. The instructions given to the English delegate at that Con- ference were to the effect that "he would assist at the. " meerings of the Conference solely in order to be a medium " of communication, and to afford information which the " Conference may require, but with no power of voting." 3. We observe that your Lordship's predecessor did not propose to continue at present the discussion of this important matter with the Treasury. We have no wish to question the expediency of this decision ; but, in view of the probability of the subject being again taken into considera- tion in compliance with the recommendations of the Royal Commission now inquiring into the causes of the depression in trade, we think it of importance to acquaint your Lordship with our views on the main points raised in the letter from the Lords Commissioners of Her Majesty's Treasury, dated Slst May 1886. We cannot, meanwhile, in view of the experience gained since 1881, and of the grave importance of the question, avoid expressing dis- appointment at learning that Her Majesty's Government proposes to adhere to a purely passive attitude, and that the Government of India is to meet its pressing financial difficulties unaided, or with such assistance as it may derive from the action of foreign nations. We trust that this decision is not irrevocable, and that the result of the deliberations of the Royal Commission, which we hope will be appointed for the special purpose of examining the silver question, may be to disclose some method of relief for our finances which will, at the same time, be acceptable to Her Majesty's Government. 4. We understand the grounds on which the Lords Commissioners of Her Majesty's Treasury decline to take any steps at present towards a settlement of the silver question by international agreement to be as follows : — Firstly, that it is doubtful whether it is possible to secure stability of value between gold and silver. Secondly, that it is not proved that any measures which would raise the gold value of silver would on the whole be a gain to India. Thirdly, that the arguments employed against the pro- posals made by the Government of India in 1878 have never been answered, and retain their full force. Fourthly, that the difficulty can be met in great measure by reduction of expenditure. Fifthly, that the Government of India has not distinctly stated the nature of the remedy which it proposes. We propose to deal with these arguments in the order in which we have stated them. Possibility of maintaining stability of relative value of Gold and Silver. 5. The Lords Commissioners remark that the question of the possibility of maintaining a fixed ratio between gold and silver is " one of the most disputable and disputed points in economic science," and they quote the declaration recorded by the rej>resentatives of Her Majesty's Govern- ment at the International Monetary Conference of 18/8 that "the establishment of a fixed ratio between gold and silver is utterly impracticable." We desire to observe that the establishment of a fixed ratio between gold and silver may be held, as in the words above used, to be utterly impracticable, either because it is theoretically impossible to devise measures which would have the desired effect, or because it is practically impossible to secure the adoption of these measures as the result of international agreement. If it is meant that it is theoreti- cally impossible to secure stability of value between gold and silver, we cannot do more, within the hmits of a despatch, than refer to the facts that the first 7'* years of the present century, and to the numerous treatises in which the theoretical possibility of maintaining a fixed ratio has been demonstrated. But if, on the other hand, the Lords Commissioners refer to the practical difficulty of securing an international agreement on a sufficiently wide basis, we beg that reference be made to the proceedings of the Monetary Conference of 1881. The Conference of 1881 was held at the instance of France and the United States of America, and the following are the words of the note forwarded by the United States Minister in London to Her Majesty's Secretary of State for Foreign afiairs : "The Government of the Republic of France and the Government of the United States having exchanged views upon the subject of a conference between the Po^yers principally interested in the question of establishing inter- nationally the use of gold and silver as bi-metallic money, and securing fixity of relative value between these metals, and finding themselves in accord as to the usefulness and importance of such a conference, and as to the time and place at which the same should be held, have the honour now to invite the Government of Great Britain to take part in a conference, by such delegates as each Government may appoint, to be held at Paris on Tuesday, the 19th day of April next, to consider and adopt for presentation to the Governments so represented, for their acceptance, a plan and system for the establishment by international convention of the use of silver and gold as bi-metallic money at a fixed relative value between these two metals." France and the United States are the two nations whose influence, with the exception of that of England and India would be the most powerful in maintaining the stability of the relative value of gold and silver ; and the words of the note above quoted show in unmistakeable terms that, whatever views may be elsewhere entertained, the Govern- ments of those countries considered the establishment of a fixed ratio both practicable and expedient. 6. At the Conference the attitude of the delegates, ex- cluding those of France and the United States, was generally one of reserve, each country desiring to retain for itself complete liberty of action ; but the delegates of Holland and of Italy distinctly avowed their desire to see the free coinage of both gold and silver at a fixed ratio. M. Pierson, delegate of Holland, observed : " The adoption of " the bi-metallic system is the only means of escaping from " the annoying situation in which we are placed. That, at " least, is the conclusion we have arrived at in Holland." M. Seismit-Doda, delegate of Italy, observed: "The " Italian delegates associated themselves fully with the " declarations presented by Messrs. Denormandie and " Cernuschi, as well as Sir Louis Mallet, on the subject of ' ' the necessity of raising the value of silver,and of establish- " ing a fixed ratio between the two metals." The delegate of Austro-Hungary, in view of the fact that the currency of that country consisted of inconvertible paper, was un- willing to adopt an attitude other than that of reserve ; but nevertheless Count Kiif stein declared : " Still they felt no " hesitation in saying that as in the Conference of 1878, " so for the future, their sympathy was with any measure " which might be adopted with the aim of improving or re- " establishing as much as possible the position of silver. " They therefore hoped that the Conference would not " separate without having adopted some remedy to obviate " the inconveniences of the present monetary situation, " which they believed in many ways to be a grave one." 7. As the attitude of Germany at the Conference is of special importance, we quote at some length the words of Baron Thielmann, the delegate of that country : — " We " acknowledge, without reserve, that the rehabihtation of " silver is desirable, and that it couldb e attained by the re- " establishment of the full coinage of silver in a certain " number of the most populous States represented at this " Conference, which for this purpose would take as a basis " a fixed proportion between the value of gold and that of " silver. Xpvertheless, Germany, whose monetary reform " is already so far advanced, and whose general monetary " situation does not seem to invite a change of system of " such vast importance, does not find itself able to concede, " as far as it is itself concerned, the full coinage of sih'er. " Its delegates cannot therefore agree to such a proposal. " The German Government is, on the other hand, entirely ■' disposed to help as far as possible the efforts of the other " Powers which might be willing to unite, with a view to " the rehabilitation of silver by means of a full coinage of " this metal. To attain this end, and to guarantee these " Powers against the influx of German silver which they APPENDIX. 355 seem to dread, the German Government will impose " some restrictions on itself.'" When Baron Thielmann was asked if the attitude of England had been the cause of the reserve shown by Germany, he replied "that the " a.ttitude of England had had some efEect on the resolu- tion of the German Government," as it was "necessary " for the German Government to pursue a monetary system " similar to that of England." There is, therefore, reason to believe that if Her Majesty's Government had shown a stronger desire to further the objects of the Conference, Germany would have been prepared to take steps in the same direction. 8. In view of the opinions expressed by France, the United States of America, Austro-Hungary, Italy, and Holland in favour of the establishment of a fixed ratio between gold and silver, and of the undoubtedly favourable attitude of Germany, and the evident inclination of that Power to follow the lead of England, it appears to us reasonable to conclude that it was within the power of Her Majesty's Government at the Conference of 1881 to have secured the adoption of a fixed ratio ; and as the evils due to the non-existence of a fixed ratio have maniiiested them- selves in an aggravated dergee since 1881 , we may reasonably conclude that it is still within the power of Her Majesty's Government to secure this result, if willing to exert its influence for that purpose. Looking to the facts we have just stated, we are unable to admit the contention that the establishment of a fixed ratio is impossible because inter- national agreement cannot be secured. It appears to us that if Her Majesty's Government abandoned the attitude of absolute reserve which they have so long maintained to the injury, as we believe, alike of England and India, there would remain no obstacle to the establishment of inter- national agreement which could not be surmounted. Even allowing, for the sake of argument, that it should prove impossible to secure the establishment of a fixed ratio on a sufficiently wide basis to permanently maintain that ratio, we see no reason to doubt that that the active and sympa- thetic intervention of Her Majesty's Government would secure the adoption of measures which would tend in that direction, and which would at any rate have the effect of mitigating existing evils, and of removing grave grounds of apprehension as regards the future. 9. In connexion with the question of the possibility of maintaining a fixed ratio between the two metals, we further desire to observe that, in quoting the opinion of Mr. Goschen, Mr. Gibbs, and Sir Thomas Seecombe as re- corded in 1878, the Lords Commissioners of Her Majesty's Treasury appear to have attached little weight to the extremely important fact that since the expression of opinion by the representatives of England in 1878, the evils of the unsettled state of the silver question have become greatly aggravated, that the question has been far more thoroughly discussed, and that both the origin of the disease and the nature of the remedy are better understood. It seems to us to be at least possible that if an opinion were obtained in 1886, it might differ from that given in 1878 ; and we know that in the case of one of the gentlemen cited, the opinion expressed in 1878 has been entirely repudiated. 10. We have no opportunity of ascertaining the views on this question which Sir Thomas Seecombe may now hold, nor are we aware whether Mr. Goschen considers the impracticability of establishing a fixed ratio as great as it appeared to be in 1878 ; but we observe that in 1878 Mr. Goschen concurred with the other representatives of England in holding " that a campaign undertaken against " silver would be exceedingly dangerous, even for the " countries which have given a position as legal tender only " to gold." Again, in a speech " on the condition and pros- pects of trade " delivered by Mr. Goschen at Manchester on 23rd June 1885, we find him reported to have expressed himself as follows :— " Now let me take the silver question. It is impossible to embark upon that or upon the appreciation of gold in a satisfactory manner in a few sentences, because it would take a whole speech to itself. But there is one point connected with the silver question which I will touch, and it is the insecurity which it imparts to trade with the silver-using countries. That must affect your dealings with India and with others, and I am sorry to think that with regard to that insecurity there is no hope till you know what the United States will do with respect to the Bland Bill. It seems to me that we must almost conclude that the uncertainty in the trade of the silver- using countries will increase, and that the position in that respect must get worse; and I do not hold with those who think that this country has little interest m the question because we are a creditor country. This is an argument which is often put forward that we are a creditor country, and that as amounts are due to us in gold, therefore the more gold will command for commodities the better for this country. But we are not all creditors ; and though we may in the balanc^ be a creditor country, there is an enormous interest in our trade with the silver-using coun- tries ; and so I trust that this silver-question will fairly be kept in view by those who are responsible for our Indian Empire. It is a question of the deepest interest. As I have said, it is impossible for me at this moment to expatiate upon the subject ; but I must submit that is a factor in the case, and a very important factor too." Finally, we find from Hansard (3rd series, vol. ccciii, page 1491) that during the late session of Parhament, Mr. Goschen addressed the following question to the Chancellor of the Exchequer : — " Whether in view of the deep and increasing interest hown in various parts of the country on the silver question, he will consider the expediency of separating this urgent subject from the other matters referred to the Royal Commission on the Depression of Trade, and of appointing a separate Commission to inquire into the position of silver, the condition of the currency, and the various plans of utiltising silver to a greater extent for currency purposes." We believe, in view of the above extracts, that we are justified in coming to the conclusion that, whether or no Mr. Goschen believes in the practicability of establishing a fixed ratio between gold and silver, he at any rate con- siders the silver question to be one of great importance, and is anxious that measures should be taken to utilise silver to a greater extent for purposes of currency. Mr. Gibbs has entirely altered his opinion since 1878 : is now of opinion that the establishment of a fixed^ratio is not merely pracdcable, but in itself highly desirable ; and for some considerable period has himself been President of the Bi-metallic League. We are at a loss to understandhow the change in Mr. Gibbs' views since 1878, which his writings on the subject have rendered matter of much notoriety, should, as would seem to be the case, have escaped the knowledge of the Lords Commissioners of Her Majesty's Treasury. Question of gain or loss to India from the fall in the rate of exchange. 11. With regard to the question whether India has obtained any such advantages from the fall in exchange as wholly or in any part to compensate her for the undoubted injury which the fall inflicts, and specially for the loss on the gold remittances of the Government of India, we would observe that this is a matter'on which opinion is by no means unanimous. The fall in the rate of exchange has coincided in point of time with a large development of Indian trade and a steady increase of Indian revenue ; but many autho- rities hold that this growth of trade and revenue is due to a succession of several good harvests, to the increased energy shown of late years in the construction of railways in India, to the cheapening of the cost of sea transport, and to the opening of the Suez Canal rather than to the fall in exchange. The question has been recently examined in a paper entitled " Indian Trade and Exchange," prepared by the Assistant Secretary in our Financial Department, copies of which have been forwarded for your Lordship's information ; and the considerations therein set forth materially assist in enabling a judgment to be formed upon this important matter. It is beyond question that the instability in the relative value of gold and silver discourages the investment of capital in India ; and the higher rate of interest which we sdould have to pay for silver loans forces us to borrow in gold, and to accept the risk of a still further appreciation of that metal. The variations in exchange introduce great uncertainty in that large class of commercial transactions in which the element of time is involved. The fall in silver, by throwing unexpectedly a heavy burden on our finances, has more than once compelled us to defer the construction of public works intended for the protection of the country against famine, and has led to regrettable and wasteful fluctuations in our public works policy. These are evils of great magnitude ; and if we take into consideration also ihe direct accumulat- ing increase to the public expenditure due to the fall in exchange, it is, to say the least, difficult to contend that India as a whole may have gained as much as she has lost. It has no doubt been argued that the fall in exchange by encouraging Indian exports has given a stimulus to industries in which India competes with countries that have a gold standard ; but, apart from the results of recent inquiry into this part of the subject which we have above alluded to, we have been unable to discover that the silver prices of Indian exports, or Indian commodities generally, have risen since the fall in the rate of exchange, and there are good grounds for believing that the effect of the change that of late years 356 KOYAL COMMISSION ON GOLD AND SILVER: has taken place in the relative value of silver and gold has been to lower gold prices and not to raise silver prices. Apart from this aspect of the question, it further appears to us that the Lords Commissioners of Her Majesty's Treasury have failed to notice that those persons who are of opinion that India has gained by the fall in exchange hold, as an essential part of the same opinion that England and all other countries with a gold standard have lost in an exactly equal degree. They argue that the rupture of the old ratio of 1 to 154 between the two metals has led to a reduced supply of metallic money to countries with a gold standard, and an increased supply, of an exactly equivalent amount, to countries with a silver standard j and if the increased supply has been a gain to the silver countries, it follows that the reduced supply must have proved injurious to countries with a gold standard by causing a general fall in the prices of commodities. 12. The Lords Commissioners quote, with seeming appro- val, the opinion of Mr. Barbour, our Financial Secretary, on the question of the gain or loss to India; but we observe that they have omitted to refer to the passages in which Mr. Barbour states that the gain of the silver countries is balanced by a corresponding degree of loss on the part of the gold countries. The following extracts from the pre- face to the book quoted from show what Mr. Barbour's opinion is on this point : — "This fall in prices has been aggravated in countries using the'gold standard, and checked, or altogether obviated, m countries using the silver standard, by the partial demo- inetisation of silver. In so far as this has been the case, the silver countries have unquestionably gained, while the gold countries have lost." ****** " Every fall in the gold price of silver will be followed by a corresponding decline in the gold prices of commodities, by increased disinclination of capitalists in London to invest money in India, by a reduction of profits and a general increase of the burden of obligation already contracted in England." These passages make it clear that the theory of gain to India by the fall in exchange is based on the belief that countries with a gold standard have lost in an equal degree ; and that, in short, the gain of the silver countries arises from a species of protection against countries with a gold standard. It is not possible to accept one-half of the theory and to reject the other. If the silver countries have gained by an increase of the supply of metallic money, the gold gold countries must have lost by an exactly equivalent reduction in the supply. We desire to lay special stress on this aspect of the case, because we find it stated that " Eng- " land would not herself take the initiative in making " changes which would have the effect of disturbing a " monetary system under which she has enjoyed much " prosperity," and no notice is taken of the fact that any special gain to India from the low exchange must have been attended with corresponding loss to England. In connec- tion with the question of the prosperity which England may have enjoyed in former years under the gold standard, it should not be overlooked that up to 1873 England enjoyed the benefits of a comparatively stable ratio between her gold standard and the silver standard of other countries, and that since the wide departure from the old ratio occurred, the progress and prosperity of England have sufFered a decided check. Without attempting to define the specific causes which have been in operation, we may observe that the prices of commodities have fallen very largely in Eng- land in recent years. 13. Even if, for the sake of argument, it be admitted that India, as a whole, has gained as much as she has lost by the fall in exchange, we are stiU of opinion that a change is imperatively required in the interests of the British Government in India. If the gain has just balanced the loss owing to the fall in exchange, we may reasonably conclude that in case of a rise in exchange, the loss would not on the whole exceed the gain, while the financial relief, and consequent political advantage, to our Government would be incalculable. This view of the matter was referred to by Sir Louis Mallet at the Conference of 1881 in the following words : — " Although we may, no doubt, look forward in the future to some rearrangement of taxation when the depreciation of the coinage has produced its effect in a general rise of prices, and particularly in that of labour, we must wait a long time for that result ; and, meanwhile, it would be im- possible without serious political danger to propose new taxes based on considerations which the mass of the people would not be able to understand. " But it is not only the actual loss which we have to think about ; it is the absolute uncertainty which hangs about the future, and which prevents any serious or accurate calculation of the revenue and resources of Government." These words have a special bearing on our present finan- cial position. The recent renewal of instabiliiy, followed by a heavy fall in exchange, and maintained up to the present time, has rendered the most careful calculations we can make valueless. We have already imposed unpopular taxation, and we see before us the possibility of being com- pelled to have recourse to the imposition of further taxes, alike unpopular and injurious to the well-being of the com- munity. The future is, if possible, even less assured than it was when Sir Louis Mallet spoke. Moreover, the rise in prices, owing to the depreciation of the silver currency, to which Sir Louis Mallet looked forward, has not taken place ; the alteration in relative gold and silver prices, which must necessarily follow the alteration of the exchange, has taken the form of a fall in gold, and not of a rise in silver prices. We cannot, therefore, count, within any reasonable time, on such a growth of revenue as will enable us to meet the burden thrown on our finances in recent years by the fall in exchange. 14. Putting aside, however, all matters of minor impor- tance, we desire to observe that, in our judgment, the ques- tion of the establishment of a stable ratio between gold and silver must be decided on broader grounds tha,n the gain or loss of a single country, and that it is a question of world- wide importance, the interest of England in securing a per- manent settlement being no less than that in India. So far as regards the momentary standard, no country is, or can be, independent of the action of other countries. Apart from the dislocation of trade and industry caused by varia- tions in the rate of exchange between two standards not linked by a legal ratio, each country is at the mercy of others, which, by adopting or discarding the gold or silver stan- dard, can seriously prejudice the interests of that country which makes no change in the standard. England has made no change in the standard since 1816; but the result of the more extended use of gold by foreign countries is certainly not less serious in its effect on the industries of England and the interests of the English people than in its effect on French and American industries and interests. The Government of India, like that of England, has made no change in the standard ; yet the action of foreign nations has placed our finances in those perpetually recurring diffi- culties which are set forth in our Despatch of 2nd February last, and threatens them with even greater disasters in the immediate future. The question of the monetary standard appears, therefore, to us to be pre-eminently one for settle- ment by international agreement ; in no other way can a satisfactory or permanent settlement be eflfected ; and we trust that Her Majesty's Government wiU abandon their attitude of absolute isolation — an attitude which, we ven- ture to think, is both indefensible in theory, and in practice fraught with danger both to England and to India. Omission to answer the arguments employed against the proposals of 1878. 15. In 1878 the Government of Lord Lytton proposed that the coinage of rupees should be restricted, by means of a seigniorage, in such manner as to raise the value of the rupee from Is. 7d., the market rate of the day, to 2s. ; and these proposals contemplated ultimately the introduc- tion into India of a gold standard. The Lord Commission- ers of Her Majesty's Treasury refer to this proposal, and ex- press regret that in the Despatch of 2nd February last the Government of India has not replied to the arguments which led to its rejection, nor shown that it has now some scheme in view which is not open to similar objections. Great importance is evidently attached to this point, as in Mr. Fowler's letter of 31st of May the arguments used against the proposals of 1878 are repeated, and it is added that " the Lords Commissioners find no reason stated in " the Despatch of the Government of India in the present " year which induces them to dissent from the conclusions " thus set forth on the authority of Sir Stafford Northcote " as to the results of any attempt to artificially enhance " the gold price of silver." We confess to having read these remarks with surprise, as, for the reasons which follow, we can perceive no analogy whatever- between the proposals of 1878 and those which we recently put forward. 16. The proposals made by the Government of India in 1878 involved the restriction of the coinage of rupees, a measure which, in our recent proposals, we have not advo- cated. The proposals of 1878 aimed at establishing a fixed ratio between gold and the coined rupee, which is a totally different matter from the establishment of a fixed ratio between gold and silver. The Government of 1878 pro- posed to establish between gold and the rupee the ratio of ten rupees equal to one pound sterling, while the proposal contained in our Despatch of 2nd February last merely APPENDIX. 367 involved the establishment of a stable ratio between gold and silver, and left the question of what that ratio should be for future "discussion. The proposals of 18/8 could have been carried out by legislation in India, and were en- tirely independent of international agreement ; the essential feature of our present proposals is their dependence on international agreement. The proposals of 1878 would not, as seems to be supposed, have raised the gold value of silver, but would, on the contrary, have tended very ma- terially to reduce it. The arguments used against the measures advocated in 1878 have, therefore, no bearing on our recent proposals ; and, as those measures lay outside the scope of the recommendations contained in our De- spatch of February 2nd, we admit our inabOity to perceive why, in that Despatch, we should have been at the pain of answering them. The proposals contained in our Despatch of 2nd February did not necessarily involve the raising of the gold value of silver to the old ratio of 15^ to 1. It was our intention that the question of the precise ratio to be adopted should be left for future discussion, and for settlement after fuU consideration of all the interests in- volved, and after ascertainment of the view of the principal nations interested in the matter. Even if a Conference should have decided on the adoption of the old ratio of 1 5| to l,we cannot admit that the change oould more accurately be described as one for raising the value of silver rather than as one for lowering the value of gold. The essential end to which our recent proposals were directed was the establishment of a stable ratio between silver and gold; and even if a higher ratio than the market ratio of the day had been adopted, the procedure which we advocate would have had as much effect in lowering gold as in raising silver. The scheme of 1878, on the other hand, would have materially lowered the value of silver, and must ultimately have had the effect of raising the value of gold by increasing the demand for it. We fail, as we have said, to perceive anything in common between the two> proposals ; and we conceive it unnecessary to remark further on this portion of the question. Possibility of relieving the finances by reduction of expenditure. 17. In paragraph 15 of Mr. Fowler's letter our-attention is directed to the importance of the reduction of expenditure, and it is added that the principal element which has deter- mined the unfavourable "condition of Indian finance, and which has conduced to our difficulties more obviously and certainly than the faU in the price of silver, is the alarming growth of expenditure. The general question of the growth of expenditure on the civil administration of India was dealt with very fully in the Despatch from Lord Ripon's Government, No. 233, dated 24th August 1883, and in the Minute by Sir Evelyn Baring, which accom- panied, as well as in other correspondence which took place about the same time, and which was published as a Parlia- mentary blue book in August 1885. We can add nothing to what is contained in the correspondence in question beyond remarking that our financial difficulties since that date have forced us to scrutinise very narrowly all proposals for incurring additional expenditure, and that we have been compelled to put aside many valuable reforms simply because we could not find the means to carry them out. We do not know to what facts the Lords Commissioners of Her Majesty's Treasury more particularly desire to draw attention when they speak of the alarming growth of ex- penditure. The fall in silver has no doubt added largely to expenditure on account of exchange, and we have been obliged to incur expenditure in the construction of famine railways, which do not, for the present at any rate, return a profit sufficient to cover interest on capital. The same remarks hold good in regard to the expenditure on frontier railways and coast defences, while the events that have occurred in recent years beyond the north-west frontier have compelled us to increase the army, both European and native. Her Majesty's Government, we believe, concur with the Government of India in the necessity of measures calculated to minimise the risk of such loss of life as oc- curred in the Madras famine, and |o guard agamst externa,! a,ttack on the north-west frontier of India. So long as the adequate protection of India against the consequences of war, and famine is an essential portion of tke policy of Her Maiesfcy's Government, it is premature to object to the expenditure which the attainment of these ends necessarily for a limited time involves. * vi x • 18 With the exception of the expenditure referred to in the preceding paragraph, which was incurred deliberately and with a full knowledge of the burden it would impose on the country, and which we should gladly have avoided if we could safely have done so, we are not aware of any great growth of expenditure in recent years. The measures taken in 1881 to provide an insurance against the financial effects of famine have, no doubt, added nominally 1,600,000?. (conventional sterling) to the expenditure ; but this was, as those conversant with Indian finance are aware, a measure of economy, and this item of 1,500,000?. is of the nature of a reserve or insurance fund. Possibly the fact may have been overlooked that the Government of India is now a very large railway proprietor, and that the opening of new railways necessarily involves an addition to the yearly expenditure of the total amount of the working expenses of the railways. This expenditure cannot, however, be avoided ; it brings in corresponding revenue, and can in no sense be treated as an addition to the cost of Government properly so-called. The danger of misunderstanding aris- ing from this cause was alluded to in our Despatch No. 331, dated 1st December 1885, in the following terms : "The " rapid increase and great complexity of the railway trans- " actions make it very inconvenient to embody them in " finance accounts, and the apparent increase of revenue " at the disposal of Government as new lines are opened and " corresponding apparent increase of cost of governing the " country giverise to mistaken idea of the increasing income " and extravagance of the Government." But whatever the origin of the remarks regarding the growth of expenditure may be, we must be allowed, with all deference, to maintain that we have by no means been forgetful of the relief to the finances which can be obtained by reduction of expenditure ; the fall in the gold value of silver has more than once led to reductions of expenditure, which have caused serious administrative inconvenience; and we are at the present time engaged in making every reduction which is reasonably or safely practicable, though there is no hope that any economies we may be able to effect will do more than cover a fraction of the additional burden imposed on India by the recent fall in exchange. 19. In order that there may be no room for misunder- standing as to the serious effect which the fall in exchange has had on the course of Indian administration, and of the repeated efforts which have been made to meet the addi- tional expenditure therein involved by reduction of ex- penditure, we will briefly review the facts of the last 10 years. In the financial statement for 1876-77 Sir William Muir remarked as follows : — "The sudden depreciation of silver, and the consequent " enhancement of charge to the Government of India in " laying down yearly the sum required in England of about " fifteen millions sterling, without doubt cast a grave " shadow on the future. In truth, it may be said that the " danger, from whatever point of view considered, is the " gravest which has yet threatened the finances of India. " War, famine, and drought have often inflicted losses on " the exchequer far greater than the charge which threatens " us in the present year. But such calamities pass away : " the loss is known and limited ; and when it has been " provided for, the finances again stand on sure and stable " ground. This is not the case with the present cause of " anxiety. Its immediate effects are serious enough, as " has already been shown. But that which adds signifi- " cance to it is, that the end cannot be seen ; the future is " involved in uncertainty." As a consequence of the position in which the Government found itself owing to the fall in exchange, measures were taken in July 1876 for th effective curtailment of expenditure on extraordinary nublic works, and at the same time all outlay of public money on the ordinary civil administration was stopped "which is " not absolutely necessary, or to which the Government is " not committed, or the discontinuance of which will not " cost disproportionate loss and waste." 20. In November 1878 measures were again taken " for " the reduction of the ordinary expenditure of the country " within the narrowest limits "; but these measures were, based on the probability of heavy war expenditure, as well as on the fall in exchange. The orders given in November 1878 were followed up in May 1879 with equally stringent orders for still further reduction of expenditure in all branches of the administration. The contracts with provincial Go- vernments were temporarily set aside, and contributions obtained from them to help to tide the Government of India over its immediate difficulties. The result of the measures taken involved a reduction of 758,000?. in ordinary expen- diture, as well as the reduction of productive public works expenditure by 1^1)00,000?. yearly, although the estimated expenditure o£i 1879-80 was already 1,000,000?; below the average expenditure of the two preceding years. In June of the same year the following language was used :-;-" Rigid economy in every branch of the public " service is in present circumstances the pohcy which must 358 ROYAL COMMISSION ON GOLD AND SILVER: " be followed." To quote again the words of the resolution of the 1st May :— " Unless positive necessity exists, no improvements in administration, however desirable, must be undertaken if they involve increased charges; no fresh estabUshments must be entertained ; no new offices must be created ; no new works, which it is possible to postpone, must be commenced. " It is through this policy of retrenchment and economy that the necessity for fresh taxation has for the present been avoided ; and if the fall in the value of silver in relation to gold should further increase, strict adherence to that policy will be more than ever essential." The language used by Lord Lytton's Government in their Despatch No. 138, dated 22nd May 1879, shows how great must have been the pressure which compelled them to have recourse to such reductions : — " We do not propose in this Despatch to discuss the circumstances which have rendered it necessary to under- take these reductions in the expenditure on public works in India. The result will undoubtedly be that the material progress of the country will be seriously retarded ; and we in no way disguise from ourselves the injury which India will sustain, or the discredit which will be entailed on the Government, by even the temporary abandonment of a policy which we are satisfied is essentially wise, and which in spite of many errors has been on the whole attended with eminent success. The measures which we now take with so much regret have been forced upon us by circumstances over which we have no control, and for which our Govern- ment is in no degree responsible." 21. From 1879-80 the rate of exchange remained nearly constant for some years, the average rate obtained for home remittances having been as follows : — 1879-80 1870-81 1881-82 d. 19-96 19-96 19-89 The surplus revenue, which was found to exist in the beginning of 1882-83, was used, not for the increase of expenditure, but for the reduction of taxation, including the removal of the general import duties. After 1881-82 the course of exchange was steadily down- wards, and in 1883 the question of reduction of expenditure having been brought before, and impressed upon, the Government of India by the Secretary of State for India in Council, the matter was exhaustively considered, as will be seen from the correspondence referred to in paragraph 1 7 of this Despatch. In 1885 stringent measures were taken for the reduction of expenditure in consequence of the probability of a war with Russia ; and, in order to meet the cost of military preparations, reductions were effected in the sanctioned expenditure of 1885-86 to the extent of over 1,500,000Z. (conventional sterling). As regards the current year, we may observe that at the time of framing the estimates our financial difficulties were seen to be so great that every effort was made to keep down expenditure, and the extreme measure was adopted of withdrawing the sum of 400,000/!. from Local Governments, and consequently of reducing the possible provincial expenditure by that amount. In February 1886 a Committee was appointed with the special object of effecting reductions of expenditure, and is at present earnestly prosecuting inquiries directed to this end. The language used in the orders appointing the Committee indicate the anxiety with which we have sought economy in the hope of avoiding taxation. " The circumstances in which the Government now finds itself placed compel it to examine with renewed and anxious attention the possibilities of such an effective decrease in its expenditure as shall in a sensible degree con- tribute to relieve it of the financial embarrassments with which it is threatened. The uncertainty whibh prevails regarding the future relative value of gold and silver com- pels the Government to contract, so far as is possible, ex- penditure which in other circumstances may have been desirable or necessary, but which at present it can no longer maintain." 22. The sketch which has been given of the financial history of the last ten years is sufficient to show that the Government of India has been very far from unmindful of the relief to the finances which may be obtained by econo- my and reduction of expenditure ; it demonstrates, on the contrary, that such relief has frequently been secured at the cost of great detriment to the administration. We are at present again seeking to effect all possible economies in the cost of civil administration, and we hope in this way to secure an improvement to the extent of at least 500,000Z. yearly. How insufficient this relief may prove in com- parison with the burden thrown on the finances by the fall in exchange will be seen from the fact that, though the rate of exchange for the estimates of 1886-87 was taken at only Is. 6d. per rupee, we have at present to comtemplate the possibility of taking a rate as low as Is. 4d. per rupee in the estimates of 1887-88 — a fall which would impose an additional yearly burden on our revenues of more than 2,000,000^. (conventional sterhng). Looking to the facts which we have stated, we are com- pelled to arrive at the conclusion which admits, in truth, of little dispute, that further reduction of expenditure is unlikely to give us financial relief in any degree commen- surate with the magnitude of our difficulties ; and that the contention that the alarming growth of expenditure in late years is the principal element in the unfavourable condition of Indian finances will not stand the test of examination. Nature of the remedy proposed. 23. With regard to the complaint that we have not definitely indicated the nature of the international agree- ment which should supply the solution of the silver question, we desire to observe that it appeared to us that we stated with sufficient plainness tiiat the end to be aimed at was a stable ratio between gold and silver, and that the means for the attainment of this end was an inter- national agreement between the countries interested in the question. We did not specify the exact ratio which we wished to see established, nor the precise nature of the agreement, because we felt that on both these points it would be necessary to ascertain and take into account the views of foreign Powers, and that any attempt on our part to lay down the exact terms of the settlement at the outset might have a prejudicial effect on the negotiations. If Her Majesty's Government had been willing, under any circumstances, to recommend the opening of negotiations, there would have been no difficulty in obtaining a more definite expression of our views by telegram. Your Lord- ship will, moreover, not have forgotten that on May 29th of the present year, while we were still awaiting the reply of the Lords of the Treasury, we submitted specific pro- posals, which were only not laid before the Lords of the Treasury because their letter was received by your Lord- ship's predecessor very shortly after the recommendations we refer to reached him. What we consider essential in the interests of the finances of British India is the establish- ment of stability in the relative value of gold and silver, and the removal of the danger which hangs over the silver market from the existence of large quantities of overvalued silver money in tie currencies of France, the United States, and other countries. For the attainment of these ends, we propose generally the utilisation of silver as currency to a greater extent than is the case at present, as well as an international agreement for the free coinage of silver, and the making of both gold and silver coin a legal tender at a fixed ratio by a group of nations possessed of a metallic currency of sufficient extent to maintain that ratio perma- nently. The question of the ratio to be established is one which must be decided by the nations which undertake to coin both gold and silver freely, and it should be a ratio not lower than the average market ratio of recent years, and not higher than the former French ratio of 1 to 15^. So great is the importance whicli we attach to stability of rela- tive value, that we do not consider that there would be sufficient grounds for objecting in the interests of India to any ratio, within the limits above indicated, which might be approved by the other nations concerned ; and, on behalf of India, we would be willing to undertake either to maintain the present silver standard, or to coin both silver and gold for all comers at the fixed ratio. It does not appear that any plainer expression of our views, or any pro- posals of a more specific nature, could be expected, or should be required, at the present stage. 24. In conclusion, we desire again to express our convic- tion of the importance, in the interests of British rule in India, of securing a speedy and final settlement of the silver question. In our Despatch of 2nd February last we stated in the clearest terms, but not, as we consider, more strongly than the occasion required, the nature and extent of the difficulties and dangers to which India is exposed in the present state of the silver question, and we need not repeat our observations. The immediate cause of future disturb- ance which we specially took into consideration at that time was the possibility of the repeal of the Bland Act by America. Since the date of our Despatch, although there is every prospect that America will, for the present at least, continue the coinage of silver, the rate of exchange has APPENDIX. 359 fallen l^d. per rupee. The additional burden thrown on compelling us to use resources which we relied upon as a our finances by this fall of lid. in the gold value of the reserve to meet the cost of possible war or famine. Above rupee, after all allowance made for any possible set-off, all, our finances will still remain subject to the special amounts to at least 1,750,000Z. (conventional sterling) uncertainty due to the unsettled condition of the American yearly, and it is quite possible that the repeal of the Bland currency. Your Lordship is aware that a powerful party in Act by America might increase the burden by an equal the United States ol America presses for the stoppage of the amount. We cannot hope to cover more than a fraction of coinage of silver. If that course should be adopted in the the amount already added to our expenditure through the immediate future our financial difficulties threaten to bfj recent fall in silver by any economies in the cost of the greater than any which the Government of India has administration which we may be able to effect. Even hitherto experienced. We do not therefore hesitate em- though the measures which we are now carrying out for the photically to repeat that, from the point of view of Indian defence of the country against war and famine should, in finance, the position has become intolerable, view of our pressing financial difficulties, be curtailed. We have, &c. further taxation appears at present to be inevitable ; and (Signed) Duj'fbrin. when we have again established equilibrium, there is no F. S. Roberts. prospect that the settlement will be final, or even reason- C. P. Ilbbrt. ably permanent. A rise in the rate of exchange may prove S. C. Bayley that unpopular measures of taxation have been undertaken T. C. Hope. unnecessarily ;, a fall may force us to impose further taxa- A. Colvin, tion. Meanwhile the pressure of our present difficulties is G. Chesnby. o 24358. 3 A 360 ROYAL COMMISSION ON GOLD AND SILVEE : ANALYSIS OE EVIDENCE. (Names of Witnesses arramged in Alphabetical Order.) Professor ROBERTS AUSTEN, F.R.S.: Is chemist to the Royal Mint, 1 198. Puts in a paper on the subject of the cost of producing silver, 1200, 1201. Diffierent methods of obtaining silver, 1202-1204 ; by the refining of native gold, 1205^1211 ; by the desilverisa- tion of lead, 1212-1233; by the desilverisation of copper, 1234-1247 ; from silver ore, 1248-1274. General conclusion as to mean cost of production by the above methods, 1275-80, 1326. Explains what is included in cost of production, 1281- 1300. Notices large difference between cost of production and the market price of the commodity, 1301-1316. Observations on amount of production of silver, 1323- 1325, 1332, 1333. Possibility of new discoveries in the future, 1318-1320. Will undertake a similar inquiry into the cost of pro- ducing gold, 1327-1331. Mr. D. M. BARBOUE, C.S.I. : Information as to hoarding in India, 1097-1101, 1154- 1160, 1163-1176, 1183-1197. The precious metals are hoarded in the form of both bullion, coin, and ornaments, 1099-1101. Net imports of gold into India since 1835, 1102-1112. Amount of silver hoarded probably exceeds amount of gold, 1113-1116, 1196. Total amount hoarded, 1102, 1117-1121.- Causes which are likely to bring out hoards, 1124-1129, 1135, 1149-1163, 1155. Consumption of gold in India for various purposes, 1108, 1109, 1130-1134. Illustrations of capacity of the people for absorbing money, 1136-1141, 1145-1148, 1190-1194. Opinion as to probabihty of a diminution in tendency to hoard, 1142-1163. Probable effect on value of precious metals of a cessation in hoarding, 1143, 1144. Alteration in purchasing power of silver in India, 1179- 1182. Little alteration in price of labour in India in recent years, 1161, 1162. , Diagram showing oscillations in prices of silver and of commodities since 1860, 1177. Mr. ROBERT BARCLAY: Is engaged in the export trade irom England to India and other silver-using countries, 2230-2235. Trade has suffered from fluctuations in exchange, 2236, 2369. Merchants generally able to protect themselves against loss if all parties to contracts fulfil their obligations, 2237- 2245, 2279 ; but business is necessarily checked by the in- troduction of a speculative element, 2240, 2245, 2275- 2278, 2369, 2373-2379. Losses arising through failure of manufacturer to keep his contract, coupled with concurrent alteration in ex- change, 2261-2270, 2284-2285; though intrinsically insig- nificant, become important, owing to small margin of profit with which business is conducted, 2271-2274. Silver prices in the East have a tendency to rule the gold prices here, 2245-2260, 2349, 2352 ; and have been little affected by the disturbaTice in values in Europe, 2246, 2364, 2419-2421, 2468, 2469. Advantage of falling exchange to the Indian merchant and manufacturer, 2287-2299, 2306; growth of Indian cotton manufacture and falling off of certain branches in England, 2301-2304, 2319-2334. Advantages to India of trading with silver-using countries, 2306-2319, 2367-2368. Stimulus to Indian exports of wheat, 2336-2344, 2371, 2372. Extent to which the Enghsh and Indian export trades are respectively affected by fall in exchange, 2369-2370, 2395-2401. Manner in which exchange operates on international trade, 2402-2418, 2460-2465, 2486-2496. Advantage and disadvantage to the two countries gene- rally of exchange fluctuations, 2419-2457, 2466-2494. Causes of appreciation of gold or fall of gold prices, 2349-2353. Is in favour of adopting a fixed ratio between the two metals, 2356-2356, 2477. Objections to introduction of a gold standard in India, 2380-2386. Effects of a further fall in silver, 2387-2394. Mr. J. W. BIRCH : Extension of banking expedients during the last 20 years, 1336-1340. Possibilities of further increase, 1341, 1344-1346. Effect of telegraphic transfers, 1342, 1343. Estimates of circulation and of stock of gold in the United Kingdom, 1348, 1362-1365. Light gold and U. notes, 1396-1399. Sources from, which Italian demand for gold was met, 1349-1363. Similar information with regard to Germany^ 1364-1361. South America, Portugal, &c., 1368-1370. Hoarding in France, 1354-1360. Sources from which gold is drawn through a rise in the rate of interest, 1366-1368. Amount of gold coin melted down for industrial pur- poses, 1371. Stock of gold held by Bank of France, 1379-1382. Currency in Spain, 1386-1394, 1400, 1401. Puts in certain statistics as to circulation in France, Germany, Belgium, Italy, and Switzerland, 1378. Mb. J. K. BYTHELL : Is a Manchester merchant, engaged chiefly in the import trade from India, 1897-1899. Mode in which the export and import trade with the East is financed, 1900-1912. General effect on trade of the uncertainty in exchange and extent of the risk imposed upon the several parties concerned, 1907-1931. Alleged stimulus to export trade of India owing to fall in exchange, 1932-2008, 2072-2165, 2185-2190. Advantages to the Indian producer, 1933-1944, 1947 2082-2165,2184. Causes of fall in gold prices, 1933, 1944, 1946, 1950, 2170. Difficulties of the Government of India have been ex- aggerated, 2009-2012, 2026-2046, 2066-2071. Real extent of the loss sustained bv the Government 2013-2026, 2040-2042, 2047-2059. Borrowing power of the Government as affected bv exchange, 2019-2025. ^ Effects of a fixed ratio between gold and silver. 2062- 2066, 2166-2169. Mr. H. H. GIBBS: Is a Director of the Bank of England, and engaged in trade ^vith silver-using countries, 3020-3023. His opinions are not those of the majority of the Court of Directors, 6880. Present divergence in relative value of gold and silver due to both appreciation of gold and depreciation of silver 3024,3026,3221. Causes which have led to appreciation of gold and de- preciation of silver, 3026, 3027. Other causes have prevented silver being depreciated in relation to commodities, but those causes have not operated in the case of gold, 3028-3041. Probable result of a further fall in silver, 3109-3113. Injurious effect on trade of fluctuations in the values of the precious metals, 3042, 3043, 3098. The risk arising from uncertainty must be an impedi- ment to trade, and cannot be transferred to other persons without paving for the accommodation, 3046-3049, 3106- 3108, 3216, 8216, 3299-3233, 3241-3244, 6791-6803. Extent to which trade is obstructed by this means 3049-3068. ANALYSIS. 361 Stimulus given to production in countries with de- preciated currency, 3069, 3070, 3138-3145, 3179-3212, 3779-3784, 3811, 3812, 4517^4553, 5386, 6386, 6804-6807, 6872-6879 ; caused by riiniinution in the initial cost of manufacture, 3070-3073 ; corresponding disadvantage to producers in countries with an appreciated currency, 3073- 3084, 3234-3237 ; facilities offered for trade between two silver countries as against trade between a silver and a gold country, 3?16, 5808-6816. Discouragement to invest in silver-using countries, 3101- 3103, 3164-3178, 5847-6861. In countries with inconvertible paper currency the depreciated paper is the basis of transactions, not the appreciated coin, 3645-3650. Effects of exchange upon trade and prices, 3114-3137, 3224-3227, 3677-3679, 3687-3714, and on investments in silver countries, 3146-3164,3218-3220; evils arising from the want of a fixed par of exchange, 3677-3679, 3709- 3714, especially in the case of India, 4483-4516. Disadvantafi;es under which the agricultural interest suffers owing to the existing state of things, 3778-3781. An appreciating currency is generally unfavourable to trade, 3092-3099. Evds of low and especially falling prices, 3104-3106, 3238, 3617-3626, 3851, 5816-6818. Necessity of an elastic currency to meet the increasing requirements of trade, &c., 3617-3626, 3846-3854. Effect of contraction of the currency in this and other countries, 3746. Meaning of the term " appreciation of gold," 5180-5188, 5201-620.';. Effects of a fall of prices vary according to the causes which have brought it about, 6189, 6190. Fall of prices proceeding from increased abundance of commodities. 6190-5200. Nature of the evidence which proves a fall in prices, 5206-5219 ; and a scarcity of gold, 5364-5362. The evil alleged is a scarcity of gold, which in itself constitutes a fall of prices, 6201-5205, 5220-6222. Course of prices during the last 26 years, 5256-6262. And the available supply of gold. 6322-6327, 6355- 6368, 5374-5378, 6396-5400, 5831-5841. As to economy of currency in recent years, 3747-3768. Connexion between prices and currency, 4554-4572, 4634-1641, 4676-4693, 5223-6256, 5262-5321, 5388-6396, 5820-6830. Effect of the rate of interest on the supply of gold, 5328-5362, 6368-6373. Wages and necessaries of life are affected very slowly by changes in the value of the currency, 3076-3079, 3082- 3084, 3138, 3139, 3213, 3214, 3743-3745, 4629-4553; except, perhaps, in countries themselves producing the material of the currency, 3086-3089. A large portion of the existing uncertainty in exchange wovdd be removed if bimetallism were adopted, 3459-3460 ; explains proposed bimetallic law, 3461, 3462. The two metals were always effectively linked at a fixed ratio previous to 1873, 3716-3729. The bimetallic proposal is merely to revert to a state of things which existed before that date, 3786-3794. Number of countries necessary for a bimetallic union, 3663-3666. Possibilities of an agreement with foreign countries for the establishment and maintenance of a fixed ratio, 3669, 3673, 3674, 6785-5788. Improbability of the agreement, if made, being infringed by any nation, 3670-3674, 6787- As to the precise ratio to be adopted, 3627-3642, 4649- 4659. Extent of re-coinage which would be required, 3629- 3640, 4613a. Effects of bimetallism, as it existed in France, and the Latin Union, 3463-3471,3732,3733,3739; stability in exchange which resulted, 3467-3469, 3477; tendency of the cheaper metal, i.e., the metal that will purchase more elsewhere, to go to the more favourable market, 3478- 3484, 4688-4602 ; the ratio is, nevertheless, permanent, because either metal remains legal tender, 3486, 3486. Agio in gold in France, 3529, 3608, 3732-3, 3832-9. Mode in which the bimetallic law maintains the stability of the ratio, 3487-3493, 3542-3646, 4576-4586. Reasons why a ratio between two metals can be pre- served and not between a metal and paper, 3494-3610, 3547-3550, 4588, 5819. Maintenance of the ratio, 3529-3632, 3677-3579, 3697, 3606-3608. r x. j j i. Effect of the ratio on the course ot trade and exchange between a bimetallic and a mono-metallic country, 3511- 3641, 3567-3570, 3574-3609, 4589. Effect of the ratio in the bimetallic area on the values in mono-metallic countries, 3561-3556, 3571-3609, 3667, 3668, 3827-3845, 4614-4620. Effect of a large discovery of one of the two metals, 3610- 3616, 3661, 3662, 3675, 3676. o 1^4358. Effect of bimetallism on the production of the two metals, 3865-3858, 387 1-3876, 4582-4586, 4603-461 1 . Operation of the Gresham law as bearing upon bi- metallism, 4588-4602. As to possibility of contracts to pay in one metal, under bimetallism, and consequent effect upon the system, 4642- 4648. Probable effect of the free coinage of silver in England, especially as regards the existing stock in other countries, 3734-3738. Effect upon prices and wages of remonetizing silver, 3739-3745, 3759-3777. And upon the owners of gold or gold bearing securities, 3776-3777, 6383-5385. Opinion as to the equity of making a change which would prejudice thos3 who now profit by the existing dis- turbance in the ratio, e.g„ the producers in India, or per- sons interested in existing contracts, 3651-3668, 3794- 3808, 3811-3824, 6383-5386. Desirability of preventing gain or loss to either partly from disturbance of exchange, 3659, 3660. As to silver being held by the Issue Department of the Bank of England, 3680-3686. As to a scheme for the issue of international notes, 6842-6846. Mr. R. GIFFEN: General review of statistics of production of precious metals and progress made since 1876, 464-466, 648-652. Remarks on statistics relating to Russia, Australia, and the United States, 467-471 ; Mexico and South America, 475 ; China, 476-481. General accuracy of Dr. Soetbeer's figures, 472-474, 482, 483. Relative proportion of gold and silver produced, 486-488. Details of increased demand for gold in recent years, 489-528; in Germany, 489-503; the United States, 504-516, 666-658; Holland, 517-621; Italy, 622,523; Spain, 627. Extent to which the demand for gold has been in sub- stitution for silver, 524-638. Demand for gold since 1871 compared with demand previous to that date, 529-543. Demand in France between 1860 and 1865, 529-531. Diflaculty of distinguishing between the normal demand and that required for temporary emergency, 644-646, 567-571. Normal demand in the United Kingdom, 546-563. Factors which contribute to the normal demand of a country, 554-662. Extension of banking expedients, 656, 558, 569. Net amount of coinage in the United Kingdom, 663-566, 635, 636, 642-644. Indian demand for gold, 672-681. Alterations in demand for silver in recent years, 582-602, 645-647, 659-662; France and the Latin Union, 682-687; United States, 588-693, 629-634 ; India, 594-596, 601, 602 ; China, 597-600. Summary of conclusions as to alterations in demand for gold and silver, 603-606. Consumption of precious metals for industrial purposes, 607-619, 659-662. Possibility of estimating total stock of gold and silver, 621-624. Sources from which gold is attracted to the money market by a rise in the rate of interest, 624-628. Cost of production of precious metals, 620, 637, 638. Imports of gold and silver ore to be considered in esti- mating consumption, 663-655. Information with regard to the various methods of recording prices during the last 50 years, 663. Extent to which such records may be accepted, 832. Investigations of Mr. Jevons, 666-669, 686-696 ; the " Economist," the Board of Trade, Mr. Sauerbeck, Mr. Palgrave, Dr. Soetbeer 670,671,697,871-876. Explains system of index numbers, 672-676. Facts on which these records are based, 677-679 681-685 693-696, 719-730, 827-830. Objections to the system of index numbers, 680, 687-692. Board of Trade Reports on variations of nrices 670 709-717. ' Records of Indian prices, 681-685, 761-793, 869-863. Comparison of conclusions arrived at from the several methods. described, 697, 701-705,718, 731-748, 763,831, 869, 870. Investigations into prices of previous times by Sir G Evelyn and others, 749-760, 847, 850. Price of labour or services, 795-814, 822-826. Railwav fares, freights, &c., 815-817. Records of retail prices, 794, 818-826. Nature of conclusions which may be drawn from records of prices generally, 832-846, 858, 864-868. Causes which affect prices, 833-858. 3 B 362 ROYAL COMMISSION ON GOLD AND SILVER: Mr. H. R, GRENFELL; Is a director, and has been Governor of the Bank of England, 4171-4173. Lord Liverpool's views as to the standard of value in England at the time when he wrote, 4174, 4185-4189, 4197, 4198. Meaning of standard of value, 4178. The double standard existed up to 1797, 4174-4178. Mr. Giffen's statement as to existence of the double standard in France, 4178-4184, 4190-4196. Criticises the view stated to have been put forward by Mr. Fremantle and the Treasury that the fixing of a ratio between gold and silver is an interference with natural law or with the principles of free trade, 4199, 4200, 4213-4230, 4261-4303. Observations on the contentiorf that the position of London as the centre of the commercial world is due to a single gold standard, 4304-4306. Agrees generally 'with Mr. Gibbs's evidence as to the possibiUty and expediency of introducing the bimetallic system, 4307. Serious consequences of a further fall in silver, 4308- 4315, 4336-4337. Ascribes recent fall in prices to alterations in the standard of value and the contraction of the currency, 4316-4329, 4346-4380, 4476-4482. These alterations due to foreign legislation, 4326-4329, 4444-4446. Effect upon wages and employment, of the appreciation of gold, 4409-4424. Effect of currency legislation on contracts, 4426-4434. Question whether under a bimetallic system contracts could be expressed in one of the two metals only, 4231- 4261. Extent tf) which the recent disturbance of the ratio has been caused by the depreciation of silver and the apprecia- tion of gold, 4439-4441 . Effect of bimetallism on prices, 4200-4202, 4446-76. Effect of the bimetallic system in preserving the raitio 4390-4394, 4400-4408. The ratio of 15i to 1 was fixed and maintained by law and had no relation to the cost of production of the two, metals, 4330-4332, 4338-4346, 4381-4397. Comparative insignificance of- the mining interest in America, 4203-4212. Effect of peace and war upon prices, 4442-4443. Sib HECTOR HAY: Statistics of production of precious metals, 237-297. Sources of information, 298-331, 431. Statistics of coinage, 332-368; difficulty of obtaining accurate information as to re-coinage, 366-368. Estimated consumption of gold for industrial purp oses, 371-416, 432-437, 460, 451 ; and of silver, 418-422. Consumption of gold in the United States, 388-406 . Consumption in England and India compared, 409-414, 444-448, 452-467. Opinion as to future production, 425. Cost of production, 426-430. Estimated stock of gold in the United Kingdom, 438- 443. As to accuracy of import and export statistics, 313, 468- 463. Mr. DAVID McLEAN : Is manager of the Hong Kong and Shanghai Banking Corporation, carrying on business with India, China, and Japan, 4986-4989. Mode in which the export trade to the East is financed, 4990-6014. Similar information with regard to the import trade, .5015-5035. Differences between the India and the China trade in respect of banking accommodation, 6002, 6003, 6034, 6036, 6086-6095. Extent to which fluctuations in exchange interfere with trade, 6036-6044, 6061-6063. The fall in exchange has stimulated exports from the East, 5064-5076, 5100-6103, 5146-5166. Effect on the exchange of a cessation of Council Bills, 5130-5140, 5167-6174. Mr. SAMUEL MONTAGU, M.P. : Banking accommodation in London superior to that in other parts of the world, 1407, 1421, 1433. But as regards small remittances, and transfer of funds from one part of the country to another, foreign countries offer greater advantages, 1407-1409, 1413-1416, 1422- 1425, 1469-1473, 1486-1490, 1516-1520, 1539-1547. This defect to some extent neutralized by the more common habit of keeping banking accounts here, 1418- 1421, 1426-1429, 1639-1543. Economy of gold currency on the continent as compared with the United Kingdom, 1411-1413, 1422, 1432,1435- 1439. Possibility of further economy owing to extension of banking accommodation abroad, 1441-1445, 1486-1607) and issue of paper, 1436, 1474, 1478, 1492-1494, 1512- 1514, 1557-1559. Issue of 11. notes, 1436, 1478, 1658, 1659. General disuse of small notes, and consequent increase in demand for specie, 1447-1457, 1467, 1468, 1496, 1535- 1538. Transmission of specie from London to Scotland and Ireland, 1409-1411, 1434, 1508-1514, 1521-1530, 1548^1 1556. Light gold in circulation, 1484, 1486. Professor J. SHIELD NICHOLSON: Is professor of political economy in the University of Edinburgh, 3877. Fall in the gold price of silver due rather to alterations in demand than in supply, 3879-3881, 3885, 3894, 6511- 6516, 5593-5699, 5609-6612, 6670-5678. Statistics of production of the precious metals, 3882- 3893, 4052-4061. Nature of the alterations in the demand in recent years, 3896-3919,3933-3941. Great increase in recent years in the use of gold for purposes other than currency, 6487-5603 j consequent danger in the disuse of silver aS money, 6504-5510. Possibilities of an increased production of gold or silver, 6523-5526. Effect upon prices' and the course of trade of the depre- ciation of silver, 3920-3932, 4076-4089, 4111-4118, 4145- 4153, 4166-4170, 5413-6418, 6422-5430, 5618-5631, 6662- 6669,5711-5728. Present depreciation likely to continue, with frequent fluctuations, 3942-3949. ■ Nature of the evidence as to recent appreciation of gold, 3951-3978; causes of the fall of prices, 3957-3978. Nature of the evils arising from appreciation, 4028-4060, 5653-5577, 5602-5633. Reasons why the annual additions to the stock of the precious metals are not sufficient to prevent appreciation, 4052-4061, 6455-5464. Mode in which prices are affected by the volume of the currency, 3979-4026, 5465-5486, 5772-5784. Dislocation of trade between silver and gold countries is a more serious evil than appreciation, 4121, 4122. Explains the operation of bimetallism as a remedy for the existing evils, 4062-4072, 5679-5701 ; advantages that would be derived from the adoption of bi-metaUism, 4073, 5431-5434, 5517-6522, 6533-5536, 6578-5592, 5636-6660, 6652-5669, 6/29-5739 ; reasons for adopting ratio of 16i to 1, 4092-4096. Effects of large discoveries- of the precious metals under a bimetallic system, 4076-4079, 4119, 4120. Bimetallism not likely to materially alter level of prices, but would produce greater stability, 4099, 4100, 4145- 4147. Effect of bimetallism on prices in silver countries, 5740- 5765. The monetary standard is necessarily a question for international arrangement, 5527-6532. Effect of the existence of legal ratios between the two metals in producing stability, 5401. Importance of a stable standard of value, 5403-5412, 5419-5421, 6702-6710. Ethical aspect of the alteration in values which would be produced by bimetaUism, 4123-4144, 4164, 6680-5591, .5600.5601,5608-5610. Explains a method for measuring variations in the purchasing power of the standard of value, 5435-5438 ; result of the application of this method during the present century, 6449-5464. Mr. R. H. INGLIS PALGRAVE : Explains circumstances under which his memorandum for the Commission on the Depression of Trade was prepared, sources from which the information was . pro- cured, and the lines of inquiry suggested by it, 1-5. Equilibrium of prices maintained from middle of 17th ■ to middle of 18th century, as shown by price of wheflt, notwithstanding increased production of the precious metals, 6-18. ANALYSIS. 363 Doubts as to the inference which may be drawn from this fact, owing to difference between the circumstances of that period and of the present day, 15-18, 20. Various estimates of production of the precious metals, and of amounts available for coinage, 21-2,9, 108-121, 135. Statistics of coinage, 37, 70-72, 125-130. General conclusion that production of gold has been less in recent years and of silver more, 30. Production, consumption, and price o£ silver, 31-36. Mode in which silver is valued in the statistics, 58-69. Extent of available information with regard to re-coinage, 37-47. 90-94, 125-130, 135. Estimates of stocks of the precious metals existing from time to time, 48-51, 101-107, 122-124, 133-135. Information as to amount of gold in the United King- dom, 62-54, 94-100. Amount of light gold, 99, 100. Amount used for industrial purposes, 55-57, 117-119. Efifect on production' of the precious metals of altera- tions in their value, 73-89. Indian demand for gold, 78-89,, 131, 132. Demand for the precious metals for currency purposes, 932-934, 976-979, 1057-1068. Kelation between commercial transactions or production of commodities and demand for currency, 935-954, 1052- 1056, 1067, 1068. As to increase of production in silver-using countries, 944-954, 958-962. Inaccuracy of statistics of imports and exports of precious metals in France, 957. Amount of reliance to be placed on index numbers as showing fluctuations of prices, 905-910, 972-975, 991- 1052, 1076-1084. Comparison of fall in wholesale and retail prices respec' tively, 911-916, 1037-1039, 1085-1093. Dr. Soetbeer's conclusions as to fall of prices compared with others, 1006-1015. Investigations into the fluctuations in wages, or price of labour and services, 913, 918-931, 1040, 1051, 1052. Causes of the fall of prices, 983-990, 1057-1068. Variations of price of silver with prices of commodities, 986-988. Mr. STEWART PIXLEY : Statistics showing monthly price of silver in London since 1833, 139-141. London prices govern prices elsewhere, 142-146, 268- 279. Statistics of production of gold and silver since 1852, 147-172. Source from which information is derived, and compari- son with other similar estimates, 148-172. Statistics of consumption of precious metals for various puTDOses, 173-197; for use in arts and manufactures, I75I178, 182-188, 219; for export to India, 175-181 ; for coinage, 196, 197, 280, 281. Amount of gold and silver coin in the world, 263-266. Amount of gold in the United Kingdom, 198-206, 266 ; and amount of light gold, 260-262, 282-285. Amount of old coin re-melted, 207-218. Possibilities of future production of the precious metals, 225-231. Cost of producing silver, 232-245. Ofigin of the gold required for new demands of various countries in recent years, 260-255. Mb. a. D. PROVAND, M.P. : Is a merchant trading, with China, Japan, &c., 3246- 3260. Changes in mode of transacting business with the East in consequence of the fall in silver, 1873, 3261, 3260-3266 ; mode in which the Eastern trade is financed, 3252-3265 ; extent to which the merchant can protect himself from uncertainty of exchange, 3376-3377; evils which result from uncertainty, 3317-3319. Fluctuations in exchange are more unfavourable to trade with China, &c. than to India, 3266-3288, 3306-3316; iDustration showing the extent of the consequent burden on trade, 3289, 3386-3404. Operations of the exchange banks. 3290-3304, 3336- 3342, 3346-3363, 3369-3374, 3405-3408. Comparison of exchange rates between England and China, and India and China, 3320. Transfer of trade with China, &c. from England to India, owing to more favourable position of Indian producer, 3320-i3336, 3343-3345, 3354-3361, 3413-3422, 3429-3456. As to whether it would be equitable to take away this advantage by legislation, 3362-3368, 3378-3384. Trade with Java as compared with that with China, .3409-3413. Mr. a. SAUERBECK: Accepts Dr. Soetbeer's statement of production of the precious metals, 879-884. Consumption of gold for industrial purposes, 886-887, 955, 956. . . Methods of economismg the precious metals for purposes of currency, 891-901, 963-966, 971, I069-I075. Effect of telegraphic transfers not economical, 892-896, 967-970. ^ ■ , ., , Use of bills of exchange not so economical as formerly, 896 897 970 ' ■ ' ■ Amount of reserves held by banks,. 892-894, 896-898. Probability of extension of banking expedients, com- pensating increased demand for precious metals, 900-903, 1069-1075, Mr. SAMUEL SMITH, M.P. : The fail of prices since 1873 is due to an appreciation of the standard rather than an increase of commodities, 4696- 4715. It has also been caused partly by the increased competi- tion of silver using countries, 4721-4726. Evidence derived from index numbers and other sources, 470O--47O6, 5881-5913, 5917-6931. Evidence of a contraction of the currency, 5914-6916. Mode in which a contraction of the currency affects prices, 4716-4741. Causes of the rise of prices before 1873, 4746, 4746, 4843-4847. New demands for gold in recent years, 4741-4763, 4757-4760 ; have not been compensated for by increased economy, 4754-4761, 4851. The connexion of trade depression with the appreciation of the standard and the fall of prices, 4765-4796, 4807- 4823, 4854-4908, 4959-4980. Effect of appreciation of the standard on fixed contracts payable in gold, 4796-4823, 4909-4956. Protective tariffs and socialistic movements are en- couraged by depression of trade, 4824, 5932-5940. Effect of the depreciation of silver on the export of In- dian wheat, 4810-4814, 4837-4840, 4969-74. Explains the operation of bi-metallism as a remedy for the evils alleged above, 4895-4836, 4981-4285 ; number of countries to be included in the bi-metallio union, 4827- 4831, 4982, 4983, 6943; is in favour of the old ratio of 16i to 1, 4832, 4833. Mr. PAUL F. TIDMAN : Is a merchant engaged in the trade with the far East, 2813, 2814. Explains manner in which the English exporter suffers owing to uncertainty of exchange, 2815-2818. Reasons why he cannot entirely cover this loss by bank- ing and other expedients, 2819-2829, 2870-2877, 2915- 2927. Gives instances of trade being checked in the course of last year owing to uncertainty, and panic in the silver market, 2824^2826, 2833-2852, 2981-2986. Import trade not affected by fluctuations in the same way as export trade, 2830-2832. Illustrates loss incurred by tracing an actual transaction of export of .goods to the East, 2863-2862; and a similar transaction of export of produce from the East, 2863-28 69 Loss accruing to English capitalists investing in the East, 2878-2885, 3004-3017. Consequent difficulty of obtaining capital for the proper development of those countries, 2881-2885, 2958-2962. Stimulus to manufacture and production in silver-using countries, 2885-2899, 2936-2970, 2979-2986. Points out stabUity of exchange between Java ancl Europe, and consequent commercial advantages of Java as compared with Straits Settlement, 2900-2914, 2971-2978. Causes of variation in relative values of gold and silver 2928-2935, 2948, 3002, 3003. Effect on the price of silver of the suspension of coinage in France, the Bland Act in America, and the German sales, 2987-3001, 3018. Comparative slowness with which prices in silver countries adjust themselves to alterations, 2944, 2966-2958 3019. 364 ROYAL COMMISSION ON GOLD AND SILVER : ANALYSIS. mk. henry WATERFIELD, C.B. : Is Financial Secretary to the Secretary of State for India in Council, 1663. Nature of the difficulties felt by the Government of India owing to fall in value of silver, 1566, 1646, 1647, 1710-1762, 1853, 2786-2802. Details of the financial position of the Government of India, 1566, 2767-2774, 2803-2806. Items of revenue, 1676-1 601, 2656-2716. Possibilities of increased taxation, 1598-1601, 1648-1652, 1745-1748, 1753-1767, 2764-2766. Items of expenditure, 1602-1638, 1831, 1832, 2655, 2717-2721, 2755-2763. Explanation of charge for exchange, 1603-1608, 2660. Basis on which military pay is converted from sterling into rupees, 1616-1626. Financial effect of the fall in exchange, 1639-1647, 1735- 1744, 1838-1881, 2645-2654. Effect of fall in exchange on the borrowing powers of India and on investments in India, 1653-1660, 1722-1729, 1768-1780, 1833, 1834, 1888-1893, 2722-2744, 2776. Expenditure on public works, 1713-1721, 1734, 1867- 1876, 2746-2764. Effect on employes of the Government, 1661-1665, 1843- 1852, 1882, 1883. Question whether prices have undergone any alteration in India, 1666-1680, 2606, 2607. Liabilities of Government of India under old and new contracts respectively, 1681, 1854-1866, 2644-2655. Effect of fall in exchange on the export and import trade of India, 1682-1707, 1781-1821, 2499-2569. Possibility of a gold standard or currency in India, 1896, 2776-2785. As to effect of alterations in exchange on trade generally, 2570-2604. Observations on Mr. Bagehot's evidence before Select Committee of 1876, 1800-1803, 2694-2604. Real nature of the burden imposed on India, 2613. Mr. J. TALBOYS WHEELER : Represents the uncovenanted Indian civilians, 2191-2196. They sustain a loss of 26 per cent, on pensions and furlough pay paid in Europe, 2197, 2198, 2227-2229. Complain that the Indian Government have kept them to a bargain made when the rupee was worth about 2s., 2198, 2209, 2217. Nature of the uncovenanted service, 2222. Payment of rupee pensions in England a concession made by the Government of India, 2226. LONDON: Printed by Byke and Spoitiswoode, Frinteis to the Queen's most Excellent Majesty. For Her Majesty's Stationery Office. GOLD AND SILVER COMMISSION. FIRST REPORT OF THE KOYAI. COMMISSION APPOINTED TO INQUIEB INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS; With Minutes of Evidence and Appendices. ^wgcnUii to l)otf) ^ou^t& of ^ailiament ftp Command at^tv iMaieiStg* LONDON: PRINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYRE AND SPOTTISAVOODE, PEINTEES TO THE QUEEN'S MOST EXCELLENT MAJESTY. And to be purchased, eiljier directly or thrqugh any Bookseller, from EYRE AND SPOTTISWOODE, East Hardikg Street, Fleet Street, E.C., and 32, Abingdon Street, Westminster, S.W.; or ADAM AND CHARLES BLACK, 6, North Bridge, Edinburgh ; or HODGES, FIGGIS, & Co., 104, Grafton Street, Dublin. 1887. GOLD AND SILVER COMMISSION. SECOND E E P O E T or THE ROYAL COMMISSION APPOINTED TO INQUIRE INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS; With Minutes of Evidence and Appendices. ircssentelr to fiotft ^ou&t& of parltament fig Commaittr of l^er Mait^t^* LONDON: PRINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYRE AND SPOTTISWOODE, PRINTfiBS TO THE QUEEN'S MOST EXCELLENT MAJESTY. And to Ije purchased, either directly or through any Bookseller, from EYRE AND SPOTTISWOODE, East Haeding Street, Fleet Street, E.C., and 32, Abingdon Street, Westminster, S.W.; or ADAM AND CHARLES BLACK, 6, North Bridge, Edinburgh; or HODGES, FIGGIS, & Co., 104, Grafton Street, Dublin. 1888. [C— 5248.] Price Ss\ GOLD AND SILVER COMMISSION. SECOND REPORT or THE ROYAL COMMISSION APPOINTED TO INQUIRE INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS ; With Minutes of Evidence and Appendices. 1^vt»mtelf to fiotft ?^ome^ of ^avlisLmmt t>v ffiommanii of m^v ifMajestp, LONDON: PRINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYEB AND SPOTTISWOODE, PRINTERS TO THE QUEBN'S MOST EXCBLLBNT MAJESTY. And to be purchased, either directly or through any Bookseller, from EYRE AND SPOTTISWOODE, East Harding Street, Fleet Street, E.G., and 32, Abingdon Street, Westminster, S.W. ; or ADAM AND CHARLES BLACK, 6, North Bridge, Edinburgh; or HODGES, FIGGIS, & Co., 104, Grafton Street, IDublin. 1888. [0.— 5248.] Price Bs. TABLE OF CONTENTS, Page ROYAL COMMISSIONS - iii SECOND REPORT - viii LIST OF WITNESSES EXAMINED - - 1 NOTES OF EVIDENCE -...-.- - . 3 LIST OF APPENDICES - 221 APPENDICES - - - - - - - 222 ANALYSIS OF EVIDENCE ... 274 ROYAL COMMISSIONS. I. VIGTOBIA E. Wlrton'a, by tie Grace of God of the United Kingdom of Great Britain and Ireland Queen, Defender of the Faith. Co Our right trusty and -well-beloved Councillor Arthur James Balfour, Our Secretary for Scotland ; Our right trusty and well-belored Councillor Joseph Chamber- lain ; Our trusty and well-beloved Charles William Premantle, Esquire, Companion of Our Most Honourable Order of the Bath (commonly called the Honourable Charles "William Fremantle) ; Our trusty and well-beloved Sir John Lubbock, Baronet ; Our trusty and well-beloved Sir Thomas Henry Farrer, Baronet ; Our trusty and well- beloved James Eichard BuUen Smith, Esquire, Companion of Our Most Exalted Order of the Star of India ; Our trusty and well-beloved David Miller Barbour, Esquire ; Our trusty and well-beloved John "William Birch, Esquire ; Our trusty and well- beloved Lionel Louis Cohen, Esquire ; Our trusty and well-beloved Leonard Henry Courtney, Esquire ; and Our trusty and well-beloved William Henry Houldsworth, Esquire, greeting. 2MftertaSi it has been represented unto Us that it is expedient that a Commission should forthwith issue to inquire into the recent changes in the relative values of the precious metals shown by the decrease in the gold price of silver. ^Ob) fenoh) pt, that We, reposing great trust and confidence in your knowledge and ability, do by these Presents authorise and appoint you the said Arthur James Balfour ; Joseph Chamberlain ; Charles William Fremantle (commonly called the Honourable Charles William Fremantle) ; Sir John Lubbock ; Sir Thomas Henry Farrer ; James Eichard BuUen Smith ; David Miller Barbour ; John William Birch ; Lionel Louis Cohen ; Leonard Henry Courtney ; and William Henry Houldsworth to be Our Commissioners for the purposes of the said inquiry. 9[nlJ We do hereby enjoin you, or any five or more of you, to investigate the causes of the said recent changes in the relative values of the precious metals, and especially to inquire whether the said changes are due — (1.) To the depreciation of silver ; or (2.) To the appreciation of gold ; or (3.) To both these causes. Jf you should find the said changes to be due to the depreciation of silver, you will then inquire whether such depreciation arises from increase of supply or diminu- tion of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. it you should find the changes to be due to the appreciation of gold, you will inquire whether the appreciation arises from the diminution of supply or from increase of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. Ilabing regard to these different causes and their respective effects, you will next inquire what has been the bearing of the changes in the value of the precious metals on the following matters of practical business : — I. India : {a.) Upon the remittances of the Government of India : (1.) For payments on old or fixed contracts. (2.) For payments on new or current contracts. (&.) Upon the persons in India who have to make remittances home in gold, (c.) Upon the producers, merchants, and taxpayers of India. {d.) Upon merchants and manufacturers at home who trade with India, o 51080. a 2 ^, iv COMMISSIONS. II. The United Kingdom : (a.) Upon the trade of the United Kingdom -with, other silver-using countries. (b.) Upon the foreign trade of the United Kingdom generally, (c.) Upon the internal trade and industry of the United Kingdom. Jf you should come to the conclusion that the aforesaid changes in the values of the precious metals are causing permanent or imp6rtant evils or inconveniences to any of the interests above referred to, it will be your duty then to inquire .whether it is possible to suggest any remedies within the power of the Legislature or the Govern- ment, by itself or in concert with other Powers, which would be effectual in removing or palliating the evils or inconveniences thus caused without injustice to other interests, and without causing other evils or inconveniences equally great. HaSStlp, if you are of opinion that this is possible, you will state the precise form which such remedies should take, and the manner in which they should be applied. 9[ntJ for the better effecting the purposes of this Our Commission, "We do by these Presents give and grant unto you, or any five or more of you, full power to call before you such persons as you shall judge likely to afford you any information upon the subject of this Our Commission ; and also to call for, have access to, and examine all such books, documents, registers; and records as may afford you the fullest information on the subject ; and to inquire of and concerning the premises by all other lawful ways and means whatsoever. 91ntl We do further by these Presents authorise and empower you, or any five or more of you, to visit and personally inspect such places in Our United Kingdom as you may deem expedient for the more effectual carrying out of the purposes aforesaid. 9[nlJ We do by these Presents will and ordain thp-t this Our Commission shall continue in full force and virtue, and that you, Our said Commissioners, or any five or more of you, may from time to time proceed in the execution thereof, and of every matter and thing therein contained, although the same be not continued from time to time by adjournment. 9iVLti We do further ordain that you, or any five or more of you, have liberty to report your proceedings under this Our Commission from time to time, if you shall judge it expedient so to do. 9ini Our further will and pleasure is that you do, with as little delay as possible, report to Us, under your hands and seals, or under the hands and seals of any five or more of you, your opinion upon the several matters herein submitted for your consideration. 9[nlJ for the purpose of aiding you in such matters. We hereby appoint Our trusty and well-beloved George Herbert Murray, Esquire, to be Secretary to this Our Commission. Given at Our Court at St. James's, the Twentieth day of September one thousand eight hundred and eighty-six, in the Fiftieth year of Our Reign. By Her Majesty's Command. HENRY MATTHEWS. COMMISSIONS. " ■'■ " - . , ' II. • riGTOBIA E. u ?PKton'a, by the Glrace of God of the United Kingdom of Great Britain and Ireland Queen, Defender of the Faith. Co Our right trusty and well-beloved Councillor Farrer, Baron Herschell ; Our right trusty and well-beloved Councillor Joseph Chamberlain ; Our right trusty and well-beloved Councillor Sir Louis Mallet, Knight, Companion of Our Most Honourable Order of the Bath ; Our right trusty and well-beloved Councillor Arthur James Balfour ; Our right trusty and well-beloved Councillor Henry Chaplin ; Our trusty and well-beloved Charles William Fremantle, Esquire (commonly called the Honourable Charles William Fremantle), Companion of Our Most Honourable Order of the Bath ; Our trusty and well-beloved Sir John Lubbock, Baronet ; Our trusty and well-beloved Sir Thomas Henry Farrer, Baronet ; Our trusty and well-beloved David Miller Barbour, Esquire, Companion of Our Most Exalted Order of the Star of India ; Our trusty and well-beloved John William Birch, Esquire ; Our trusty and well-beloved Lionel Louis Cohen, Esquire ; Our trusty and well-beloved Leonard Henry Courtney, Esquire ; and Our trusty and well-beloved William Henry Houldsworth, Esquire, greeting. W!S!i)tVtU^ We did, by Warrant under Our Eoyal Sign Manual, bearing date the twentieth day of September one thousand eight hundred and eighty-six, authorise and appoint Our right trusty and well-beloved Councillor Arthur James Balfour, Our then Secretary for Scotland, together with the several gentlemen therein mentioned, or any five or more of them, to be Our Commissioners to inquire into the recent changes in the relative values of the precious metals shown by the decrease in the gold price of silver. ^OU) ItnOiD pt, that We have revoked and determined, and do by these presents revoke and determine, the said Warrant, and every matter and thing therein contained. ^itltt whereas We have deemed it expedient that a new Commission should issue for the purposes specified in such Warrant of the twentieth day of September one thousand eight hundred and eighty-six. SviVtf)tt fenoto pt, that We, reposing great trust and confidence in your ability and discretion, have appointed, and do by these Presents nominate, constitute, and appoint, you the said Farrer, Baron Herschell; Joseph Chamberlain; Sir Louis Mallet ; Arthur James Balfour ; Henry Chaplin ; Charles William Fremantle (com- monly called the Honourable Charles William Fremantle) ; Sir John Lubbock ; Sir Thomas Henry Farrer ; David Miller Barbour ; John William Birch ; Lionel Louis Cohen; Leonard Henry Courtney; and William Henry Houldsworth to be Our Commissioners for the purposes of the said inquiry. 91ntl We do hereby enjoin you, or any five or more of you^ to investigate the causes of the said recent changes in the relative values of the precious metals, and especially to inquire whether the said changes are due — (1.) To the depreciation of silver ; or (2.) To the appreciation of gold ; or (3.) To both these causes. Jf you should find the said changes to be due to the depreciation of silver, you will then inquire whether such depreciation arises from' increase of supply or diminution of demand, or from boibh, and you will endeavour to ascertain the proportions in which these different causes have operated. 5f you should find the changes to be due to the appreciation of gold, you will inquire whether the appreciation arises from the diminution of supply or from increase of demand, or from both, and you will endeavour to ascertain the proportions in which these different causes have operated. VI COMMISSIONS. l^ablUg regard to these different causes and their respective effects, you will next inquire -what has been the bearing of the changes in the value of the precious metals on the following matters of practical business : — I. Ind/ia : {a.) Upon the remittances of the Grovernment of India : (1.) For payments on old or fixed contracts. (2.) For payments on new or current contracts. (&.) Upon the persons in India who have to make remittances home in gold, (c.) Upon the producers, merchants, and taxpayers of India. [d.) Upon merchants and manufacturers at home who trade with India. II. The United Kmgdom : (a.) Upon the trade of the United Kingdom with other silver-using countries. (&.) Upon the foreign trade of the United Kingdom generally, (c.) Upon the internal trade and industry of the United Kingdom. Jf you should come to the conclusion that the aforesaid changes in the values of the precious metals are causing permanent or important evils or inconveniences to any of the interests above referred to, it will be your duty then to inquire whether it is possible to suggest any remedies within the power of the Legislature or the Govern- ment, by itself or in concert with other Powers, which would be effectual in removing or palliating the evils or inconveniences thus caused without injustice to other interests, and without causing other evils or inconveniences equally great. ^aStlp, if you are of opinion that this is possible, you will state the precise form which such remedies should take, and the manner in which they should be applied. 9[nij for the better effecting the purposes of this Our Commission, We do by these Presents give and grant unto you, or any five or more of you, full power to call before you sucIj persons as you shall judge likely to afford you any information upon the subject of this Our Commission ; and also to call for, have access to, and examine all such books, documents, registers, and records as may afford you the fullest information on the subject ; and to inquire of and concerning the premises by all other lawful ways and means whatsoever. 9[nlJ We do further by these Presents authorise and empower you, or any five or more of you, to visit and personally inspect such places in Our United Kingdom as you may deem expedient for the more effectual carrying out of the purposes aforesaid. ^IllJ We do by these Presents will and ordain that this Our Commission shall continue in full force and virtue, and that you. Our said Commissioners, or any five or more of you, may from time to time proceed in the execution thereof, and of every matter and thing therein contained, although the same be not continued from time to time by adjournment. Sltltl We do further ordain that you, or any five or more of you, have liberty to report your proceedings under this Our Commission from time to time, if you shall judge it expedient so to do. 91n}J Our further will and pleasure is that you do, with as little delay as possible, report to Us, under your hands and seals, or under the hands and seals of any five or more of you, your opinion upon the several matters herein submitted for your consideration. ^[nU for the purpose of aiding you in such matters. We hereby appoint Our trusty and well-beloved Greorge Herbert Murray, Esquire, to be Secretary to this Our Commission. Given at Our Court at St. James's, the Sixth day of May one thousand eight hundred and eighty-seven, in the Fiftieth year of Our Keign. By Her Majesty's Command. HENRY MATTHEWS. COMMISSIONS. ■"" III. VICTORIA R, ^tct0]i:tai by the Grrace of God of tlie United Kingdom of Great Britain and Ireland Queen, Defender of the Faith. Co Our trusty and well-beloved Samuel Montagu, Esquire, greeting : « Wl\)tVt!lS We did, by Warrant under Our Royal Sign Manual, bearing date the sixth day of May one thousand eight hundred and eighty-seven, appoint Our right trusty and well-beloved Councillor, Farrer, Baron Herschell, together with the several gentlemen therein mentioned, or any five or more of them, to be Our Commissioners to inquire into the recent changes in the relative values of the precious metals shown by the decrease in the gold price of silver. ^nlj whereas one of Our Commissioners, so appointed, namely, Lionel Louis Cohen Esquire, has since deceased. ^OtU ItnOtU pt, that We, reposing great confidence in you, do by these Presents appoint you, the said Samuel Montagu, to be one of Our Commissioners for the purpose aforesaid, in the room of the said Lionel Louis Cohen, deceased, in addition to and together with the other Commissioners whom We have already appointed. Given at Our Court at St. James's, the Twenty-sixth day of July one thousand eight hundred and eighty-seven, in the Fifty-first year of Our Reign. By Her Majesty's Command. HENRY MATTHEWS. Note. — The Right Hon. Joseph Chamberlain resigned in September 1887. GOLD AND SILVER (COMMISSION. SECOND REPORT. TO THE QUEEN'S MOST EXCELLENT MAJESTY. May it please Your Majesty, We, the undersigned Commissioners, appointed to inquire into the recent changes in the relative values of the precious metals, desire humbly to submit to Your Majesty a further report of our proceedings. We append notes of the evidence "which we have taken since the date of our last Report, together with other information bearing upon the subject of our inquiry. this section of the evidence relates chiefly to the effect upon the trade, industry, and general interests of the United Kingdom of the changes in the relative value of gold and silver. We shall very shortly proceed to consider our Final Report on the several matters referred to us, and w© hope to submit our conclusions at no distant date. All which we humbly submit for Your Majesty's gracious consideration, 30th January 1888. HERSCHELL. LOmS MALLET. ARTHUE JAMES BALFOUR. HENRY CHAPLIN. C. W. FREMANTLE. JOHN LUBBOCK. T. H. FARRER. W. H. HOULDSWORTH. D. BARBOUR. J. W. BIRCH. LEONARD COURTNEY. SAMUEL MONTAGU. Geo. H. Murray, Secretary. LIST OF WITNESSES. 1887. Page June 10. Me. S. Williamson, M.P. - - ... 3 „ 24. „ J. Bare Eobektson ...... g July 1. „ Thomas Comber ....... 26 „ 8. „ Bebtram Cubeie - - - - - 39 „ 11. „ H. L. Raphael . - . . - 53 „ 15. Sir Eveltn Baring, K.C.B., K.C.S.I. ... - 64 „ 18. Me. H. D. Maoleod ....... 72 „ 25. „ H. WoLLASTON Blake ... - - 83 Nov. 4. „ J. C. Fielden ....... 92 „ 7. „ William Fowlee ... ... 100 „ 11. „ „ „ (further examined) - - 111 „ 14. „ J. C. Fielden (further examined) ...... i24 „ 18. „ Thomas Combbe (further examined) .... 135 „ 21. „ William Fowlee (further examined) - - - 148 „ 25. „ H. Schmidt ....... jsi „ 28. Lord Beamwbll ..... . . 175 Dee. 2. Me. William Fowlee (further examined) - - - 188 „ 5. „ Daniel Watney ^ ..... . 203 „ 9. Lord Addington ---... -211 NAMES OF "WITNESSES IN ALPHABETICAL ORDER. Lord Addington - - - - - - - -211 Sir Evelyn Baring, K.C.B., K.C.S.I. ..... 64 Mr. H. Wollaston Blake ...... 83 Lord Beamwell ........ 175 Me. Thomas Combee ... - 26, 138 „ Beeteam Cueeie ----.--39 „ J. G. Fielden ..--.. 92, 124 „ William Fowler - - - 100, 111, 148, 188 „ H. D. Maoleod ....... 72 „ H. L. Eaphael ----- 53 „ J. Barr Robertson ------- 8 „ H. Schmidt .-.--... 16I „ Daniel Watnet - .... 203 „ S. Williamson, M.P, ..... 3 o 51080. ^ MINUTES OF EVIDENCE TA.KEN BErORE THE ROYAL COMMISSION ON GOLD AND SILVER. Twenty-fourth Day. 8, Richmond Terrace, Whitehall, S.W. Friday, 10th June 1887. PRESENT : The Eight Hon. LOED HEESCHELL, the Chairman, presiding. Me. D. M. Barbour, C.S.I. Mr. J. W. Birch. ]VIr. L. Courtney, M.P. Mr. C. W. Fremantle, C.B. Mr. W. H. Houi-dswortii, M.P. Sir Louis Mallet, C.B. Mr. Geo. H. Murray, The Secretary. Mr. S. Williamson, M.P., called and examined. 5945. ( The Chairman,^ You have carried on busi- ness for many years in Liverpool ? — Yes. 5946. Amongst other branches of your business you have large dealings with Chili, I believe ? — ^Yes. 5947. In the importation of wheat from ChiK to this country ? — In the importation of Chilian produce generally, wheat amongst others, copper, nitrate of soda, and in the shipment of British manufactured goods and others to Chili. 5948. Has yt)ur principal business been vrith Chili ? — It was for many years. Latterly, perhaps, our largest business has been with Cahf ornia, where we also have a house. 5949. Chili, as we have heard, is a silver-using country, but with a depreciated paper currency ? — Yes, it was really bimetallic in a certain sense, that is to say silver being a product of the country was at their hands, while gold had to be imported, but during the recent war with Peru their metallic money was all drained away and they were left practically with an enforced 'paper currency. But previous to that, Chili was a silver-using country although they had gold coins with a fixed ratio to silver. 5950. You have considered the question of the effect of the more general adoption of the gold standard, which has taken place in recent years, in lieu of the silver standard ? — ^Yes, I have, 5951. In your opinion has that caused an obstaclei to business with silver-using countries ? — Yes, I think it has been most hurtful and damaging, injurious to commerce, generally speaking bringing down values, and presenting hindrances to the interchange of commodities. 5952. Will you explain to the Commission how, in your view, that has operated ? — Since Germany dis- carded silver as her money Europe has practically become gold monometallic, but silver has not been Mr. S ■ Williamson, M.P. driven out of tne world. Foreign nations. South America and the East, still use silver largely, and the difficulties that we foresee, and the injurious con- 10 June 1887, sequences that we fear, are to a large extent appre- hensions founded on the partial experience of tl at divorce since 1874 up tiU now. What we are afraid of is that this tendency to divorce silver from the money of the world will go on unless a remedy is now put to it, and that leads us to believe that very inju- rious effects will fall upon our manufacturing industries and our trade. 5953. Silver is not divorced from the money of the world ; it still is the standard, in countries using very large quantities ? — Quite so. Tip to this point it is a partial divorce only. 6954. You are referring specially to the evils which have arisen in relation to the trade between gold-using and silver-using countries, I understand ? — Yes ; and while there has been a struggling up till now to inter- change commodities, the expansion that we would naturally have expected during recent years has not, according to my view, taken place, and there are those hindrances now existing that any man can easily appre- hend. For instance, you would not, under existing monetary laws, think of investing money in a silver- using country, getting your interest paid in rupees or dollars, you would not think of investing in the debentures of a railway company, paying you interest in its silver money; and you would not think of in- vesting in shares in any of these industrial enterprises such as railways,_waterworks and so on in silver-using countries, so that we are putting a check upon their development, and the expansion of commerce. 5955. One of the evils, then, to which yon refer is the obstacle which it creates to the investment in a silver- using country of capital existing in a gold- using country ?— Quite so. That is the principal point A 2 ROYAL COMMISSION ON GOLD AND SILVER : Mr- S. that I would like to lay stress upon. Of course, Williamson,^ besides that, to a merchant transacting business with a ' ' silver using country, the fluctuations in exchange are 10 June 1887. most tantalising. Some may by haphazard make money out of the fluctuations, but as a rule to a prudent merchant they are excessively annoying and injurious. 5956. You think that that inconvenience is to some extent met by the operations of exchange banks, yet they cannot completely obviate the hazardous character of transactions between gold-using and silver-using countries ? — In the small silver-using States you can- not arrange ahead for remittances with banks, or at least to a very moderate extent only. The Indian banks have certainly been trying to meet the difii- culty, but we know that some of the Indian banks have got into trouble because of it, and are not paying dividends, and I look upon it as an extremely risky business. You make these banks that are now trying to accommodate their customers, exchange speculators, and what English capitalist is to put money into these banks, I should like to know ? I think it is a most serious position that you put these Indian banks into. They can buy, of course, ahead to a certain extent, but the tendency is to sell exchange ahead to a larger extent to meet the demands of exporters from this country, and that is rash speculation. We know per- fectly well that two or three of the Indian banks have presented very bad accounts recently. 5957. Are you able to arrange ahead in transactions between this country and Chili ? — Only to a small extent, and we are obliged to give up giving credit almost entirely now, in Chili. The credit in Chili used to be 6, 7, and 8 months. I grant it was a long credit to give to dealers there, yet that vras the course of business. We had interest. We ought to have got and did get interest for the use of our capital, besides the commercial profit on the goods we sold, and pro tanto it was an outlet for the employment of British capital. Now we are obliged to curtail those credits, and sell for cash. Three-fourths of our sales are cash sales ; that is to say, payable in a month, and for these we can possibly arrange ahead, but we still occasionally make sales at six months' credit, and for those we cannot arrange ahead. 5958. Does that result from the depreciation of silver or fk-om the depreciated paper currency ? — It arises from the extreme fluctuations in exchange. We have no basis on which to found exchange. 5959. Yes, but those fluctuations might exist, I suppose, even if silver were steady elsewhere, in a country with an inconvertible paper currency ? — I am speaking of the country rather as a silver country. Let us take the dollars as silver dollars. Even suppose Chili were now on a silver basis, we could not sell at six months' credit and know what we were to get back, at the end of that time, if we could not arr.ange ex- change ahead. The fluctuations in the sterling value of silver dollars are now very great. 5960. But supposing a change were made which fixed the value of silver in relation to gold, would that get rid of your exchange difiiculty between this country and Chili so long as the latter had an inconvertible paper currency ? — No ; but it would present an inducement to Chili to resume specie payments. She has got State railways to borrow money on sufiicient to enable her to resume specie payments if there was any inducement for her to do it, but there is none. She is just about as well with a paper currency as with a silver currency just now. 5961. Then you think that one efi^ect of a change which produced a fixed relation between silver and gold would be to induce Chili to resume specie pay- ments ? — To a large number of countries. Chili as well as other countries, the existing monetary position of silver is an absolute barrier to the resumption of specie payments. I think this is a very serious question well worthy of the consideration of the Commission. 5962. With regard to the counterbalancing advan- tages which it is suggested arise from the present condition of things, in the exchange between this country and India, what hare you to say ? — I think the advantages have been exaggerated. The maxi- mum export of wheat from India has been 6,000,000 of quarters in a year. Of these we have received 3,000,000 of quarters, and I would put the ad- vantage at 15s. a quarter, that is 2,250,000Z. The Continent and the Mediterranean have taken an equal quantity, making another 2,250,000/; together 4,500,000^. But then the whole of that has not been gained by the fall in exchange. For instance, freights have fallen during recent years. Steamer freights have fallen from 55s. a ton down to 20s., which is now- pretty much the standard rate from Bombay and Calcutta for wheat. That is exactly 8s. a quarter of saving in freights now as compared with what it was about the year 1880 or 1881. That is 2,400,000/., and practically we have just a net grain through fall in exchange of about 2,000,000/. sterling on wheal, to the Indian people, and we know that the cultiva- tion is not increasing much. If they produced about 20,000,000 of quarlers we would not get any of it. It is the surplus of a large crop, of which India only exports about one-fifth or one-sixth, and we know that notwithstanding this great gain that we hear so much about, the Indian producers are in a state of penury. When they have to buy clothes to clothe themselves, or other European commodities, they have to pay so much more for them. Then the Indian Government have to provide about 50,000,000 of rupees or there- abouts annually more than they did when the exchange was about 2s. or 2s. Id., and this implies additional burdens on the people of India. 5963. And you do not think this suggested stimulus or advantage to India has been great ? — I think it has been an advantage to a certain extent, because of the land rents being in silver ; no doubt the Indian cultivator has gained, that is to say the Indian culti- vator has been able to meet the fall in the price of wheat more easily than cultivators in other countries. That may be, but they are a set of poor people, notwith- standing, and the advantage to India as a whole has been very much exaggerated, and the advantage to ourselves has been exaggerated too. 5964. You mean the advantage to ourselves by getting the food cheaper ? — Yes, it has been exag- gerated, I think. Certainly the shipowners, who have contributed perhaps most largely to the bringing of this cheap wheat, have done it at their own cost ; few of their boats are paying expenses. 6965. Then what do you say with regard to the suggested advantage to India, by certain manufactur- ing industries being stimulated in India ? — Yes, that again is a very serious question. By divorcing their silver money from gold and having the Indian mints, the only mints in the world now open for the coinage of silver, if you force large quantities of silver on the London market (supposing that this question is not settled, and that the United States cannot go on, as I am sure the United States cannot go on, hoarding their silver as they are still doing). India is almost the only outlet for it. It will go either by direct shipments from America to India, or by way of the London market. The usual route for it is by the London market. It comes across here and is forced ofE. If they stop the hoarding of it in America it must come here for sale, it must compete with Indian bills, and it must force down exchange. I do not know how low, it would be ridiculous to predict, but I think it is very likely that it might be forced much lower than any of us dream of Well, then, the efiect of prices payable in greatly depreciated rupees and annas for British manufactured goods, must undoubtedly be to stimulate the planting of native industries in India. We see what has taken place in Calcutta in the planting of jute factories there. Some Dundee people thought that they would still keep the hold of that trade, and get cheap labour out in India and cheap jute. Freights were then very high, and they planted some jute mills. These have got extended; they are not now all in the hands of Dundee people, they are in the hands of London and Liverpool and Glasgow people largely, and they are making jute goods in MINUTJES OF EVIDENCE. Calcutta, I know, at prices that Dundee cannot compete with. We ourselves struggled on shipping bags from Dundee to the West Coast and to California, but we found ourselves losing heavily one or two years. We found that our neighbours were getting cheaper goods in Calcutta, so, contrary to our own inclination, we had to abandon buying in Dundee and had to make our purchases in Calcutta. Now freights are so low all over the world that we get goods sent from Calcutta to San Francisco cheaper than to London. We paid four dollars and a half a ton last year, and the demand for these Calcutta goods is of course just taking away the trade from Dundee altogether, except in those other staples made of jute that from time to time come into play in this country ; but practically the trade in bags and sacking is taken away from Dundee to Calcutta almost entirely. The same thing may happen in cotton goods, and our persistent ad- herence to a gold monometallic standard will inevitably give a greater stimulus to the planting of native manufactures in India. 5966. Do you think that if the Indian Government were to cease borrowing in the English market and to borrow in India on a silver basis instead, that would be likely to have any prejudicial effect upon the trade between this country and India ? — I think it would reduce the exports of commodities from this country, but it would be beneficial to the Indian Government and a necessary step for them to take, I think. 5967. Tou think that borrowing in India on a silver basis, instead of in this country on a gold basis, would be a prudent course for the Indian Government to take as far as they were concerned ? — Yes. 5968. My question was rather directed to the point whether it would be likely to have a prejudicial effect upon the trade between this country and India ? — The way it would act would be simply this. Silver is pressed upon the London market ; the borrowing in this country would enable you to send it out, and it would not curtail the export of goods from this country to any appreciable extent ; but if you borrow in India you do not require to send the money out, you have then the silver competing with council bills exclusively. The silver comes and is forced off on the London market, and that necessarily must bring down the exchange and reduce the volume of our exports of goods to India. 5969. Have you any opinion on the question which has been raised whether our national wealth has grown in recent years or not ? — Yes, I have read statements from time to time in The Economist upon that question. I think that The Economist has left out a good many facts in its calculations. I think that they have left out of account the very large diminution in the value of shipping property which I estimate at about 50,000,OOOZ. sterling ; and it is well known that we hold a much lesser amount of foreign securities of certain classes, such as Russian stocks and United States bonds, than we did years ago. 5970. When you estimate the depreciation of shipping property since 1880 at 50,000,000/. sterling, do you arrive at that estimate upon the basis of the increased quantity of shipping between now and 1 880 ? I will take the medium quantity, I will take 7,500,000 tons at 11. a ton ; it will come to .'iO,000,000/. in round numbers. 5971. Yes, but there has been a large increase in the tonnage between 1880 and 1885 ? — Yes, but I take the average quantity of tons. A steamer, for instance, was sold in Liverpool the other day. She was built in 1883. She wa's sold for I3,500Z., and she cost 30,000/. She was a steamer carrying 3,000 tons. She was forced off at auction, and she only brought 13 500/. What of vessels that were built about 1880 or before 1880 ? The diminution in the value on the quantity existing in 1880 or the quantity existing a few years ago is at least 50,000,000/. sterling. 5972. There has been a very great addition between 1880 and 1885 in tonnage? — Yes, there has been to the extent of perhaps 1,500,000 of tons. 5973. That would naturally tend to a diminution of value unless there had been an increase in the demand Mr. S. for carrying purposes, corresponding with the increase Williamson, in the tonnage ? — I am only stating a fact that I m.F . think The Economist lost sight of. While they give jq jm,g jggy_ a glowing account of the increase of our national wealth, they forget a diminution of value in other quarters. 5974. You are not speaking of the causes which led to that diminution ? — No, not at all ; merely I appi'ehend that the calculations of the The Economist are erroneous. I do not know what it is in London, but I know that in Liverpool there are whole streets of houses standing empfy, working men's houses. In the course of a few years a street of working men's houses becomes so dilapidated that decent people go out of it, and then there are new streets built of working men's houses in the suburbs, and the working people go into these and leave the streets they had occupied empty. The Economist says we have had a great increase in the value of our house property. Yes, but I think they lose sight of depreciation, of natural deterioration besides actual depreciation, and so in many other particulars. In landed property, we all know there has been a great depreciation, and I think The Economist entirely lost sight of that. I do not think our national wealth is increasing. That is my belief. 5975. I gather that you think that the condition of things arising from the_suspension of the use of silver as a standard in Germany and other countries is sufficiently serious to demand some remedy ? — Most assuredly. Not a new remedy, but a reversion to what existed in this country with great advantage, the bimetallic system that we had. It is not a new remedy. 5976. When did that exist in this country ? — Ail through last century. We are accused of introducing a novel idea. It is not novel ; it exists in France now with advantage, although free mintage, which is the real thing that we want, does not exist, but you can pay your debts to 'day in silver to any extent in France. 5977. You mean reverting to the condition of things which existed in France prior to 1874 ? — Exactly so. But on a much wider basis. 5978. And adopting that state of things in this country as well ? — Yes, I do not think that France by herself can do it. France and the United States together could, but I do not think that the United States will venture without the concurrence of England and Germany, one or other of them at any rate ; and seeing that we are so largely beholden to our manufacturing industries for our existence, I think it behoves us to give serious consideration" to this question. 5979. Has the import of wheat from Chili increased of late years ? — No ; it is not a large quantity, it never has been a large quantity, it has never exceeded half a million of quarters in a year. 5980. Then the depreciation of currency in Chili has not in fact stimulated the export of wheat from that country to this ? — No, but the low exchanges and low freights during recent years may have enabled Chili to ship part of her surplus to Europe during a time of very low prices. 5981. {Mr. Barbour.) Can you say when the export of wheat from Chili began ? — It began 40 years ago. 5982. You hold that in the present day, the export trade from this country to silver countries depends very much upon the exchange ; that you have to watch the turn of the market to get a favourable exchange? Naturally yes. 5983. Have you had any experience in trading with countries which had the same standard as Eng]and,or with countries which had a silver standard at the time that silver and gold bore a fixed ratio to each other ? — Well we have, as I told you, a house in San Francisco where practically, because payments there are on a gold basis, we find no difficulty: 5984. You have not to pay the same attention to the ROTAL COMMISSION ON GOLD AND SILVER: Mr. S. probability of fluctuations in exchange ? — TJiere are Williamson, slight fluctuations in exchange that do occur and will ^■^- always occur when there is a greater or les,3 demand 10 June 1887 ^'^^ money. But you can either send the coin out to, ' ' or bring it in from, a gold using country, subject to the mere charges of transmission, and you have to allow for that in your calculation, as a prudent merchant in any case will, if he has to give long credit. 5985. But if there is no common basis between the two standards, the balance of indebtedness has to be adjusted by the exchange acting directly on the trade. It cannot be adjusted through money ? — With a silver using country it cannot so be adjusted under present conditions. 5986. Tou cannot make an adjustment through money, and that is an inconvenience, because the exchange acts directly on the trade, checking the trade for the time being, or stimulating it, as the case may be ? — You can, of course, make an adjustment through money, running the risk of losing very heavily by your remittance of it. 5987. Have you heard that a fall of a penny in the rupee makes a difference to the Government of India now of ten millions of rupees in a single year ? — I believe so. Yes. 5988. For 1882-3 the Indian estimates were based upon an exchange of Is. Sd. and for the current year, 1887-8, they are based upon an exchange of Is. 5^d. That makes a difference of 2^d. in the rupee ? — Yes, and now I understand the Indian exchange is really about Is. 4^d. 5989. That is 2^d. in five years, or |rf. for each year ? — Yes. 5990. And that is on the average an additional half million of money every year since the year 1882? — Yes, it would be so. 5991. There had been also a considerable fall before 1882 ?— Oh, very large. 5992. And are you aware that since March of this year, since the estimates were made on the basis of Is. .5^d., the exchange has gone down to Is. 4|(^. as nearly as may be ? — I believe so, rather lower in fact. 5993. That makes a difference of |rf. ? — Yes. 5994<. And that at the present rate of exchange would be about eight millions of rupees ? — It would be. 5995. Do you consider that such a state of affairs is a serious matter ? — Most decidedly for the Indian Government, and so must react on our own trade. 5996. I think you hold the opinion that when exchange with India falls, and the Manchester manu- facturer finds that he cannot get a higher rupee price than before, he tries in some cases to meet the difiiculty by lowering the quality of the goods .■" — Well, I have had no experience of the Indian trade, but I know that we have had to do that in our Chilian trade ; not that we would do it willingly, but the traders have a decimal currency. They have got certain small coins 10 cent, 15 cent, and 20 cent, pieces, you may say a token currency like our own, and the course of the trade compels them to bring articles to sell to the poor work people who must make their wages go as far as they can. They try to get it to fit in with the small silver coins, and the consequence is that with the great fall in exchange they are obliged to ask us to bring cheap goods. We do not choose it. There is often a great deal of nonsense talked about Enghsh merchants and manufacturers lowering the quality of the goods they make. They make as good qualities as they ever did and they make goods as poor as they ever did. It is no new thing., We simply send out what they ask us to send, whether it be cheap domestics or cheap prints. Of course -there is a larger portion now of low class goods sold in those countries that are being affected by heavy declines in the exchanges. There is a larger proportion, although there was always a certain pro- portion, but as the exchange goes down you must get a larger proportion of low classed goods in order to fit in with the wants of the dealers. 5997. For goods manufactured in a gold standard country and sold in a silver using country the trader adjusts the matter as far as he can by lowering the value of the article as the value of silver falls relatively to gold ? — That is one of the necessities of the situa- tion with silver using countries or with countries with a very fluctuating paper currency based ultimately on silver. 5998. {Mr. Birch.) I think you stated just now that formerly there waa a ratio between gold and silver in Chili. Can you tell me when that was or what the ratio was ? — The ratio was the French ratio of 15|^ to 1 or within a fraction of it. 5999. And now what is the ratio between the paper and the silver ? — None whatever. It is based on the possibilities of resumption, which of course would become much stronger and might become effective at once if silver was put in its old position. 6000. Yes ; but is there no discount on the paper at present ? — Oh, yes, the exchange just now is about 26d with Chili ; and the silver dollar, the old Chili silver dollar, if remitted, would give about 32d. , 6001. And that difference, I suppose, you have to take into consideration in such operations ? — It is not a fixed discount. Even if we got paid in silver we could not remit the silver dollars as we used to do when sellers of bills to us did not give us the exchange that we thought reasonable. We merely remitted the dollars in those circumstances, but we cannot remit paper money. 6002. Then those silver dollars would give you vary- ing exchanges in accordance with the variation of the premium upon the silver dollar ? — Yes ; that is quite true. The silver coin does not appear just now in our calculations as it does in the River Plate, where there is a premium on gold or a discount, but they have simply a paper dollar in Chili now. I* 6003. But surely the paper doUai", being at a discount, and a varying discount from one day to another, must be a great hindrance to the introduction of commodities which you were speaking of just now ? — It accentuates the difiiculty very greatly. We would have diflBculty enough with silver, but the difficulty with inconvertible ])aper is much greater. 6004. The difficulty is greater, but the difficulty would exist even supposing silver should return to the ratio that previously existed in Europe .' — Cer- tainly it would remain if the paper money remained. But I have tried to point out that there would then be a stimulus to resumption. 6005. That would depend rather, would it not, upon the powers of the country itself.? — Yes, Chili has plenty of power to resume specie- payments if they set their minds to it. 6006. Then I understood you to say that the difficulty is not so much what is now felt, as what, may happen in the future ? — Evils have happened, but I think much greater evils may happen in the future unless we try to put this matter right. 6007. I have before me a book published in 1859, in which exactly the same difficulties were foreseen and prophesied with regard to gold as you are now prophesying with regard to silver. This is a hook that was written by Monsieur Chevalier, a man very well known in France ; and the same things were stated then with regard to gold as aienow stated with regard to silver. He foresaw that gold would then be produced to a large extent and English Consols would decline in value, very much what is pointed out now with regard to silver. The difficulties that presented themselves to Chevalier's mind evidently arose from a fear of a superabundance of the metal ? The difficulties now are of a totally diffierent character, they arise from the inadequacy of the metal gold for the use of the world. You are forcing gold, the great mone- tary nations of the world are forcing the use of gold, and the quantity of gold is notoriously inadequate, consequently the difficulties that Chevalier faced, or apprehended rather (for it was a mere apprehension), are totally different from the actual difiiculties that we are practically experiencing. 6008. (The Chairman.) But is it not the converse case ? — Yes, exactly the converse of it. MINUTES OP EVIDENCE. 600i). {Mr. Fremantle.) la one case there has been too much gold, and in the present case there is too much silver ?— Yes, or too little gold ; that is to s^J) if gold is to be used universally, there is too little of it. 6010. {The Chairman^ "What I meant by the con- verse case was that what M. Chevalier apprehended from a certain condition of things was exactly the opposite of that which you apprehend from the opposite state of things ? — Exactly so. 6011. But then what is suggested to you is that as his apprehensions proved ill-founded, so yours may prove to be equally ill-founded ? — No, because his were mere apprehensions and never were embodied in actual facts at all. They vanished, they were found perfectly illusory, but we have experienced the dilficnlties. 6012. {Mr. Birch.) Surely they were not illusory, inasmuch as prices, you remember, rose very mate- rially ?^Yes, and wages rose also and people were able to pay better prices ; there was more general prosperity. 6013. {Sir L. Mallet.) But are you not confusing the two things ? — In the first place you have a ques- tion of the effect on prices, as to which, no doubt as you say, M. Chevalier's apprehensions were the converse of those which are now current ; but in Chevalier's time at all events there was what there is not now, a fixed ratio between the two metals ; at all events there was no variation, whether it was caused by the French law or not is matter of controversy ; but at all events as matter of fact, the price of gold and silver remained practically at a fixed ratio during the whole of the period of the gold discoveries ; and the difficulties that you, as I understand it, apprehend from the present prospect before us arise from the fact that the two metals, which for 70 years had been practically at a fixed ratio are no longer at any ratio ? — Quite so, are divorced from each other. 6014. And are flying about wildly without any kind of thing to keep them together — a state of things quite different, as it seems to me, in that respect from the case which Chevalier contemplated ? — The apprehensions of Chevalier have no bearing whatever on this question. 6015. {Mr. Birch.) You were referring specially to the business of Chili and how much it was interfered with. We had one leading witness the other day before us who stated (question 3069) that " if the exchange " should rise from its present point of 25d per dollar to " somewhere between 36d and 40d, not another quarter^ " of wheat would be grown in Chili for export ; many " copper mines which subsist on the low exchange would " be closed, and many nitrate establishments would be " in the same case. ' Now as you are a merchant trading with Chili it would hardly appear that it would be greatly to your advantage that that state of things should be brought about? — Well, I believe this, that being on an enforced paper currency, and wages not having yet risen as might have been expected the smelters of copper are able to carry on a struggling industry nominally with some advantage, but their whole property is correspondingly de- preciated in value and the thing will come to an end. Workmen will stand out for higher wages, and they will be no better off in the end. If Chili cannot pro- duce copper in competition with countries that produce copper more cheaply then it is evident they will not be able to maintain the manufacture there. In Australia it has gone down, because they cannot com- pete with Montana, and I grant that Chili has a Struggle in regard to her copper industry ; there is no doubt about that, and the use of paper currency pro tempore alleviates the evil, that is all. If Chili cannot produce copper to compete with other nations that produce it more cheaply, then she must improve her methods, and her methods of mining. With respect to nitrate of soda, it only comes from the coast of Chih, and whatever the importers of nitrate of soda demand has to be paid. They have no competition. If the price is put up very high naturally the consumption of it will fall off. In regard to wheat I do not believe that its production would be very materially affected. Mr. S. The quantity exported to Europe is very small. WiUmmsoti, 6016. But you would allow that the merchant - " trading with a country like Chili and exporting goods, jq June 188? as you have told us just now that your house does, — , would not be beuefited by that country failing to be able to export its produce. Surely the condition of the country being a flourishing condition must be advantageous to you who ship your English goods there. You get a better chance of being paid than if they had nothing to ship ? — Yes ; but I do not think that any prudent merchant ought to base his trans- actions on prices that are inflated by the use of a paper currency. They ought to get on some prudent basis, and I repeat that if Chili cannot produce copper in competition with other countries, then her copper industry must decline, and it is declining in competition with Spain and Montana. 6017. {Mr. Houldsworth.) Do you approve of the doctrine that the fall in silver has stimulated the export of wheat from India? — It may have done so to a certain extent, but the fall in freights has given an equal stimulus. 6018. I understood you to say that you did not think it had done so in the case of Chili. Now we have had very strong evidence, in fact I think the evidence has been universal, that it does stimulate it in the case of India or that it has stimulated it ? — Yes, in regard to export naturally, but taking it in view of the entire growth of wheat in India, the margin for export has not increased enormously in proportion to the total quantity of the crop grown in India. That is to say we only get a surplus, and that is a small quantity of the entire crop of wheat in India. 6019. What I wanted to ascertain was whether in your mind there is any difference in the position of Chili from that of India, with regard to the stimulation of the export of wheat ? — Yes, there is a difference, because Chili has a small population. It has only a population of barely 2,000,000 of people, and they have not got hands for the growth of it. The production of nitrate of soda has increased, and wages in the north part, in the desert part of Chih, have been higher than in the agricultural part, and hands have been drawn away. Then they lost a good many men in the war with Peru, and other circumstances have come into play in Chili, with regard to the production of wheat, which do not apply in India. 6020. Then would you anticipate that in India the export of wheat would be largely stimulated if the present fall of silver was continued or was increased ? It has been stimulated, no doubt. If the rupee fell to Is. there might be a further stimulus, but what then of the Indian debt, and of our export trade ? 6021. And it would continue to be stimulated to a large extent ? — It may be ; it depends, however, very largely on the cost of internal carriage, and on the maintenance of those very low freights that are so totally unremunerative to shipowners. I do not think that during the last two or three years the Indian crop of wheat has increased. 6022. Do you think it has been the increased export from India which has reduced the price of wheat in this country to any extent ? — Well, prices fall so soon as you get over the exact quantity that this country requires to import for consumption. So soon as you get a surplus of a million of quarters floating about wanting buyers, prices go down. 6023. Then you do think that it has ?— Yes, but look at the question in this light. Our wants are about 15 to 17 millions of quarters a year. We have never in any year had more than three millions of quarters from India, about one-fifth of it. No doubt that one-fifth has had its influence in lowering the prices, along with other imports from the United States, California and elsewhere. 6024. Do you not think that the present state of things will increase that export from India, and that instead of one-fifth it will become a larger proportion ? — It may be ; but if the Indian people have to pay more for their goods, and if the price' of wheat, which 8 ftOTAL COMMISSION ON GPLB AND SILVER: Mr. S Williamson, M.P. 10 June 1887. is one of oui" own commodities that we grow in this country, is unduly depressed by means of very unjust and erroneous monetary laws, then I do not think it is an advantage. I would be very glad to see India competing on fair terms, with Indian money on the same metallic basis as our own. I do not see why we should make laws to stimulate the growth of Indian wheat adverse to the whole of our other commercial interests and to our own agricultural interests too ; that is to say, I do not think the present is a fair basis. Looking at it all round I think there is disadvantage instead of advantage. The witness withdrew.' Adjourned. Twenty-fifth Day. Friday, 24th June 1887. PEESBNT : The Eight Hon. LOED HBESCHELL. Mk. D. M. Baeboue, C.S.I. Mk. J. W. BlECH. Me. Heney Chaplin, M.P. BIe. L. Couetnet, M.P. SiE Thomas H. Faeebe, Baet. Me. C. W. Feemantle, C.B. SiE W. H. HouLDSWOETH, Baet., M.P. SiE John Lubbock, Bart., M.P. SiE Louis Mallet, C.B. Me. Geo. H. Mueeat, The Secretary. Mr. J. Barr Robertson. Mr. J. Baee Eobeetson called and examined. 6025. {The Chairman.) You have resided, I believe, 24 June 1887. Bome time in the United States ? — Yes, 10 years. 6026. And have paid considerable attention to questions of currency and variations in the value of the precious metals ? — Yes, I have. 6027. It is a subject which has excited much in- terest on the other side of the Atlantic as well as on this side ? — ^Yes. 6028. I believe you have drawn up a table showing the changes that have taken place during the last 25 years in England, and in India, as a gold and silver using country ? — Yes, I have. 6029. Will you explain to us the sources from which you have obtained the materials, and the re- sult ? — It commences with gold. The eight years, 1858 to 1865, and the 10 years, 1866 to 1875, are taken from the Report on the Depreciation of Silver of 1876. The 10 years, 1876 to 1885 and 1886, are taken from the Board of Trade Eeturns. 1886, I may say, is taken from " The Economist's " monthly issue of the Board of Trade Eeturns. Silver is from the same sources. 6030. And is that the case with regard to India, as well as the United Kingdom? — India I have taken from the Eeport on the Depreciation of Silver down to, I think, 1873-74. I took these from the India Office returns. I had them specially sent to me for the purpose, so that these figures are all really official figures. 6031. Now as regards the result you find the net imports in the eight years 1858 to 1865, of gold, into the United Kingdom to be 29,658,000^. ?— Yes, that is correct. 6032. By net imports, I suppose, you mean the gross import of gold during that period less the amount exported ? — Yes, that is the meaning of it. 6033. Then in the following 10 years it was 50,108,000A ?— Yes. 6034. Making an average annual addition to the gold in this country during the first eight years of 3,707,000Z. ; and during the following 10 years of 5,Oll,00OZ. ?— Yes, that is correct. 6035. Then in the next 10 years, from 1876 to 1885, I understand you to say that the exports of gold from this country exceeded the imports of gold into it ? — ^Yes, they did. 6036. Showing a net export of 865,000/. ?— That is correct. 6037. Was that process going on generally during those 10 years, or did it result from any specially large export during any particular year ? — There were five years in which the net exports amounted to 17,988,000/. and five years in which the net imports were 17,123,000/. Of course, I have the whole of the tables showing exactly what that is, though I have not brought them with me, and have not put them in my memorandum. 6038. Then in 1886 the net export was 342,000/. ? — Yes. The reason why I have these tables in that form is that I drew them up just about 16 months ago, as I was going to America, and I have only recently returned. I had them complete up to 1885. I put in a year later. The figures also show, of course, an increase on the average for that one year. That is how I make the 1 1 years. 6039. That 11th year showed a larger export than the average of the previous 10 ? — Yes, it did. 6040. Before we leave the gold, have you endeavoured to ascertain in what form that net increase, during the first 18 years of the period which you have taken, remained in this country? — I have not done that, except that there are tables showing the estimated consumption in the arts, and, of course, the balance naturally would pass into currency. 6041. You say that the balance would pass into currency, but it can only pass into currency by being added to the reserve or by being actually coined ? — It must be coined, of course. Then there is far more coin than what this net amount is. It may be coined, and exported as. coin. I daresay it will be found that most of it is so ; but the coinage is a very unreliable test, in my opinion, as to the movement of the metals. The fact that it is coined is no proof at all that it remains in the country. 6042. Yes, but have you at all carried your inves- tigations out to ascertain whether there was an increase of the reserve of bullion in this country, or of coinage, representing this net import ? — No, I cannot say that I have ; I am dealing with the official figures simply. 6043. And supposing that there was no addition to the i-eserve of bullion, then it would all have taken MINUTES OF EVIDENCE. 9 the form of an increase of the coinage, I suppose ?— Of course the natural form would be to be coined in much larger quantities than what we absorb, than what passes into the currency, and the currency might be increased without anything to show in the Bank of England reserve, as that is in a general way comparatively stationary. 6044. Yes, but if the Bank of England reserve was stationary, then the whole of it must in some way or another pass into circulation ?— So it must, yes. ^ Prices regulate whether it will pass into cir- culation or whether it will go abroad. 6045. But according to your investigation this did not go abroad, this is the excess of imports over ex- ports, which remained in this country? — Yes; pre- cisely. Consequently, allowing for what was consumed in the arts, which, in another part of my paper I show, upon Dr. Soetbeer's calculation, probably amounted to 2,400,000^. a year, though it would of course be less in the period from 1866 to 1875 ; then the balance must have gone into the currency, it must have gone into circulation, it did not go abroad. 6046. Supposing it went into circulation in that way, must not that have shown itself, somehow or other, in the amount of coin held by the banks ? — No ; it would only show itself to a small extent in the banks, because they are simply private institutions, holding enough to protect a certain amount of capital and liability. 6047. That is, people must have had more in their pockets? — Precisely, that is inevitable. There must have been more in their pockets, more in their tills, more in their counting-houses. 6048. That would be a change of habit, would it not, if people kept any more in their pockets ? People generally take such coin as they have to the bank, except the small amount they need for their daily transactions ? — Still, of course, you will readily see, whereas we were importing 5,000,000Z. sterling a year, it was impossible for the bank to hold 1,000,000/. or 2,000,000/. more than a certain fixed quantity without lowering the rate of discount and driving it abroad or into general circulation. Suppose now that a large amount of gold was produced in the world, say 100,000,000/. sterling, that gold must pass into every country on the gold standard. I am speaking about normal conditions. That 1 00,000,000/. must pass and must distribute itself according to the proportion that each country holds of the gold stan- dard. It must pass into the countries having the gold standard, and most of it must pass into general circula- tion, because all the financial institutions are simply private institutions holding a certain amount to protect liabilities, and are in no sense mere repositories of the precious metals. 6049. Yes, but what puzzles me is this, how the habits of the people should have become changed, so that instead of paying in aU the money that they receive into the banks they should have kept it in their pockets or in their houses ? — The habits of the people did not change in the 10 years 1866 to 1875, they still paid into their banks, but any surplus beyqnd the necessary reserves of the banks must have passed out of the banks into the hands of the people and influenced prices. 6050. But I want first to see where it is ? — Well, I will take an illustration. I wiU suppose that any one purchased a certain amount of articles 12 years ftf o, and is purchasing the same articles to-day ; it is very evident that prices having fallen, for whatever reason is not material for the moment, a smaller amount of money will enable him to make all these cash pur- chases than would have been required 12 or 15 years ago. He has not changed his habits, though he will require less money for current wants than formerly. Now, it seems to me that the money in the country during periods of excessive imports of gold not being in the banks it must be held in the pockets of the people, or in tiUs and counting-houses ; it must be, where can it go ? The banks may hold only a small o 51080. portion of it. Money has, therefore, its effect upon prices by being to a larger extent in circulation. 6051. (Sir T. Farrer.) Wholesale or retail prices ? — Upon both, though wholesale prices are real prices. Of course retail prices are largely conventional. They differ for the same articles in different shops and in different localities. 6052. (The Chairman.) I am coming to the re- lation of the volume of currency to prices presently. I was for the moment only trying to trace where this addition to the amount of the precious metal, if it existed, was to be found ? — It must be in the hands of the people. 6053. (Mr. Courtney.) Is it not the usage of the people who are dealing with large sums of money to deposit their money with their bankers and to draw as wanted ? — Yes, it is, although people dealing with large sums, and having large command of money, rarely have much money, as their transactions will generally be in documents — cheques or bills — ^which they will deposit with their bankers, and the amount will be placed to their credit. 6054. Well, if there was a large accretion of gold in any one year in the United Kingdom, would not the greater part of that be deposited with the banker until wanted ? — Well, if deposits were increased any banker would hold a larger amount of gold against these in- creased deposits, that is perfectly true : but he would only hold, say, one quarter or one fifth or less of the gold deposited, and the surplus, I maintain, must pass into general circulation among the people. 6055. (The Chairman.) That is what is rather puzzling me. I do not quite understand how there should be more in the hands of the people ; because, if the habit, which certainly was acquired prior to 1858, of people paying all the money that they did not want for their immediate use into their bankers still con- tinues, why should not any extra gold that came into the country have found its way into the hands of the bankers ? — Well, I might put the question the other way. Where else is it to go ? It must remain some- where in this country because we are on the gold standard, we are assuming that every countiy has got a large amount of gold, and the bankers only hold a reserve against their liabilities, they hold only a frac- tion of the amount of their deposits. 6056. It may be that the true explanation is that more was used in the arts, or that there is some error in the calculation or in the returns ? — You see we are assuming an addition of the quantity of gold that is not required in the arts. 6057. Then it may point to this that there is some error in the returns, in the figures ? — That can scarcely be the case, as considering the production of gold there is no inherent improbability in the fact of our getting so much. 6058. T mean if you have to account for it either by saying that there is some error in the figures, or by saying that people have changed their habits, and keep large sums of money in their pockets or in their places of business, it may be that the former is rather the direction in which one would look for the expla- nation ? — Well, I maintain that the habits of the people may be assumed to be the same, only when prices are high people must pay more money than when prices are low, and thus both those who have bank accounts and the very great number who have no bank accounts must use more money in the transactions where they pay actual money and not cheques. I do not say that there is no economy of money, more banks opening up and that sort of thing, still, as matter of fact, people carry about money in their pockets in proportion to the amounts they have to pay in money. 6059. (Mr. Birch.) All the evidence and all the experience I have had in connexion with banking is exactly the contrary, that there is less money carried about in the pockets of the people, and that mc«t pay- ments are now made by cheques. We pay cheques generally for everything, and we do not carry about money in our pockets, save for petty payments, aa railway and cab fares, and such small calls upon one's B Mr. J. Barr Jtobertson. 24 June )S87. 10 ROTAIi COMMISSION ON GOLD AND SILVER: Mr. J. Barr Sobertson. 24 June 1887, purse ? — Still there are 37,000,000 of people to-day, all using more or less money. There is an increasing population, and what I maintain is this, that the banks simply take what gold they reasonably require ; they do not -want to hold large quantities of gold which bring no profit, that is beyond reasonable reserves against their liabilities. When the banks have a much larger amount of gold than is necessary to pro- tect their liabilities it seems to me that their natural course must be to invest this surplus in first-class securities. I take the Bank of England. Notwith- standing the diminution in the stock of gold in the United Kingdom, the Bank of England continues to hold practically the same amount as before : — £ Average amount of coin and bulHon in Bank of England in 1874 - 22,294,000 „ 1884 22,955,000 „ „ June 1st, 1887 23,562,000 Notwithstanding the larger business being done in the world, the Bank of England has usually no more gold or silver ; its capital is nearly at the same figure. Its deposits are not any greater, probably less some- times, so there is the fact, the Bank of England itself has not any larger amount of gold in the vaults than it had 10 years ago. 6060. It is constantly varying, you know ; we have had 36,000,000^. and 19,000,000^.?— Still, I am taking the average over long periods, showing there is no great variation in the normal supply, and particularly when the rate of discount is neither high nor low compared with the permanent rate of interest. 6061. {The Chairman.) Have you made any inves- t igation of the deposits held by the banks from their customers during this time which covers the diminu- tion of the gold in this country ? — I have not. 6062. I suppose you would expect, would you not, during that time that the deposits would diminish ? — Yes, they might diminish per head of the population ; yes, on the whole I would expect them to diminish to some extent, though as the holders of securities and the investing classes generally have gained immensely in purchasing power it might be that deposits had not diminished per head of the population. 6063. {Mr. Courtney.) Supposing you divided the people roughly into two classes, private persons and merchants; in the course of business if merchants receive money, you would not say they put it in deposit in the bank, but they put it in the bank to draw against ? — Yes, that is true. 6064. And no greater affluence of money would cause the result of more money being held by the merchants ? — ^No, except in so far as higher prices would require a larger amount of money on hand for small payments. 6065. Well, then, do you think that the greater affluence of money has caused the result that the average amount kept in the purses of the private inhabitants of the kingdom has increased, or did increase, during those years 1866 to 1875 ? — It must be evident that in all cash transactions the money paid out of the pocket or the till must be greater when prices are high than when they are low. During the last 10 years the amount of money outside of the banks has undoubtedly diminished ; that is, where the diminution falls. 6066. Whereas a man was content with carrying about on an average 41. or 51. in cash and drawing on his banker for anything extra, he would increase that 41. or 51. to 6^. or 71. ? — Yes, I think he would, during the period of increase in money. 6067. But what force or motive would induce him to do that ; it is inconvenient to him to increase his money in his pocket ? — If he has to pay higher prices for what he is purchasing, he must have more money in his pocket to pay higher prices for the same articles. 6068. You are not conscious yourself of having carried about more money with yon ? — No individual can judge on a point of that kind ; it is hardly an individual question. 6069. ( The Chairman.) Almost all wholesale trans- actions are settled simply by cheque upon the banker ? — That is perfectly true. 6070. No money passing, the whole of the trans- actions being settled by a system of set-olf? — Now that was in existence, except probably in Liverpool and one or two towns of that nature, 20 years ago. No merchant who had a bank account held any more money practically than he does to-day. The mercan- tile business does not weigh in this question very much, the actual money in the counting houses of merchants being so very small in comparison to their business. 6071. That is what puzzles me as to this great increase in the gold held in this country during those years. I do not quite understand why it should have been held by people who usually did not hold money but paid it into the bank ? — Well, where is the gold to go to ; a certain amount is there ; it is an auto- matic thing ; it comes into the country ; it will be paid into the bank ; the bank will have to use it, or pile it up ; and as no bank does keep it piled up be- yond a limited amount, consequently it must pass out of the banks and be in the hands of the people. There is at any one time a certain amount of money in the banks, and a certain amount in circulation outside of the banks. In periods of what is called inflation of the currency, the percentage of money outside of the banks as compared with the amount in the banks wiU be greater than it was before inflation took place. On the other hand, when the currency is diminishing and contraction is taking place, the percentage of money outside of the banks as compared with the amount in the banks will be smaller than before contraction set in, and thus the diminution must come almost entirely out of the pockets of the people and out of the tills of merchants. 6072. When bankers receive money they lend it out to somebody else. Well, that somebody else pays it into his bank. It may remain out for a very short time, but it will come back into the bank ? — There is an average business that a bank does, depending on its reserve. Of course, a large bank can do a large business, and a small bank can do only a small business. 6073. But if a bank lends a man 1,000/. for a mercantile purpose, the man who receives it pays it into his bank, and he will only draw it out as he wants it. If he pays it to some person doing work for him, that person will pay it again into his bank, therefore I do not quite understand how the money should be an addition to the circulation, that it should not show itself in any way in the reserves of the bank or the coin held by the bank. 6074. {Mr. Courtney.) I might, perhaps, add to the statement of the Chairman, that these loans and re- payments are not accompanied by any movement of real money ? — The loan of 1,000/. may or may not be accompanied by any movement of real money. It may be dealt with entirely by cheques, and these cheques may be paid into other banks. But the 1,000/. may be wanted entirely for wages, and if so every sovereign of the 1,000/. will be drawn out of the bank, and before it filters back to banks another 1,000/. may have been borrowed for the same purpose. 6075. {Sir W. H. Houldsworth.) Would not the increase of population account for it ? — Well, of course, that has a considerable influence. 6076. That would be the same thing as individuals carrying more money, more individuals wanting money ? — The increase of population would really account for a certain amount of contraction of money ; more population requires more money. 6077. And that would really account for where this gold has gone to pro tanto ? — It would certainly in proportion to the increase of population. 6078. Would it account for aU ? — I do not think the increased population from 1858 to 1875 would ; while the increased population for the last 10 years would not account for more than 1,500,000/., I think. 6079. {The Chairman.) You mean each year? — MINTTTE9 OP EVmENOE. 11 Each year ; it means so much more money than the previous period for the population alone. 6080. {Sir W. H. Houldsworth.) The increase of population would account for the gold between 1858 and 1875; now the population has increased by 4,000,000, from 28,000,000 to 32,000,000, 1 think. Would that take up the extra gain of gold in this country, do you think ? — No, I do not think it would ; but then the increased amount of gold set in motion a vast amount of new industries or extensions of then existing industries. 6081. Of course, in addition to the point you put just now, which is worth consideration, in addition to the 4,000,000 of increased population, those 4,000,000 are engaged in industrial work, therefore they would carry no more in their pockets, but would use more money in various forms of industry ? — Yes, certainly. 6082. {The Chairman^ There would be a great deal of what is carried in the pocket and paid in wages, in silver, would there not ? — Yes, no doubt. 6083. {Mr. Courtney.) The increase of gold in the period from 1858 to 1875 is 80,000,O00Z. in round numbers, is it not ? — Tes, it is. 6084.iThat bears a proportion to the estimated stock beforehand of about 40 per cent. ? — More than that ; probably it is 100 per cent. 6085. It is altogether out of relation to the increase of the population ? — Entirely. 6086. {Mr. Barbour^ Have you deducted from that 80,000,000/. whatever amount would probably be used in the arts ? — No, I have not ; I am giving a com- parative statement of the quantity absorbed in this country. 6087. But if you deduct from that the amount sup- posed to be used in the arts and for ornaments, you would get a less addition to what you may call the money of the country ? — Yes ; certainly you would. 6088. {The Chairman.) Now to pass to the silver, during the 10 years 1866 to 1875 the net imports of silver you put at 12,714,000/. ? — Yes, that is correct. 6089. And the succeeding 11 years the net imports you put at 2,000,000/. only ? — Yes. Of course I may explain that I do not place any importance on silver for this reason. Silver, of course, is a limited article, coined in a hmited quantity. It has comparatively little effect in this question of money, very little indeed. The gold, the full valued currency of the country, is what of course can be increased or decreased by imports or exports ; the silver cannot be changed except by the wants of the people, either using less or using more, consequently you provide an automatic system at the Bank of England, by which the Bank is bound to give silver money for gold or gold for silver, so that silver cannot become either redundant or deficient. 6090. What rather strikes me about those silver statistics is this, that I should have expected an in- crease of the population, so far as it affected the cur- rency, to have shown itself in an increase of the silver used, wages being paid to a large extent in sUver, and the silver production having certainly increased rather than diminished during the last 10 years? — Yes; well, of course, you see the Master of the Mint coins what is demanded for money. This is a totally different question from the gold, which must be coined to any extent, as it may be offered. I only put the silver in to show you the figures. To me they are quite unimportant. 6091 . {Mr. Barbour.) Do these figures of the imports of silver given by the Board of Trade include the lead ore which contains silver which may have been im- ported into this country ? — Well, I am not sure on that point. 6092. Because if there has been a considerable im- port of ore containing silver, which is not shown as an import of silver, that may account for the apparent falling off in the imports of silver ? — That may account for the deficiency, because the use of silver in this country must have amounted to a great deal more than 2,000,000/., and it must have been imported; but the figures I have taken were from the Statistical ^"^^{^f^^ Abstract and the Board of Trade Eefcurns. 6093. {Mr. Birch.) We produce a great deal of 24 June 188r. silver in lead mines here ? — I have no statistics relat- ___ ing to that. Silver does not enter into the currency in any sense the same as gold. Although there were 20,000,000/. of silver imported we should still only add the insignificant amount which the Bank of England would demand at the Mint, so that although I have put these figures in they are the same as the gold figures in India ; they do not figure in the currency at all, because the production of silver might be enormously increased without our coining a single additional shilling on that account. I do not look upon the statistics of silver in this country as having anything to do with the currency, because we only can add a limited quantity when it is wanted, whereas we are bound to take all the gold offered, and give up all the gold demanded. 6094. {The Chairman.) Passing to India, you deal with silver there, of course, as the principal metal ? — Yes. 6095. In the 10 years from 1868-4 to 1872-3 you find the net imports of silver to be 78,182,000 tens of rupees ? — ^Yes, that is the amount. 6096. That is an average of 7,818,000 tens of rupees a year ? — Yes. 6097. And in the succeeding 10 years the net im- ports of silver are 59,116,000 tens of rupees, or an average gain per annum of 5,912,000 tens of rupees ? — Yes, that is the case. 6098. Then after that date you give them year by year. In 1883-4, 6,406,000; 1884-5, 7,246,000; 1885-6,^11,607,000; and 1886-7, 7,156,000?— These are correct. 6099. Excepting 1885-86, which seems to have been unusually krge, that gives something like 6,000,000 to 7,000,000 tens of rupees per annum ?— Yes, that is correct. I print that to show the com- parison between 7,818,000 tens of rupees per annum in these 10 years, and 6,538,000 tens of rupees per annum in the last 14 years, during which the pro- duction of silver has very largely increased, and where authorities have predicted that consequently India would be deluged with silver, and to show that silver has not gone there even in a quantity as large as it did in the 10 years 1863-4 to 1872-3. However it would certainly, in my opinion, have gone in as large quantity, and probably in larger quantity, but for the Bland Bill in 1878 in the United States. 6100. {Mr. Birch.) The exports from this country to India you have taken from the India Office re- turns ? — From the India Office excepting the first 10 years, which are taken from the Report on the De- preciation of Silver of 1 876. 6101. {The Chairman.) That seems to show that of the considerable increase in the production of sil- ver during the last 10 years, compared with the earlier 10 years that you have taken, none of it has gone to India ?— No, none of it has gone to India. It has not increased the money in silver countries, that is my .point ; because India is a country depending on imports and exports for the movements of silver the same as we are for gold. It does not produce anything of any importance in the way of silver. I take the last 14 years and show that the average is less than the 10 years from 1863-4 to 1872-3. 6102. Then you have also taken the gold imports into India in the lO years 1363-4 to 1872-3 the net imports of gold into India were 52,057,000/., giving a net average gain per annum of 5,206,000/., and in the next 10 years the net imports were 19,761,000/., giving a net average gain per annum of 1,976,000/.?— Yes. 6103. Then you have given each of the succeed- ing years 1883-4, 5,462,000/. ; 1884-5, 4,672,000/. , 1885-6, 2,763,000/.; 1886-7, 2,172,000/.; showing a net average gain per annum for the 14 years, 1873-4 to 1886-7, of 2,488,000/. ?— Yes, these figures are official, only I have changed them from rupees. B 2 12 ROYAL COMMISSION ON GOLD AND SILVER: JUr. J. Barr 6104. (Mr, Barbour.) Are those pounds 10 rupees Robertson. to the £ ? — ^Yes. 6105. ( The Chairman.) The result that you bring 24 June 1887. ^yt ^s regards the United Kingdom is that there was a gain in gold between 1866 and 1875 of 50,108,000^. ?— Yes, that is correct. 6106. And that in the following 11 years, 1876 to 1886, there was a loss of 1,207,000/. ?— Yes. 6107. Then you say the deficiency of gold in the 11 years, 1876-1886, as compared with the average per annum in the 10 years, 1866-1875, was 56,326,000/. By that, I suppose, you mean that if the same gain had gone on during those 11 years as had gone on during the previous 10 years, there would have been 56,326,000/. more gold in the country ? — In this country, yes ; that is the point. 6108. Then as regards India you make the silver gain in the ] years, 1863-4 to 1872-3, 78,782,000 tens of rupees; and in the 14 years, 1873-4 to 1886-7, 91,551,000 tens of rupees ? — Yes, these are correct. 6109. And that the addition in the last 14 years was 17,921,000 less than if it had progressed at the rate of the previous 10 years ? — Yes, that is a correct statement, 6110. Then you have made an estimate of the amount of money in circulation in the United King- dom and India ? — Yes. 6111. Taking first the United Kingdom, you take the estimated amount of gold in England in 1876 at 122,368,000/. ?— Yes, that is correct. 6112. That figure you get from the Report of the Committee on the Depreciation of Silver ? — ^Yes, I do. On the first page of the Appendix. 6113. The Committee do not give it on authority? — It is supplied from the Bank of England ; the names of the gentlemen who have drawn up the figures are given. 6114. (Mr. Barbour.) It is an estimate? — An estimate of course ? — Still we can only go upon what we have. Of course I am not relying upon the accuracy of that. It is a fact :to begin upon ; the question then is what was added to that or subtracted. 6115. {The Chairman.) Does that estimated amount of gold in England include both bullion and coin ? — I think it does. The coin and the stock in the Bank of England, consequently that is really coin and bullion as far the currency is concerned. It gives there the quantity of net imports in the year 1875, and that causes me to think that the net imports includes bullion. After all bullion in the Bank of England is potentially, and for all purposes of reserve, coin. 6116. I see it is headed " Estimate of Gold Coinage " in Circulation in the United Kingdom." This apparently estimates the addition to the coinage between 1858 and 1872 at about 17,000,000/., and from 1872 to the middle of 1876 at a further sum of 15,000,000/. ? — Yes, I have not the document before me. 6117. The silver money in circulation you put at 20,000,000/. Where do you get that from ?— That is also from the Eeport of the Committee on the Depreciation of Silver in 1876, 19,000,000/., I have not changed that figure. 6118. Then notes in excess of gold in circulation 10,000,000/.; where do you get that ?— I take that from the statement of the Bank of England — 23,000,000/. of gold, 24,000,000/. of notes. The Bank of England practically has only a very small amount of notes issued without gold against them. The Scotch Banks have got about 3,000,000/., the Irish Banks about 4,000,000/., and Provincial Banks 1,000,000/. or 2,000,000/. There are not more than 10,000,000/. now, but they vary a great deal. The Bank of Eng- land can by law issue 15,000,000/. without any gold being held against this amount. I am taking this as the statement now, there is not much more than 10,000,000/. of notes in circulation for which no gold is held. 6119. Then you deduct 26,400,000/. for 11 years' consumption in the arts, &c., and loss by net exports 1,200,000/. You assume that during the last 11 years there has been something like 2,500,000/. con- sumed annually in the arts ? — That statement is taken from the Appendix to the Third EeporJ; of the Com- mission on the Depression of Trade. 6120, That 2,500,000/. of coin that was in circula- tion has been converted into articles of ornament and jewellery ? — That is so. It is 2,400,000/. that is put in the Report of the Commission on. the Depression of Trade, from Dr. Soetbeer's calculation, 6121. ( Mr. Barbour^ Do you take it all to be coin or bullion ? — I am dealing with the quantity merely of gold, and I do not place any importance on the distinction between coin and bulUon, because for currency purposes they are interchangeable. 6122. ( The Chairman) If your figures are correct it must have been from actual coin, because we were actually exporting gold from this country, and thex-efore, it must, according to you, have come out of the coinage ? — No, not necessarily, because we were importing gold bullion all the time, in fact we are always doing so, but we were exporting more gold coin or bullion than we were importing of gold. Thus we are consuming our stock of gold money. 6123, Then you arrive at the conclusion that the total money in circulation is now 124,768,000/., so that there is actually less gold in circulation now than there was in 1876!' — Of course there must be less because we have consumed 24,000,000/. at least in 10 years in the arts, and we have received none. In 1 1 years we have consumed 26,400,000/. on that estimate. Of course, you understand these figures are not estimates of mine, but I am showing the movement on some general basis. I took this figure of 122,368,000/. from the report because I thought it was coin and bullion. I see I am mistaken on that point. Still that does not alter the fact that there is some very wide ratio. There are 26,400,000/, that we did not get in 11 years ; whether the stock of gold in 1876 was 122,000,000/., or 135,000,000/., which would be a fair estimate including bullion, and we have taken out 26,000,000/. sterling in the last 11 years. 6124. {Sir T. Farrer.) The quantity consumed in the arts is little more than a guess, I think, is it not ? — I suppose the Master of the Mint could form a very close opinion on that point. 6125. {Mr. Fremantle.) Have you ever seen any estimate made by the Mint or any other public Department in this country ? — I have not seen any estimate from the Mint ; I have been away for the last 13 months, and only came back the other day, and have not had all the time I should have wished to pre- pare materials for this examination. I took this from the Report on the Depression of Trade, in Mr. Pal- grave's statistics ; and the United States Government make an estimate also which, of course, would not be altogether reliable for our purpose, but that estimate is 2,300,000/. per annum as the amount consumed in the arts in the United Kingdom. 6126. But in Mr. Palgrave's memorandum, I think he said that it was very difiicult to form any opinion as to the consumption of the precious metals in the arts ?--Well, he gives Dr. Soetbeer's figures in a table for this country, 6127. In this country he said it was next to im- possible ? — Well, of course I have simply given that figure as being one that can be criticised by those who put it forward. That does not get rid of the fact that there are 26,000,000/., or some very large amount, to be accounted for in 1 1 years. 6128. {The Chairman.) But would you not expect, if there was this scarcity of gold, that the amount which was used for the purposes of the arts, would be rather diminished ? — ^No ; the only way in which it might be diminished would be the fact that people could not afibrd so much, and it is evident that the investing classes and those having fixed incomes have been both absolutely and relatively enriched by the contraction of the currency. On the other hand, we have an increasing population and a greater tendency MINUTES OP EVIDENCE. 13 probably lor poorer people to use gold instead of silver in ornament. I think, perhaps, the additional ten- dency to use gold would be counterbalanced by any diminution in the resources of the people to purchase gold ornaments. 6129. Well, then, you estimate that if the gold during the last 11 years had increased in this country to the same extent as it did in the previous period, that there ought to have been in circulation 181,000,000/. of money, or would have been, instead of 124,000,000/. ?— Yes, these are the figures. I may remark, of course, that if that return I started from, 122,368,000/., is wrong, then, of course, it does not vitiate any other figure. This is a question now of additions or diminutions in the stock. I take 122,368,000/. as a starting-point. Now, supposing you had 13,000,000/. more, making it 135,000,000/., which is perhaps an approximate estimate of the stock of gold coin and bullion in 1 876, you stiU would want much more than 56,000,000/. to keep the same rela- tive amount of increase as in the previous 10 years. It does not affect that part of it. 6130. It does not affect it except so far as the in- creased or diminished per-centage, as compared with the pre-existing stock, may be important ? — Exactly. 6131. {3Ir. Birch.) But how do you imagine that that gold would have come ? Gold does not pour down upon us, how would it have come? — It would have come in through the Bank of England. 6132. How would it have come at any period ? People would not have sent us gold for nothing ; you say we ought to have had it, but surely we ought not to have had it, unless we sent goods or something, commodities to represent it ? — That is perfectly true, but commodities will go to represent it. The foreign exchanges will cause the gold to be sent, otherwise gold would fall to a discount in gold money. Sup- posing now anyone has imported 1,000,000/. ster- ling in gold bullion from some country. He goes to the Bank of England with it and receives for it British legal tender money or its value at 3/. 17*. 9d. per standard ounce. He does not ask if anybody is sending goods or not, he goes and gets the notes or the gold. The Bank of England is bound to take all the gold offered, and give up all the gold demanded, without any choice. I am talking gene- rally; my argument is this, that if our supplies of gold were in any sense normal in the previous 10 years, then we are 56,000,000/. short in the last 11 years, and if we were keeping up prices to any just level during the period 1866 to 1875, then we are at a very unjust level now. It is a comparative state- ment ; I am not relying on the figures I start from at all, it is a comparison of changes in the quantity of the stock of gold based on the Board of Trade returns. 6133. {The Chairman.) Then you say : "As,how- " ever, instead of having 181,000,000/. of money in cir- " culation in 1887, we have only about 125,000,000/., " we need not be surprised that average prices have " fallen from 30 to 35 per cent., seeing that the sup- " ply of money that would have been necessary to " keep up prices is deficient to the extent of " 56,000,000/., which is equivalent to a diminution « in the volume of money of 31 per cent." Now is it your view that there is a direct relation between the volume of money and the price of commodities gene- rally ? — It is, certainly. 6134. And that as you contract or expand the volume of the currency prices would rise or fall ? — Certainly. 6135. I should like you to explain how in your view that operation comes about ? — I will give you an illustration. I do not happen to have the document here, but I know the facts. In 1861 the United States suspended specie payments and adopted the Legal Tender Act and began to issue greenbacks. Now in the debates in Congress at that time there were not more than three or four men out of 300 who believed but what the United States could issue any quantity of greenbacks, and that they still would remain at par in gold, because the United States signature was attached to them. Well, then, they found at the end of a very brief period that the greenbacks began to fall to a discount in gold. 6136. That is to say, because people had not that perfect confidence in the United States ?— The green- backs were legal tender, the same as gold, 6137. In the United States, but nowhere out of them ? — ^Yes, but if they had issued a limited amount of legal tender paper, gold could not have gone to a premium in greenbacks. That is to say, the green- back went on falling in purchasing power as com- pared with gold, until for 100 dollars in gold you could get 280 dollars in greenbacks. Now, then, that was due to the issue of more than one and half times the amount of money in the United States that could be kept at par in gold. Instead of having, we will say, a basis of 100 they had a basis of 280. That is an illustration of the exact relation between a much larger amount of money than can be kept at par on the gold standard, and a volume of money of say gold, silver, and paper such as we have, kept at the gold standard. 6138. Yes, that is an illustration of what happens from an excessive issue of inconvertible notes and consequent depreciation of currency ; but I should like you to explain, where you have no such feature, where you are dealing simply with a particular stan- dard, such as gold, how the diminution in the volume of gold that there is in this country affects the prices ? — ^Well, in my opinion, the withdrawal of gold comes practically from the money in the hands of the people, that is to say, by far the greater portion of it, and thus prices are correspondingly lowered. 6139. No ; but let me put this illustration to you. Supposing that to-day the deposits in the banks or the money which the public have lent to their bankers, for that is the legal relation between tnem, is greater than it was 10 years ago, so that the amount of cheques which can be drawn upon the bankers is larger than the amount of cheques which could have been drawn 10 years ago. People pay for what they buy by means of a cheque upon their banker, and what they are willing to give is regulated by the balance which they have at their bankers or can put there. Now supposing that that is greater even though there be less gold in the country, why should prices go down ? — Well, of course, the quantity of deposits naturally depends on the number of people who have money to deposit. There is an element in this thing, I think, that is not perfectly clear. The money is not the property of the country ; it is merely a standard. I will take an illustration. You can carry on all the business of this country with 125,000/. if you will divide it small enough ; if you wiU divide it into millionths of a sovereign, each millionth will represent in that system of money about the same ratio to the whole that a farthing now does to the whole. You are going, in my opinion, on an impression that if a man has 40,000/. that somehow it is in the bank. He may not have 1,000/. in the bank, though he has 40,000/. worth of property. This is a mere standard ; you may as well speak of the goods in the country, and the yardsticks in the country. Money as a measure is not altogether analogous to a yardstick as a measure, but there is some analogy between the . ^two. A yardstick will measure any quantity of goods, but the goods must be in existence. Money is simply a something in which the property is valued. At the present moment in England there is probably not one-fiftieth part of the money in existence that there is of wealth, probably not one-hundredth part ; yet this fractional amount distributes all the wealth, and all values are rated in terms of it. 6140. Quite so ; but what I want you to explain s if this is the only function of money, how comes it that 10 per cent, contraction in the amount of that meta will produce 10 per cent, contraction in prices of all the commodities that are measured by it ? — Let me take an illustration. I will suppose you have a dozen com- modities representee^ by 100/. each, that is l,200i\ Mr. J. Barr Sohertson. 24 June 1887. 14 EOYAL COMMISSION ON GOLD AND SILVER: Mr. J. Barr Y[e\[, I will suppose now that a number of gentlemen oberts on. ^.^gUy jjaye a certain amount of money with which 24 June 1887. to purchase these exact commodities, let us suppose " 1,200Z. We will say that by some process the money is reduced by 10 per cent. That reduces the 1,200/. to 1,080Z., and how are you to get prices up to 1,200/. if you have only 1,080/. to pay with; how are you to doit? 6141. There can be no doubt if the transactions of the world were carried on by the exchange of the pre- cious metal for the commodities, the diminution of the precious metal must in the same proportion affect the prices of the commodities. But when you suggest that the same operation now goes on, you allow no effect to all the banking expedients, because you say the state of things is now precisely the same as if there were no banking expedients, and the prices are in the same way affected by the contraction or expansion of the precious metals ? — In the way of banking expe- dients from 1866 to 1875 they were probaDly nearly as extended for all mercantile purposes as they are to-day. Still that is an important subject for con- sideration, and perfectly reliable information ought to be obtainable regarding it from bankers and others. 6142. I do not think you catch my point. Suppos- ing the banking expedients did exist during that time as much as they do now ; they existed then to a large extent, but when you say that prices will vary pre- cisely as the expansion or contraction of the precious metals, you allow nothing at any time for the effect of banking expedients, because you say that the process now is precisely the same as it was if there were no banking expedients, but every transaction were a direct exchange of the precious metal for the commo- dity ? — No, I am not going on that ground, as I am confining myself to the enormous contraction in the volume of money, and to the enormous concurrent fall in prices as accounted for to the extent of about 30 per cent, by the diminished currency, while I regard banking expedients, the varying numbers of employed and unemployed, the increase of population as disturbing elements of secondary importance, while in the present case they offset each other to a great extent. I am going on the ground that we have, as- suming a large measure, we will say 10,000,000,000/. worth of property in the country. Well, what I maintain is that we do all the exchanges on that with, let us suppose, 125,000,000/. of money, we can do it with 12,000,000/., one-tenth part of that, if we wiU only contract the currency down to that amount and make the divisions of money small enough. 6143. But how does the amount of curiency, which happens to be in circulation on any particular day or in any year, affect the value of all the commodities which exist and which are measured by money, though people may not be exchanging them, or dealing with them, at the time ? — 'There is a certain number of trans- actions in the country performed by actual money. Now all this banking in London to my mind has nothing to do with the currency at all, simply be- cause it is done without any money. How can the little money in the bank here — comparatively speak- ing nearly all locked up permanently — take the Bank of England balance ; it does not vary a million or two in ten years. Take the balance of other banks, they . are not changing at all. Now what I maintain is this, that there is a certain amount of transactions aU over the country done by actual money, retail transactions done by what people carry in their pockets or have in their tills and offices, and payments of wages, and that sort of thing. If you have a certain quan- tity of money at a given time, then you can distribute that money all over these transactions and pay a cer- tain price, you must pay a certain price. Now then, if we suppose that at that given time there was 10 per cent, less money available while the same transactions in actual money were to be carried out, it is perfectly certain that these transactions can only be carried out if the prices are 10 per cent, lower than in the former case. The whole principle of money goes on the ground that whatever money is in the country will be distributed over the whole transactions of the country in actual money. 6144. But are not those transactions in which money is actually used, namely, retail transactions and the payment of wages, just those in which prices have been least affected ? — That is perfectly true, they are those in which prices have been most slowly affected. 6145. Then on your hypothesis ought not they to be those which ought to have been most and earliest affected, and the wholesale prices to have been later and less affected? — ^The wholesale prices of most commodities are changing every day. Supply and demand arO surprisingly active in producing daily and hourly changes of price, and speculation is also an important element in making wholesale prices. Retail prices follow these changes very slowly, and only yhen some, not merely temporary, rise or fall takes place in prices per pound, per hundredweight, or per ton, sufficient to enable changes of retail prices per ounce, 4 ounces, 8 ounces, or per pound, or in cheaper iirticles per hundredweight or per ton. If retail prices con- tinue high while the volume of money is contracting the demand of the public, and thus of the retail dealers, will fall off, and wholesale prices will fall. If a high wholesale price is due to speculation and there is not a corresponding volume of money to sustain that price, the price will, as soon as the abnormal demand of the speculators ceases, fall to a lower level, because the quantity of money will not admit of such a high range of prices. Now I have said before that there are conventional prices, high in wealthy neighbourhoods, low in poor neighbourhoods ; consequently there are certain wholesale prices that are determined by the prices that the people have the money to pay in their retail purchases, and consequently everything tends to be affected by the quantity of money that there is to cover these retail transactions and the current money transactions wherever money is used. In fact, how can it be otherwise ? 6146. Well, it might be otherwise in this way, that some people think that the chief function of money is as a measure of the relative value of commodities one against another ? — It serves as a standard of measure in that sense, but it only serves thus by the total available money being spread over the actual transactions performed by money. It is not an inde- pendent and unvarying measure, the measure consists in the changing ratio between the available money and the transactions actually carried out by that money. So that in transactions with actual money or without it, money is a measure of value, but it becomes a measure of value only by being a medium of exchange in transactions in which actual money is used. 6147. {Sir T. Farrer.') Do retail prices as a matter of fact follow wholesale prices, or do whole- sale prices follow retail prices ? — Well, I do not say that retail prices follow closely, but I will say this. Take the case of a baker in a time of contraction of currency, after a time the 4 lb. loaf falls from Gd. to 6\d. or 5(/., but I do not say that it immediately accommodates itself. So far as money is concerned retail prices follow wholesale prices; but it is the inability of the public to find the money to pay high prices, the amount of money not being in existence, that causes a diminution in demand and wholesale prices to fall to a lower level, so that the same amount of goods as formerly may be paid for with the smaller amount of money. So far as supply and demand of commodities on markets are concerned, with which I am not dealing at all, retail prices foUow wholesale prices; but so far as the - money question is con- cerned any change must come through a money source. 6148. Then for the effect of money upon prices we must look to retail transactions ? — I think so, because though there is only one standard of wholesale prices, while retail prices for the same articles vary according to the locality of shops and other conditions, yet retail transactions are those in which money is actually used, and the demand of those who actually pay monev is the final determining element in wholesale MINUTES OF EVIDENCE* 15 prices, though other causes may lead to temporary changes in prices. Therefore the average wholesale prices of all the principal commodities as modified by their relative quantities, reduced to a single number, at stated intervals, will give the most accurate idea of the rise or fall of average prices produced by changes ' in the volume of money and by all other disturbing causes. 6149. {The Chairman.) Tou say average prices have fallen so much ; if the fall of prices results from the cause that you have suggested, ought there not to have been a certain uniformity in its effect upon all commodities ? — Certainly there ought to have been a uniform effect. 6150. But in regard to a considerable number of commodities-there has been no fall, and in regard to some others there has been a rise ? — I am not dealing with the supply and demand of commodities, changes in quantity or changes of taste, causing people to demand one thing to-day and another thing 12 months hence — I am dealing with this simply as a question of quantity of money and my contention is that you cannot reduce the quantity of money without reducing prices. In the struggle for keeping up a certain average of prices some goods will rise and some will fall from day to day. If some rise out of relation to others it is because there is some additional demand or some diminished supply, and conversely in case of a fall. I am not dealing with that question. 6151. But some witnesses have put this case before us. There has been this fall in prices ; therefore they reason a posteriori that it has resulted' from the diminished supply of gold which was coincident with it. Tou reason a priori that you would expect a diminished supply of gold to produce a fall of prices ? — Precisely. 6152. And, therefore, such fall as there has been you attribute on that account to it ? — There may be other slight temporary causes, but this is the chief if not the sole permanent cause, and it can be estimated in a rough way. Of course increase of population must be considered and allowed for. 6153. In taking your 181,000,000/. you have assumed an increase of gold year by year corre- sponding with that which took place during the pre- vious period ? — Yes. 6154. Well, but supposing there was no increase at aU, but the quantity of gold in circulation remained absolutely constant except as regards the demand arising from an increase of population, why should prices be affected at all on your theory ? — They would not be affected on my theory ; average prices would not. 6155. But, then, according to your view, if the quantity of gold had increased as much during the last 10 years as during the previous period, prices ought considerably to have increased ? — Well, perhaps not, because, you see, we had increased populations, and we were reaching out to enterprises in all directions in the world also. 6156. Yes; but from 1876 to 1886 you have not an increase of population that would correspond to the increase of 28,000,000/. on 122,000,000/., which is about 15 or 16 per cent. You have said that if we had had that continued supply the total amount which ought to have been in circulation is 181,000,000/. Instead of that we have only 125,000,000/., therefore we need not be surprised that average prices have fallen 30 to 35 per cent, because the circulation has diminished by 31 per cent, below what it would have been in that case. But surely in that case there ought to have been a rise in prices on your theory ? — No, because we take 26,400,000/. for the arts out of the current gold, and, taking 122,000,000/. as the stock of gold in 1876, and adding'to that 20,000,000/. of silver money and 10,000,000/. of uncovered notes, we have a total amount of money in circulation in 1876 of about 152,000,000/. 6157. Sou have deducted what is used m the arts ? —Yes ; if you begin at this fixed figure of 122,000,()00/. of gold, and add the amount which would have been over and above the supply for the arts, and add the silver money and the notes in circulation, it brings it up to 181,000,000/. 6158. That 181,000,000/. is the amount that you would have had in circulation ? — Yes. 6159. But if you had that m circulation you would have something like 15 or 16 per cent, more gold, and prices ought to have been higher ? — They might have been ; the probability is that they would not have been higher, because the probability is that we would have had a vast number more people employed to-day than we have now. 6160. According to your theory, how could prices help being higher — ^putting the increase of population aside,— if you had 181,000,000/. of currency in 1887 as compared with 152,000,000/. in 1876, your theory is that prices must have been higher ; that the two are bound together so that they could not help being higher ? — That does not foUow. Excuse me one moment. The increase of population from 1874 to 1887 was 4,500,000, and that is about 18 per cent. We have had 13 per cent, increase of population from 1874 to 1887. It is a little longer period; it is 14 years. Of course, you see another point is this. In aU probability more people would be employed, and they would be consuming more commodities ; that is to be kept in view. 6161. There, of course, you are bringing a fresh element in ? — I am. The difficulty is to keep it out when you ask me to consider the case completely. I have not considered all the elements, as my desire has been to consider only the monetary elements, which are the most important by far, and to leave to others to bring forward facts of other classes entering into a complete and final judgment as to all the causes which have contributed to the fall in prices. The population is, however, a considerable element in this case. 6162. {Mr. Birch.) In production also ? — Yes. 6163. {The Chairman.) What I was calling your attention to is this. It is not wonderful that average prices have fallen from 30 to 35 per cent., seeing that the supply of money that would have been neces- sary to keep up prices is deficient to the extent of 56,000,000/., which is equivalent to a diminution in the volume of money of 31 per cent. Now I do not understand quite how you say that 56,000,000/. was necessary to keep up prices to the extent that they were in 1876, seeing that that is more than the proportionate increase which is required by the increase of population ? — Well, of com'se, I am arguing on the general point, that if we were having a fair supply of gold during that period between 1866 and 1875, then we have had to put up with a very enormous diminution in the last 11 years. The following figures, calculated from the index numbers of the Economist, wiU show that even with" a gain cf 50,000,000/. of gold from 1866 to 1875, average prices were lower than in the eight years 1858 to 1865, showing that 50,000,000/. were not enough to keep up prices to the level of the eight years 1858 to 1865 : — Mr. J. Barr Robertson. 24 June 1887. Index Number. - 3,038 ■ 2,877 - 2,419 - 2,023 - 2,059 8 years, 1858 to 1865 - 10 years, 1866 to 1875 - 10 years, 1876 to 1885 - 1886 - - - 1887 - - - 6164. Now passing to India. The estimated amount of money in circulation in India in 1875 was about 180,000,000 tens of rupees ?— Yes. 6165. The deficiency in net imports of silver was 17,921,000 tens of rupees, which leaves 162,079,000 tens of rupees ? — ^Yes. 6166. Now by the deficiency in net imports in silver you mean that there was so much less imported than would have been imported if the previous rate of import had gone on ? — Yes. 6167. You say this is roughly about 9 per cent, of dimiuutioQ, and Mr, O'Couor's estimate of the fall of 16 llOYAL COMMISSION ON GOLD AND SILVJEE t Mr. J. Barr Indian prices is about 10 per cent., though of course Itobertson. this is only approximate. But it is not 9 per cent. of actual diminution, there was actually a large in- 24 June 1887. pj-gase of the currency ; it is only 9 per cent, less than it would have been if the large increase that had been foing on before had continued ? — That is what I mean, but still in the face of large amounts of silver being added to the currency, Indian prices did not rise, because there was not enough added to keep up prices. If you will look back to the previous page of my memorandum you will see that during the last three years the import of silver into India has increased beyond the average. It has gone to 8,000,000 tens of rupees. That is higher than the average of the previous ten years, but prices have not risen. 6168. According to your theory they ought to have risen, ought they not ? — Population comes in and the general development of railways, and so on, demanding more money. I want to show, nevertheless, taking even this mode of comparison, that it comes nearly exactly to Mr. O'Conor's estimate of the actual fall in prices. 6169. I think the evidence before us shows that prices were stationary and had not fallen ? — Well, if you look at the note issued by the Indian Grovernment you will see that it shows distinctly that there has been 10 per cent, of fall of prices in India, and a further fall of 20 per cent, in the Exchange. 6170. Is that 10 per cent, of silver prices ? — In silver prices, and 20 per cent, more between silver prices and gold prices. 6171. Between what dates? — Between 1873 and 1886. Since the ratio of silver has changed, within the last 12 years. 6172. Then you suggest that if you take 100 as representing the circulation in the United Kingdom and India in the period 1870-4, in 1887 it was reduced to 69 in the United Kingdom, and to 91 in India ? — Yes, that is what these figures that I have given would show. 6173. Is it correct to say that in one case 100 and in the other 91 fairly represents the facts when there was actually more in the later period than the former, unless you say that the increase was not pro- portionate to the increase in the population ? — I take 100 as a standard of quantity, and contend that the figures of the net imports of silver into India show that there was not enough to maintain 100, but that there was enough to keep the standard at 91, while the Indian Government declares that prices during the period have fallen from a standard of 100 to a standard of 90. 6174. But India did get the silver, though not so much as she did before ? — 17,000,000 tens of rupees less, I show ; this would account for 9 per cent, of a fall if these figures are correct. I am stating the official figure when I state this 17,000,000 tens of rupees of a deficiency. 6175. {Sir T. Farrer.) Surely in making any estimate of this sort you ought to take an estimate not of what has come into a country during a certain period of 10 years, and then another period of 10 years, but what has been the accumulated currency of the country, and what has been the relation to it of the amounts added to it from time to time ? — The difficulty, of course, as you will readily see, is to find these statistics. I do not control the British Govern- ment nor the Government of India, I only take what they give me, and it is very singular that both Govern- ments should entirely neglect such important questions as the statistics of money and of the precious metals. According to the Report of the Committee on the Depreciation of Silver, it was estimated that 1 80,000,000 tens of rupees were in the currency of India in 1875 or about that time. The official figures show that in proportion to the period 10 years previously, they did not get the same supply, but they got 17,000,000 tens of rupees less. 6176. {The Chairman.) But they were adding it to a pre-existing larger stock ? — ^If 1 have been. adding rapidly to my fortune for several years, and then go on adding less rapidly, I still am adding to my fortune, and my fortune is larger than it was before ? — That is quite true, but if you are adding less rapidly, you are adding a less per-centage. You are diminishing re- latively, because, mind you, you are consuming it at the same time. The population is expanding, so that you are really providing additional wants for this money. It might very well be that India did not get enough silver to keep up prices from 1866 to 1875, but comparatively it got less from 1873-4 to 1886-7 than from 1863-4 to 1872-3. 6177. {Mr. Barbour.') May I ask if you know how that estimate of 180,000,000 of tens of rupees as the amount of money in circulation in India was obtained, because I may say that, j udging from ray experience, I think it would be extremely difficult to get even a roughly approximate figure of the circulation in India ? — I simply took these official figures as a basis of argument. That is the figure given, I think, by Professor Fawcett. 6178. {Sir T. Farrer.) Is it stated on the autho- rity of the Committee on the Depreciation of Silver in 1876 ? Is it in the report ? — I have not looked at it for a long time. These are figures I had previously taken from the Report, where they will be found. 6179. ( The Chairman.) So that your view is that the quantity of money in England is deficient now as compared with the period of 1870-74 by 31 per cent. ? .—Yes, that is the point. 6180. {Sir T. Farrer.) May I ask you why you took those particular figures of your earlier decade, and why you did not go back, say, to 1820 or the beginning of the century ? — Well, of course modern society is on a certain level of consumption, a certain level of wealth, and to go baek to 1820 would be to deal with small populations and numerous combina- tions which do not exist now at all. I am trying rather to get very active periods of life in both cases sufficiently near together, so that the conditions do not vary to any very great extent. And, further, I desire to show immensely varying supplies of gold, which make that metal very unsuited to be a standard of value. 6181. Yes, but you began just at the period when there was a great influx of gold ? — Well, that is where the Report on the Depreciation of Silver happens to begin ; I just took their figures where they started. I put these eight years to show how the figures in that period stood, but the two tens is what I am comparing, not that eight. 6182. {The Chairman.) Your view is that inas- much as this large sum is annually being taken from the coinage of gold in England for the arts, there must be a further diminution of the currency, and con- sequently a fall of prices ? — Certainly. 6183. Supposing that there was an increase of gold imported into England, and that it was not kept by individuals, but was paid into their bankers, and so there was an increase of gold in the reserve of the Bank of England, what would be the effect of that ? — Only this, the increase of gold to be retained by the Bank of England would only bear a certain relation to deposits. They have practically a fixed proportion which the gold must bear to their liabilities. If they increase their deposits of gold to a certain point, they would not themselves keep the whole of the gold on deposit ; probably about one third of it, 35 to 40 per cent, they would keep on deposit. They have nothing to do with the balance of gold over and above their normal per-centage of reserve. If there was a large amount of it and they could not lend it, they would lower the rate of discount and drive it abroad. 6184. Then it would go to other countries, and what would come in its place? — Of course goods might come, securities might come. , 6185. In that case it leaves the country ? — Yes, certainly. 6186. Then when that operation has taken place there would be less currency in the country ?_Well, there would not be less currency, because this really MINUTES or EVIDENCE 17 was something that could not pass into the currency, because we are assuming that it could only pass into the currency if every country with a gold currency was getting a similar supply. 6187. Well, but in currency do you include only that which is actually coined, or the bullion which can be coined, as well as that in circulation ? — I include that also, of course. 61 88. You include that : well, ofcour.se it would dimi- nish tbf! currency of the country ? — It would not touch the effective currency of the country in my opinion at all, 6189. There would be less gold in this country than there was before ? — But then we were going to get too much. I will assume a figure. I will suppose that there was 5,000,000Z. sterling of gold came into the country. I will suppose that olhtir countries were not receiving a similar amount so as to keep up the gold standard in all countries. 5,000,000/. sterling comes into the Bank of England. It becomes a liability. They may say, " We have only to hold 1,750,000/. " against this 5,000,000/. sterling," and they can deal ynth this 3,250,000/. They can deal with it by lowering the rate of discount, because they feel that they want to drive it away. It had not gone into the currency, it had gone into the bank vaults because the bank could not refiise it, and as it could not be absorbed into the currency it had to be exported. If they cannot lend the 3,250,000/., they must get rid of the 5,000,000/., and this they do by lowering the rate of discount and causing it to be exported, so that importation of gold which went into the Bank of England, and could not be used by the Bank but had to be exported under the action of a low rate of discount, did not really touch the effective currency of the country. 6190. According to that, would not you expect a period when you had a superabundance of gold to be marked by a low rate of discount, and a period when you were lacking gold to be marked by a liigh rate of discount ? — I would expect that to occur. 6191. If you look at the rate of discount during the periods you speak of, precisely the opposite is the case ? — The average bank rate of discount in 1849, when gold fi'om California was first imported, was 3 per cent., in 1850 it was 2J, in 1851 it was 3, in 1852 it was 2, and in 1853 it was 3 J. No such low rates for five years have ever ruled at the Bank. When the cur- rency is being contracted the proceFs is slow, and need not therefore be shown by a conspicuously high rate of discount. Indeed contraction might very well take place without any very perceptible change in the rate of discount. Sudden withdrawals of gold from the banks and from circulation would be inevitably attended by a rise in the rate of discount. It must also be borne in mind that a contracting currency paralyses trade, throws artisans out of employment, and diminishes the demand for discounts. Further, there is a tendency to a lower rate of interest as civilisation progresses, owing to the accumulation of wealth and the greater security of institutions. 6192. Then we have had a great deal too little durini' the last 10 years, and the rate of interest has been a great deal too low ? — It has been below the average of the previous 10 years, not much, except for temporary purposes. ]5ut in considering the rate of discount as affected by import or export of gold, it is necessary to take into account the whole of the imports and exports, and not merely the balance be- tween the two. The figures show that the total imports and exports from 1866 to 1875 amounted to 343,200,000/., and from 1876 to 1886, 294,300,000/., so the average rate of discount would not be very materially aflected. But the rate of discount has nothing to do with this question of the volume of money°distributed over a country. The rate of dis- count is a temporary question, varying every day, and depends on the quantity of money available at any time for loans, but not in the volume of the circulation over the country. 6193. According to the view you have suggested, it is the one thing which regulated what amount o 51080. remained in this country or came into the country at Mr. J. Barr any time? — Prices regulate the quantity that can be R oberts on. absorbed in the country. If there is gold coming g^jjj^igg:. into the country and going into other gold countries, that means that you are increasing the quantity of the gold standard in all gold countries. In that case the gold will have a temporary effect on the rate of discount, but the gold once distributed over the circu- lation and the reserves of the banks, its effect on the rate of discount has entirely ceased, that is when prices have become adjusted to the new gold. If, however, the gold standard is not increasing and we are drawing gold from Paris or New York, as soon as some material importation of gold is made, the Bank of England lowers its rate and out it will flow ; if, however, too much flows out, the bank raises its rate and brings the necessary supply back. 6194. (Sir T. Farrer.) But do you not say (hat the quantity of gold regulates prices ? — The quantity of money regulates prices ; gold being the standard, therefore practically I say gold regulates prices. Gold regulates prices, though paper money and silver also help to make up the gold standard. 6195. (The Chairmxin.) Now with regard to the deficiency of money in the gold countries in 1887, compared to what it was in England during the 10 years 1866-1875, what have you to say ? — Well, you see, that in the 11 years 1876 to 1886, the United States have absorbed about 119,000,000/. sterling of gold. But what it gained in these last 11 years was 37,000,000/. by net import and 82,000,000/. by production. Now, but for the fact that America resumed specie payments, we would have had in England here a large amount of this gold. 6196. Have you any estimate of what it was before this addition was made of 119,000,000/. ? — At the moment I cannot say. There could not have been more than 20,000,000/. or 30,000,000/. sterling at the outside. 6197. (Mr. Birch.) You said just now that if ii had not been for what happened in America a ver}' large amount of that gold would have come to the Bank of England ? — Yes. 6198. Then you said directly the Bank of England got a certain amount of gold it took means to get rid of it ? — These statements are perfectly recon- cilable. I maintain this that, if you have a large amount of gold being produced in the world from new mines like California and Australia, every gold coun- try must come to the gold level. England, France, the United States, and other gold standard countries must take the gold, otherwise you would have in England, France, and other countries gold at a large premium, say 10, 15, or 20 per cent, as compared with gold in the country of tlic new mines, or more properly it would in the latter be at a large discount. That is an impossibility, except very temporarily and in places remote from mints and refiners of gold, consequently I say that when gold comes in large enough quantity to enter into the currencies of the different gold countries, then the Bank of England does not drive it abroad, indeed it cannot, and for this reason, all prices rise from the effect of the gold, and the gold must remain for this purpose of keeping up these higher prices. But when 1,000,000/. or 2,000,000/, comes over to the Bank of England or 3,000,000/. or 4,000,000/., and there is no demand for it to pass into circulation, prices being stationary or declining, tien the gold standard is not being in- creased over the world, the gold cannot be employed, and it becomes necessary to drive it out by lowering the rate of discount. 6199. (The Chairman.) Then there was silver ab- sorbed during those: 11 years in the United States to the amount of 74,800,000/. ? — They are the actual figures of the United States, the net imports and the production. I am not dealing now with any mere estimate, I am dealing with the actual figures as given in the official returns. There is 119,000,000/. of gold which is what they have absorbed. I will suppose that they would have probably con- C 18 ROYAL COMMISSION ON GOLD AND SILVEE : Mr.J.Barr sumed 25,000,O00Z., probably 30,000,000^. sterling Robertson. in the arts in the time, but there -would have been 89,000,000/. sterling of gold, which had they not 24 June 188 7. j.gg,jmg^ specie payments they would not have required or only a small amount of it. They would have had no use for that, and it naturally would have come to England and the other gold standard countries. The previous 10 years they had no use for the gold, ex- cept in California and for paying the interest on their debt, and we got it, Prance got it, and the other gold countries got it. Now America not only absorbed all its own production in the 11 years, 80,000,000/. sterling, but it imported 37,000,000/. sterling from ourselves, France, Italy, and other countries, wherever the gold was to be found ; whereas 10 years ago the United States made no such demand; and Germany made no such demand. I take these two figures of Germany and the United States. Taking the German addition, there is alone a demand of 80,000,000/. sterling, and adding that to the demand of the United States of 119,000,000/., you find that Germany and the United States have ab- sorbed 200,000,000/. sterling that otherwise would have been largely available for, and must have gone into, the gold coinages of the gold countries. 6200. But taking the United States from 1875 1o 1885 there has been a very large increase in the volume of the currency ? — A very large increase. 6201 . And there has been a large fall in prices be- tween 1875 and 1885. How do you account for that on your theory ? — The fact is this, they have a very largely increasing population. In England and the Continent of Europe we are dealing with a population with a fair amount of natural increase and with a diminution by emigration, they are dealing with a population with a very large amount of natural increase, which is greatly increased by immigration. Then they have immense developments going on in the country, immense development of railways, immense settlements in the West, even in the last 10 years these have been something enormous, consequently .they want money to keep them on this gold basis. On the other hand a large accumulation of gold has taken place in the Treasury, which practically is withdrawn from the circulation. 6202. (^Mr. Barbour.') Has there been a reduction of the paper simultaneously with this increase of gold ; has there been any reduction ia the greenback and other paper circulation ? — ^There has been some reduc- tion in bank notes, not in greenbacks. The United States Treasury holds of this gold coin and bullion about 46,000,000/. I am not dealing with money in circulation in America. They have absorbed this gold that otherwise would have gone to the gold countries, and in the previous ten years did go to the gold countries, and we got 5,000,000/. sterling a year, as our share of the gold production of the world. 6208. I understand that the gold in America is largely used to cover the paper circulation which was previously uncovered? — Yes, it was inconvertible up to 1879—346,000,000 of dollars were inconver- tible, but since 1879 greenbacks are convertible into gold, and the Treasury holds 46,000,000/. of gold to pay interest on its debt, and to provide for the con- vertibility of the greenbacks, 6204. {The Chairman^ Your estimate of coin cir- culating in the United States on the 1st July 1886 is 109,664,000/. of gold, and 61,757,000/. of silver ?— Excuse me, I say in the Treasury the gold is only 46,000,000/. The total gold in the country was 99,000,000/., but in the Treasury it was only 46,000,000/. What I want to point out is that the United States in these! 1 years absorbed 119,000,000/. sterling of gold, and Germany absorbed 80,000,000/. or 90,000,000/. of gold. That makes 200,000,000/. sterling of gold, that, but for the resumption of specie payments in the United States, and Germany passing on to the single gold standard, would have gone to swell the currency in the gold countries. Of course there is Norway and Sweden, the Netherlands, Den- markj and Italy; they have taken gold, but I find these two figures alone amount to 200,000,000/., so that the demand has been greater than this. 6205. How do you account for the fact that if the United States absorbed in these 11 years 119,000,000/. and had already some stock to start with, all that they possess at the end, taking the higher estimate, is 109,000,000/. ?— Of course the supply for the arts has got to come out of that 119,000,000/, 6206. You include there the total addition for all purposes ? — Yes. I should have deducted the amount used in the arts from that, still that is the gold ab- sorbed. 6207. That would show, according to your estimate, that there would only appear to be 1,000,000/. a year in the United States applied for the purposes of the arts? — About 2,000,000/. a year is the estimate. 6208. You are supposing them to have started with 20,000,000/. ? — That is about their estimate. On June 30, 1875, 110,000,000 dollars, according to their statistical abstract. 6209. Now we will pass to the observations that you have to make about the practicability of bimetallism ? Taking from the Eeport of the Committee on the Depreciation of Silver the official figures of the French coinage, it appears that in every year from 1795 to ] 875, except 1860, silver was tendered at the French Mint for coinage into five franc pieces ; that in every year from 1803 to 1875 gold was tendered at the Mint for coinage on the basis of 1 to 15^, with tne exception of 1872 and 1873, when specie payments were suspended, so that this proves conclusively, in my opinion, that gold and silver every year were tendered at the French Mint at this price ofl tol5|; conse- quently there was in France no variation whatever in the ratio of 1 to 15^ in so far as money was concerned. 6210. {Mr. Birch.) Several statements have been made in regard to this, and this book is M. Chevalier's "Treatise on Gold," published in 1859, and translated by Cobden. It is almost as good evidence as to the real state of affairs as any can be, and in Chapter 2 he says : — " Whilst in Fiance the coinage of gold takes this unexampled development, the like process with regard to silver is diminishing, and bids fair to cease alto- gether. . . . During the eight years terminating the 31st December 1867, the coinage has only amounted to 323,660,000 francs, or a yearly average of 40,457 000 francs (1,618,280/.). It should, moreover, be observed that the coinage of silver during the latter years has only taken place in consequence of the great influence exerted in that respect by the Government upon the directors of the mints. Left to themselves, they would not, perhaps, have struck a single 5 franc niece since 1853. ^ " Not only is much less silver money coined, but even that which the country possessed has been rapidly disappearing. The Custom House returns afibrd upon this subject only proximate indications, as the decla- rations are not always exact, though they nevertheless must be taken for authority. Formerly, France im- ported much more of silver commodities than she ex- ported. It appears from a report made in 1839 to a commission on the currency, over which M. Thenard presided, that during the period from the 1st January 1816 to the 1st January 1839, the excess of the im- portation of silver over the exportation amounted to 1,822,824,818 francs (72,912,992/.). Nearly the same proportions were preserved until 1851 inclusively; but then commenced an inverse movement which gathered strength every year. " In 1852 the exportation surpassed the importation by 2,700,000 francs (108,000/.) . . . From the 1st January 1852 to the 1st January 1858, the total excess of exportations over importations amounted to 1,127 millions (45,080,000/.), which would be about two fifths of the silver money possessed by France a few years since. . There are not two ways ; there is only one way of explaiuin"- these facts ; gold is imported into France in masses' and takes the place in the circulation formerly filled MINUTES OF EVIDENCE. 19 by silver, which disappears, because it is profitable to come from abroad to barter gold for silver on the loot- ing of one kilogramme of the former for 15^ of the latter, the proportion established in the French cur- rency. . . . " The merchant possessing ingots of gold has only to carry them to the Mint to obtain the same amount in pieces of 10 francs or 20 francs, weight for weight, and fineness for fineness, save only the small charge to cover the expense of coining. In this way every kilogramme of gold introduced into France enters into the circulation on the footing just described of an equality with 15^ kilogrammes of silver. The creditor is obliged to take it in discharge of his claim on that basis. " From the very fact of the parallel circulation of gold and silver, on the footing of one of the former to 15^ of the latter, it is easy to withdraw the silver coins from circulation, and export them, giving gold in exchange. From the moment that numbers of persons devote their time and capital to the carrying out of this substitution, we must conclude that it is a profitable trade, for, if the relation of 1 to 15 J were not advantageous for the holders of gold, they would take good care not to carry on the operation upon the large scale on which they have proceeded. . . " Chapter 4. . . . We know that what is now to be seen taking place in silver occurred a few years previously in gold. Gold was at a premium in the French market ; at the same time that the coinage of this metal had fallen to an insignificant sum, and the amount which had been in circulation in France was escaping abroad. The returns of the Custom House show that from the 1st January 1816 to the 1st January 1839 the exportation of gold exceeded the importation by 541,000,000 francs (21,640,000/.) without counting that which travellers carried with them. During this period the relative value of gold remained nearly fixed at 15f times that of silver, instead of the proportion of 15^, indicated by the law of the 7 Germinal, year 11. Now 15J in relation to 15J represents only a deviation of 1^ per cent. Such a shght divergence from the legal proportion sufiiced, however, to cause the disappearance of gold from the circulation, and to lead to the exportation of the larger portion of it." This proves how small a difier- ence suffices to effect the displacement of the precious metals ? — These passages only show this, that when under bimetallism you have a very large amount of gold passing into a currency naturally there is not likely to be much silver offered at the Mint, as there is the highest probability that the excessive importa- tion of gold will be accompanied by an export of silver. I showed that in two years 1859-60 the French Mint coined 45,000,000Z. sterling of gold. Well, of course, France could not take up 45,000,000/. sterling on its bimetallic standard ; it probably ex- ported 22,000,000/. of silver ; and thus, while it ab- sorbed 45,000,000/. of gold, it onlj' added perhaps 23,000,000/. to its bimetallic standard of money. Then I showed that in 1860 no silver was tendered for coinage into five-franc pieces, and I accounted for that by stating that the large additions of gold to the French currency could only be made by exporting silver, and this was why in 1860 no silver was ten- dered at the Mint. I wish to say in regard to the passages read from the volume by M. Chevalier " On " the probable Fall in the Purchasing Power of Gold," that in the " Revue des Deux Mondes " of April 1st and August 1st 1876, M. Chevalier turned round and proposed to demonetise silver for the same reasons as he proposed in the volume fi'om which Mr. Birch has read to demonetise gold. This book is written with the view to show the extraordinary dangers of enormous quantities of gold being produced and ' passing into the currencies of the gold countries. He was an eminent economist ; but as a matter of fact, within 18 years after vehemently insisting on the demonetisation of gold he turned round and as vehe- mently urged the demonetisation of silver. 6211. {The Chairman.) Why should ihey have Mr. J. Barr Robertson. 24 June 1887. been coining at that time so much gold and so little silver ?— This is the whole theory of bimetallism, that France had to take all the gold offered from California and Australia, in whatever quantity, and ''* ""i"-! had to give out silver, which is what Chevalier de- scribes. Silver was bound to disappear when Prance alone in Europe, you may say, was holding this ratio 1 to 15|. It is very natural to suppose that there was a tremendous pressure, as was proved by the enormous import of gold during those years 1859 and 1860. France took 45,000,000/. in two years, while from 1858 to 1865 we only got 29,000,000/. altogether. I quote from the official figures to show that in two years alone France took 46,000,000?. of sterling into its currency, simply because if the export of silver was probably 20,000,000/. sterling, then that helped to diminish the standard of money, because instead of adding 46,000,000/. they only added 25,000,000/.; 20,000,000/. having been drained away to India and the East. If 45,000,000/. could be taken into French currency, it could only be so by an immense addition to French prices ; the consequence was that as gold and silver were at 1 to 15| in France, then this bi- metallic standard would naturally have increased in quantity so much above the Indian silver standard that silver would begin in India to have a much larger value than in France, and so silver flowed to the East to raise prices there, so that silver prices might cor- respond to the increased bimetallic prices in France. Thus gold took the place of silver in the French cur- rency, and the amount of gold thus substituted had no influence whatever on the currencies of the gold standard countries, because it was a substitution, and not an addition to the currency. But for the existence of French bimetallism all the gold must have gone into the currencies of the gold countries, and must have raised prices in these countries to a much higher level than they did actually reach. 6212. Then you say that in 1876 the cash reserves of the Bank of France amounted to 53,960,000/. in gold and 22,000,000/. in silver ?— Yes. As at the time that France suspended the coinage of silver the Bank of France had only 22,000,000/. sterhng of silver and had 53,000,000/. sterling of gold, it was con- sequently not the pressure of an enormous amount of silver in the Bank of France that caused it to suspend the coinage of silver, it was simply the finan- cial and political consideration that it did not want Germany to draw away its gold. 6213. 1876 was not the date, was it, of the sus- pension of free mintage ; I thought it was earlier than that ? — It was 1874. These figures are taken from the Report of the Committee on the Depreciation of Silver. 6214. Yes, but do you know what the amounts were in 1874 ? — They are given there. 6215. {Sir T. Farrer.) Can you say why they did not wish Germany to take away their gold ? — Because they naturally said : " We do not want to encourage " any country to pass on to the single gold standard " by drawing away this 53,000,000/., or any other " large quantity of gold, and giving us silver. We " are willing to hold the double standard so long as " other countries behave decently to us." They did not want to co-operate in any such scheme. I think that is a very valid reason, particularly as with Ger- many they had a very strong patriotic motive. 6216. They submitted very quietly to receive, gold instead of silver, why was it that they would not receive silver instead of gold ? — Because they felt that while they were anxious that other countries like England and Germany and the United States should become double standard countries like themselves, they did not want to allow themselves to be unjustly taken advantage of. When Germany decided that it should have a gold standard the French Government did not Avant Germany to come to France! and take away gold, and when somebody else decided to have a silver standard that they should come to Prance and take away silver. They did not want other countries to change their currencies wheii they pleased, throwing C 2 20 ROYAL COMMISSION ON GOLD AND SILVER Mr. J. Barr Robertson. 84 June 1887. upon France the derangement of the French currency and the expense of frequent recoinage at the option of other countries. France was being treated as the mere reservoir of precious metals for the convenience of other nations, and it resented this abuse bv suspend- ing the free" coinage of silver, and thus depriving Germany of the opportunity of taking away French gold in exchange for the silver of Germany. 6217. (The Chairman.) Why would it have been at their expense ? — Suppose Germany had drawn away from the Bank of France 30,000,000/. of gold, France would have had to coin more silver, and they said, " What is the use of permitting our currency to *' be raided upon in this fashion ? " They would require to have given up 30,000,000/. of gold and to have recoined 30,000,000/. of silver, which would have come to them in the form of bullion or German silver money. It compelled them to recoin it. Well, then, they said, " We do not want our currency to be raided upon in this way." 6218. Why was it that they accepted the change when the change was from gold to silver, and would not accept it when it was from silver to gold ? — It was hardly from monetary considerations ; it was a question of politics, though I think it will be conceded that France might very well refuse to continue to be the victim of the currency changes of all other countries, when it was completely in its power to do so. 6219. {Mr. Chaplin.) Were they offered the silver in the same quantities that they were offered the gold? — Germany began to sell its silver for gold, and France began to have its gold drained away und the silver from Germany substituted. 6220. I want to ask if you can tell us at all whether, in those years, 1859 and 1860, there was an extra- ordinary quantity of gold offered for coinage, and was coined in Prance ? — Yes, a very extraordinary quan- , tity. 6221. Was there anything like the same amount of silver at that time ; had they the opportunity of coining the same amount of silver if they had wished it ? — There was no abnormal amount of silver being produced, but the French Mint was bound to coin whatever gold or silver might be offered. 6222. {Sir T. Farrer.) They were saturated with silver ; gold became cheaper, gold came in and drove out the silver, and silver went to India. So that they submitted, but when the converse operation came about and silver offered itself as the cheaper metal, and gold was to be taken away, they would not submit to that. 6223. {Mr. Chaplin.) I understood that in 1839 and 1860 they coined 46,000,000/. of gold, an ab- normally unusual quantity, and that to that process they submitted very quietly. What I understood was that they submitted to lose their silver, perhaps they had no choice ? — They had no choice under their bimetallic law, but M. Chevalier wrote his book in 1858 for the purpose of showing thai; gold was so certain to be produced in the future in enormous quantities, and that those gigantic supplies would so raise prices as to bring ruin and disaster on France, that he urged upon the French Grovernment the imperative necessity of demonetising gold. 6224. They might have put an end to their bi- metallic system ? — They might, but they did not. 6225. {Mr. Barbour.) You have been asked how it happened that the French allowed all their silver to pass away and gold to take its place, but would not allow gold to pass away and silver to take its place. Was there not this difference in the two cases, that in the first instance the influx of gold came from a natural cause, and in the case of the influx of silver it was an artificial cause, mainly the act of Grermany, which had recently been at war with France ? — There was no political motive in the first instance ; there was a very strong political motive in the second instance. 6226. Are you aware that in the beginning of the century France allowed her gold to pass away and silver to take its place, or have you no information on that point? — I have no information on that point, except the statistics on the subject in the Report on the Depreciation of Silver. 6227. I will read you an extract from a report of the Minister of Finance of France in 1803, showing what the state of affairs was at that date : " Gold coins " compose about a third of our specie. They are the " principal instrument of our interior commerce. It " is admitted that breadstuffs, cattle, and almost all " the bulky objects of consumption disseminated " throughout all parts of the Republic, and which are " gathered together for the provisioning of our cities, " of the army, and of the seaports, are in the first " instance purchased with gold." Does not that show that there was a large amount of gold in actual circu- lation in France in 1803 ? — Yes, it probably does. 6228. I will read you an extract from the evidence taken before the Committee for Coin at the Board of Trade on April the 26th, 1828. Alexander Baring, Esq., M.P., afterwards Lord Ashburton : — " The " variation in France is seldom above a tenth per " cent. ; it sometimes runs up to a quarter per cent. " It has been, I am told, something higher on par- " ticular occasions ; when the Bank of England was " running all over the Continent for gold. This was " the case, I believe also, at another time for the " service of the Peninsula ; now and then, from " casual circumstances, one metal gets preferred. If " Russia goes to war in a distant part, she does it " always with gold. At the present time gold has " been bought up to a large extent for this purpose." This evidence was given in 1828, and shows that gold had become scarcer at that time than in 1803 ? — Well, I would not draw that inference. 6229. It was not so common in circulation? — No. 6230. Then I will read you an extract from the evidence given by N. M. Rothschild, Esq., before the Committee on Bank of England Charter on 24tli July 1832 :— " Q. 4833. Has there been a great " export of gold from France at different times for the " purposes of foreign war ? — A, Certainly; in general " the gold is bought up in France before it goes from " this country, and if there is a scarcity in France " then it is fetched from here. Q. 4834. Does the " demand for gold from France produce a scarcity of " money in France? — A. No. Q. 4835. Why is " that? — A. Because the gold is, in general, in private " hands; it is merchandise there." Does not this extract show that in 1832 gold had disappeared from the ordinary circulation in France ? — Well, I cannot say. The statement there made is that when Russia goes to war she demands gold. It is perfectly true, but nevertheless, although in 1832 France lest by export about 1,600,000/. of gold, it gained by import in 1830, 1831, and 1833 about 1,800,000/., and it coined in the five years 1830 to 1834 about 5,000,000/. of gold. The total imports, however, from 1815 to 1836 were about 15,800,000/,, and the total exports about 16,400,000, so that France really lost in that time by excess of exports about 600,000/. of gold. 6231. What I wish to ask you is this, do not these extracts beginning with the report of the French Minis- ter in 1803 to the effect that one third of the specie was gold coin, and that all the breadstuffs were pur- chased with gold and ending with the evidence of Mr. Rothschild show that there had been a drain of gold from France, and that she had submitted to that drain without altering the laws regulating her cur- rency ? — Yes. 6232. In other words, she had allowed gold to go and silver to take its place between 1803 and 1832? — Yes, that appears to be perfectly correct according to these extracts, but the total amount of net export of gold from 1815 to 1836 was, according to French official figures, quite insignificant. 6233. {The Chairman.) From 1803 down to the present time has the banking and commercial business of France been carried on in gold and silver money indiscriminately in your view? — Yes, certainly it has. MINUTES OF EVIDENCE. 21 6234. Both gold and silver, each of them being at times at a premium ?— For export, not in money. If either had been at a premium in money, there must have been two prices in France, a silver and a gold price for all articles. Now, in the first place, the French law makes it criminal to act on the basis of premium or discount. It always did so, and consequently any one depositing money in a bank in France, say, 100,000 francs, he might get silver, gold, or paper when he wanted the money, but he got 100,000 francs, neither more nor less. There may, however, have been a premium on silver, either bullion or coin, for export to India, and the premium might for a time be considerable if there was an excessive demand for export, as silver could not always be easily got in France, all banks and other payers having the option of paying in gold or in silver. There was doubtless also under bimetallism a premium on gold. But this premium was a question for the bullion dealer ; it in no way affected the money affairs of the French people. I might instance business in China. I have seen in Shanghai, when silver was scarce, and everybody wanted it, the price of silver as expressed in the sterling exchange on London of the Shanghai tael rise 10 per cent, in a month. When there had been changes, before telegraphs and before steamers, in the available silver in India and China silver would immediately bear a premium for export from Europe ; but the question is this, where is the example of any bank in Friince that received money, gold or silver on deposit, having proposed to pay out either more or less than the exact amount in figures deposited ? Where is the transaction where any merchant has paid more or less than legal tender money, and more or less than the exact amount due. Of course, silver must be driven out of the currency when gold flows in in large quantity ; silver must be driven out of the currency by some process, and it is done by a premium on export, that is, by a rise in the foreign exchanges with silver countries. A similar process goes on with gold in England. A sovereign is always a sovereign in London, but the exchange value of a sovereign in London payable in 'New York in gold dollars changes in London in dollars from day to day, and similarly a 20-dollar gold piece in New York as valued in sovereigns in London changes from time to time. This is the only way in which the exchanges can be regulated ; by a rise or fall in the foreign exchanges gold will flow from or flow to a country, so that we have with our gold exactly the same con- ditions operating as the French had with their silver, only that then the changes in our gold that cause it to flow out or flow in are shown in the foreign discount or the foreign premium on the exchanges. Similarly in foreign countries changes in their gold are shown by changes in the rate of exchange on London. 6235. I believe you have some observations to make with regard to Professor Jevons's views ? — Jevons has been regarded in England here as the leading authority on this question, and Bagehot accepted and argued upon his views in regard to bimetallism. Now my contention is that Jevons did not understand this question, and his diagrams do not show anything in regard to bimetallism "whatever. 6236. {Sir. T. Farrer.) Which book of Jevons is this? — "Money and the Mechanism of Exchange." 6237. ( The Chairman.) Will you quote the passage ? The passage is that " the standard of value always follows the metal which falls in value " (p. 138), and " At any moment the standard of value is doubtless one metal or the other, and not both ; yet the fact that there is an alternative tends to make each vary much less than it would otherwise" (p. 139). What I contend is tliat this is a mere theory, and is not in any way borne out by the official figures which I have presented in regard to the French currency and the Bank of France. During the period from 1795 till to-day the French standard never was a purely gold or silver standard, as Jevons's theory would imply, but it was a standard of the two metals in some proportion, in varying proportions, depending upon whether gold or silver might be flowing into the French Mint, or was Mr. J. Barr being drained away by foreign countries. But he Robertson. treats here upon a theory, and builds upon that ' theory a set of diagrams, so that his diagrams and his argument have been very widely accepted as settling the question. Now I say it does not settle it at all, his diagrams and his arguments do not apply to bi- metallism, as T have shown by authentic facts and figures in the case of France. I have not got the book, but I can draw the diagrams if any one cares to see them. 6238. What do you say the diagrams are inserted by Professor .levons to show ? — To show the action of bimetallism ; but he assumes that under bimetallism gold and silver vaiy in regard to eacli other, which would require that there should have been in France a gold price and a silver price for every article, whereas I have shown that in France they have not varied as money from 1795 to the present day, and that there have not been two prices for articles. 6239. With reference to the argument that gold cannot have appreciated because money is so cheap, what have you to say ? — Well, 1 maintain that the rate of discount is no permanent indication as to the quantity of money in a country, and therefore it is no indication as to the range of prices. Prices may be high or low with a high rate of discount or a low rate of discount. There is no relation between the two except during the period when the change in the quantity of gold is taking place. If we are exporting gold, or if we are importing gold, during that change it would to some extent affect the rate of discount, but it could not affect it permanently. 6240. Of course you would not suggest that all the gold that comes into this country, that is not used for the arts, would be turned into coin ; some of it would remain in bullion .' — It does so at the bank. 6241. What regulates in your view the amount of gold that is turned into coin ? — I suppose the amount that is demanded for the purpose of being paid over the counter of the bank. Of course they do not pay bullion over the counter, that is in payment of cheques. 1 suppose as long as they find that they have plenty of gold coin in the issue department for probable demands, it is not material for them to send bullion to the Mint. I presume so. Of course I have no experience on the subject. I see no object in coining gold when it may, owing to the demands of foreign countries, have afterwards to be sent abroad as if it were bullion. 6242. That rather leads me to ask, during those years in which you say there was this large excess of imports over exports, which in your view must have been turned into coinage, whether it must not have resulted in people seeking more coinage for some reason or other ? — No, they do not seek it ; it passes automatically into the currency. 6243. But how could it pass automatically into the currency ? The amount that will pass into the cur- rency will depend upon the amount that people's re- quirements demand ? — No, I cannot agree in that view. The monetary organization of a country like ours provides the method by which all gold available for curi'ency is automatically distributed over the whole country. In a general way the demand for money is equal to the whole of the available money in the country. 6244. 1 am talking of the amount that is coined as distinguished from what is kept in bullion. I am supposing the stock of gold to remain the same, what would determine how much will remain as bullion, and how much will be turned into coin ? — Well, I suppose the individual views of the Directors of the Bank of England, as to whether they were likely to be called upon for more coin than they possessed. 6245. If their judgment was good and sound that would depend upon what people did require and seek for ? — Yes, in a certain sense ; however, they must keep this gold to suit their liabilities. Their own gold reserves and their own liabilities are the only guide that they attend . to ; they take no cognizance 22 EOYAL COMMISSION , ON GOLD AND SILVEU : Mr. J. Barr BoberUon. ,24 June 1887. whatever of the amount of gold,iu circulation outside of the bank. 6246. Yes, but what I mean is, what in your sugges- tion would have brought about the effect that, in a period of 10 years or so people would have required 50,000,000^. more of gold coins, as distinguished from bullion ? — Of course if it has to be paid across the bank counter for currency purposes it has to be paid in coin. The point is this, the amount in the Bank of England in reality remains almost stationary, there may be a few millions up or down, and the legislation by which the bank directors lower or raise the rate of discount drives out of the bank all surplus gold beyond the reserves to protect their liabilities, either into the circulation in the country or to foreign countries ; or on the other hand, draws gold into the country from abroad. This process is really automatic. 6247. {Mr. Birch.) It has varied in the 10 years from 20,000,000Z. to 36,000,000/., you know ?— That 36,000,OOOZ. is very rare, and could only remain in the bank until the action of the directors themselves re- duced it to the normal amount necessary for their reserves. 6248. {Mr. Fremantle.) You can hardly say that the coinage remains stationai'y ? — No, the coinage will vary in proportion to the supply of gold and the demand for coin. Will you allow me to make one illustration that will show this ; the illustration of the suspension of specie payments in America up to 1879. Why did gold rise to a premium in greenbacks of 180 per cent., that is to say, 100 dollars in gold was the equivalent of 280 dollars in paper money ? l.'rices advanced on the basis of the 280 and not on the basis of the 100. You ask me liow it is ? I say the banks did not hold this money when it was issued by the United States Government, because they were only holding enough for their liabilities. The country was bound to take this surplus when it was issued, there was no means of refusing, whether it raised prices or whatever it did. That is an illustration of it. They thought in America because the United States Government signed these greenbacks they -jivould remain at par, still they found this premium on gold as expressed in green- backs went on increasing and increasing until it reached 180. I give that illustration to show how an increase in money did go on raising the paper money standard to 1 80 per cent, above the gold standard. 6249. {The Chairman.) People are only bound to take it there. It is a different measure of value alto- gether compared with what it is in relation to commo- dities that people desire from other countries that will not take the greenback ? — The thing is exactly the same. 6250. Why surely a man who had a greenback could not induce all the rest of the world, if a large number of greenbacks were issued, to g\\e him goods for the greenback to the same extent as they would give him for gold ? — He could go into a bank in New York and get credit for any amount of money, if he would only deposit the equivalent greenbacks. Gold could always be got for greenbacks at the rate of the day. 6251. Yes ; but not at the same rate as if he de- posited so many pounds sterling ? — -It is exactly the same, not the same value, but if you deposit 280 dollars in paper you would get 100 dollars in gold. What I want to point out is this, this standard of value in America having changed from the gold stan- dard on the basis of 100 to the paper standard of 280 prices rose to a very large extent. Now, then, I say when they began to contiaet the paper currency they reduced this 280, and gradually population increased, and thus they brought the currency down to par in gold in 1879. There was an operation produced directly in consequence of increase and diminution in the quantity of money inserted in the currency and withdrawn from it, and what I maintain is this, that prices rose correspondingly, and yet if you look at the banks, the banks had not this money, they only had enough for theu- liabilities ; but. when a man went to pay something for which he had formerly paid five dollars he fpund he had to pay. 14 dollars for it, and therefore he required to have in liis pocket for this transaction 14 dollars, though under the gold standard he would only have required five dollars. Why was that ? Simply because this standard was one of 280 in paper money against 1 00 in gold coin, and paper money was the money of the country. 6252. But in that case would you have found the man with so many more dollars in his banking account ? — He might or he might not have had. 6253. If all prices had gone up he would probably have 280 dollars where he had 100 before .'' — -No, % beg your pardon, if you had deposited 1,000 dollars in 1861 you would, when the greenback was at 280, have had 1,000 dollars, not 2,800, as you ought to have had if you had been entitled to an equal amount of purchasing power. 6254. That is perfectly true, but when you had all your prices going up there would be some approxima- tion in all respects to an increase in the same propor- tion ? — In prices. 6255. In prices, and therefore in the deposits which people had at their bankers .' — Certainly there would be. The bankers went on changing from a gold to a paper basis, but they did not give any man credit for the increase; so that the increased deposits would have been made by those who were making additional profits by the advancing prices, and not by those who had made the deposits before prices began to advance, as the latter deposits would have remained unchanged in figures, though their purchasing power would have diminished by every advance in prices. 6253. But if the same process was going on here in the reverse direction, ought you not to have found that the money that people had at their bankers diminished just in the same way as you find it iur creased in America ? — Well, I dare say there is a diminution. I have not examined it, but I feel almost certain that there must have been a diminution. On the other hand, I ought to explain that while a pro- cess of contraction is going on the amount of money people keep at their bankers undergoes no change in figures while it is there, that is 1,000/. remains 1,000/. with, however, increasing purchasing power. If there is during contraction a diminution of people's money at their bankers, it is caused solely by the withdrawal of deposits, and not by any automatic shrinking in assets or liabilities at the banks, as theie is an automatic shrinking in the prices and money values of commodities. 6257. {Sir T. Farrer.) One question about the greenbacks. Do you say it was due entirely to the excess of quantity ; do you think that the credit of the Northern Government at that time had nothing to do with it ? — The excessive quantity of greenbacks in circulation produced a corresponding rise in prices as soon as the greenbacks were distributed over the country. With that, in my opinion, the credit of the Government had nothing to do. The fact is prices are produced automaticaliy, money being forced into the circulation. 6258. {Mr. Birch.) What effect had it upon the wage-earning class ? — All prices went up enormously. 6259. The wages of the day labourer, did thoy in- crease immediately? — ^Yes, because he had to pay dearer for everything that he used. 6260. Where was the advantage? — No advantage at all. 6261. («S'm- T. Farrer.) All American securities went down? — That is perfectly true. That was a question, not of quantity of money, but of the credit of the Government. 6262. Paper was a security ?— It was money. 6263. Was there any magic about calling it money? — Yes, because it was legal tender. Every man was compelled to take it for the money marked upon it, but he was not compelled to take American Govern- ment Bonds in payment of debts. Securities like Consols depend as to their price upon the estimation placed upon the credit of the British Government MINUTES OF EVIDENCE. 23 ihe chief consideration being whether we are likely to be involved in wars or in serious political troubles. 6264. {Sir J. Lubbock.) Do you not think the apprehension that there might be a further increase had something to do with the fall in value ? — Are you speaking of the values of securities or of commodities. 6265. I understood you to lay down the principle that the fall in paper valties was entirely due to the increased amount. Sir Thomas Farrer asked you whether you thought the fall of the credit of the American Government had anything to do with it, and you said no. Now I ask you whether you think that the apprehension that the amount might be still further increased had some influence upon the value ? — Undoubtedly it had upon the value of securities which is a mental apprehension, as the increased quantity of greenbacks was clearly an indication that would lower the credit of the American Government in the eyes of investors. But prices of commodities in the long lun are not mental apprehensions of value, they are the automatic results of the quantity of money as distributed over the business of the country in transactions where money is actually used. Prices of commodities, therefore, would not be in any permanent manner affected by any apprehension that increased amounts of greenbacks might be issued, they would be affected only by the amounts already issued. Taking the illustration of France during the war of 1870-71 and afterwards, it had to pay a much arger rate of interest on its loans during that period when it issued enormous amounts of securities, and thus weakened its credit. 6266. {The Chairman.) I will revert to the ques- tion of dear gold and low rate of discount. You say that the rate of discount, whether it is low or high, has no relation to the amount of currency in circula- tion ? — It has not. 6267. Now with reference to the appreciation of gold, which you consider has taken place, would you point out what effect it has produced in the relative position of different classes in the country ? — Yes. I think that all producers have had to sustain a very great loss ; that all parties possessing securities, like Consols, that demand the payment of a certain amount in money and bear a fixed rate of interest, and all annuities and all fixed salaries have immensely benefited. 6268. That is by reason of prices being lower, and therefore the income purchasing more commodities ? — Yos, by reason of the wealth of the producing classes having gradually undergone a diminution in its value in figures relative to the wealth of people holding theirs in Consols and other forms of securities. 6269. You have made some calculations, I think, to show your view ? — The involuntary transfer of wealth from one class of persons to another class by means of a contracting or expanding currency I call by the name of "mediatization." Let me illustrate this process by a few examples, and as I have already shown that the contraction of our gold currency in the last 11 or 12 years amounts to more than 30 per cent., I will use 30 per cent, as the fall in prices duo solely to currency causes. Takiag the National Debt at 740,000,000^., it represents to-day an amount of average commodities that would have taken 1,057,143,000/. to purchase before the contraction of the currency began. In the same way, if we take the assets in " figures " to be paid, of the Joint Stock Banks of the United Kingdom at 1,000,000,000/., the present purchasing power of this sum will amount to about 1,428,571,000/. of the former purchasing power of money. Take again the railways of the country at 800,000,000/., and 4| per cent, on an average was paid on this amount in 1884 (I have no later figures at hand). To-day that sum will purchase an amount of average commodities that formerly would have required 1,142,857,000/. If these three large items are taken, amounting in all to 2,540,000,000/., in obligations in figures, we find that they now repre- sent a purchasing power -which before the contraction of the currency would have .requited -3+628,00.0,000/. Thus we have an amount of wealth which has been mediatized into the possession of the owners of these three classes of obligations, and out of the possession of the owners' of all 'kinds of property, and of manufactories and mines, and 6f the agricultural and productive classes generally, to the amount of 1,088,000,000/. If, on the other hand, those obliga- tions had been paid up in India or in a silver cur- rency, the amount mediatized would only have been aboilt 282,000,000/., so that India has suffered but very little in comparison with England, because silver was a juster standard of value than gold. To take another illustration. The civil services in 1884-85 cost about 18,000,000/. This amount will now purchase commodities that before the contraction of the gold currency would have cost 25,714,000/., that is an excess of 7,7 14,000/. This sum of 7,714,000/. represents ah addition to the burden of the National Debt of 257,133,000/. Let me suppose now that two gentlemen each invested 100,000/, in the period 1870-74, but that the one invested in consols and the other bought an estate with a rental from crops corresponding to the purchase money. To-day the owner of the consols has his 100,000/. intact, with a purchasing power over com- modities as compared with the time he made the investment of 143,000/., and he has his 3,000/. a year with an increased purchasing power of 1,290/. On the other hand, the owner of the estate could not sell it for 70,000/., and yet if the vomme of money had been kept up from 1876 till the present time, as it was from 1866 to 1875, there can be no doubt that his property would, under average circumstances, have been worth 100,000/. to-day, and would have been yielding a corresponding rental. This amount of depreciation is due solely to the mediatization pro- duced by a contracting currency, which has given to the owner of the consols part of the value of the other gentleman's estate. The farmer and the manufacturer have had to accept continually over the last 10 years lower and lower prices for the benefit of the owner of obligations in figures, to whom the farmer, the manufacturer, and the producer generally had to gradually give up their wealth and become themselves impoverished. A careful investigation of this question would pro- bably show that the mediatizatiou of wealth from the producing classes and those allied with them to the holders of securities and the possessors of mortgages, annuities, fixed incomes, &c. has taken place in the United Kingdom in the last 12 years to at least 2,000,000,000/. 6270. {Sir T. Farrer.) All due to scarcity of gold ? — Yes, all that I have stated is due to the scarcity of gold. 6271. {The Chairman.) That 30 per cent, fall arises from taking a number of articles and averaging the fall, but how far that will benefit me, with a fixed income, will depend on the fall in relation to these given articles which I myself use, would it not ? — Certainly it would. 6272. Well, now, rent^ which is a large item of expenditure, has house rent fallen anything like that amount ? — I think relatively materials for building have fallen very greatly. Of course, I do not say that in every case ; no one article can be taken as giving any exact average. There will be articles above and below the average prices of commodities. 6273. But is not one very likely to be misled as to the benefit arising to a person with a fixed income by taking an average of that sort, because if the fall has been small in the articles that are much used, and large in the articles that are not so much used, it would give a very false idea of his position, would it not ? — Well, still the figures in the " Economist " are of staple commodities. The point is this, that if prices have fallen 30 per cent., then anyone with 1,000/. can purchase 43 per cent, more produce with the 1,000/. than he could have done before this change between gdd and silver. That is my contention. Of course, one man iria;y not be able to do it in his own Mr. J. Barr Robertson. 24 June 1837. 24 ROYAL CO>XMISSION ON GOLD AND SILVEE ; Mr. J. Barr Robertson, 24 June 1887. case, but if you take the wholesale commodities he has the command over these commodities to that extent. 6274. {Sir John Lubbock.) I think I understood you to say that all producers have suffered a losis of something: like 30 per cent. ? — Yes, I think so. 6275. I should like to follow that out for a moment. Supposing I am a manufacturer of any kind, and I buy raw material to the extent of 1,000/., I turn that into a manufactured article which I sell for 2,000/. The difference of the 1,000/., less my expenses, is the profit I should make upon the operation ? — Yes. 6276. Supposing everything has fallen, if the raw material falls to the same extent as the manufactured article falls, the difference remains the same ; where is my loss ? — Now you are engaged in a business for 11 years; to-day you purchase cotton at a certain price, and you are buying a certain quantity of cotton all the time, and selling a certain quantity of goods all the time. 6277. Now you are supposing a continuous fall : I understood your position was that articles had fallen 30 per cent., and that the consequence of that was that the producers continue to sufier heavy loss ? — No, I draw a distinction. When the fall stops and its effects are adjusted they no longer lofe, but they may have lost all their capital in the 11 years. 6278. You do not mean to say that the loss is permanent, but it is during the process ? — My point is that whatever anyone has lost he has lost permanently. When the fall in prices has adjusted itself, a manu- facturer who had originally 100,000/. may find that he has only 50,000/., the loss being duo entirely to currency changes, not to any other. But if there is no further contraction of the currency, producers will not make any further losses from currency causes, though demand and supply of commodities will con- tinue to act upon prices. 6279. ( The Chairman.') I believe you have some- thing you desire to say with reference to the India Council Bills ? — I take the ground that whereas the India Council Bills are sold here, in reality if the same transaction were being done by a merchant in Calcutta instead of having bills drawn on India, he would remit sterling bills, for which he would in India pay rupees. My contention, therefore, is that the natural order of this operation is to remit sterling, which would not interfere with silver in any way. The only reason why Council Bills show an interference with silver here is this, that where the quantity of bills offered is abnormally large it is exactly the same rule as applies to the Bank of England if the quantity of surplus money is large ; the India Council, like the Bank of England, must then take a lower rate. When the India Council wishes to press more bills than the normal quantity that have been offered, and lo which the trade between the two countries tends to corre- spond, when they issue more than usual, then, of course, they must take a lower rate ; as the market is not prepared for that additional amount at the same pi'ice as before. 6280. And in that case do you say that the silver market is affected ? — Temporarily. Instead of sending silver, which they would do, with the normal amount of bills, these additional bills must be sold off; con- sequently, to a certain extent, bankers and merchants do not send out silver because they remit Council Bills as the India Council takes a lower price. 6281. {Mr. Birch.) If the Indian Grovernment bought bills in India and the bills were sent over here people would buy silver and send it over, it is exactly the same thing? — No, I beg your pardon, the differ- ence is this ; in the one case there would be a remit- tance from India of gold bills on London, and these gold bills arriving here would not compete with silver as the Council Bills now do temporarily when they are sold for abnormally large amounts. Silver would not be pressed down by sterling bills arriving from New York or Paris ; these would be sterling transactions only ; and why, therefore, should Indian gold bills on London have a different effect in London from the gold bills from the United States and France ? 6282. {Sir L. Mallet.) It would have the same effect on "the trade .-' — All the effect it has on those prices is temporary. My argument is this, that it has no permanent effect on the trade, although many merchants and bankers in the city believe with Bage- hot that if the India Council did not draw so many bills, silver would flow to India in large quantities. I deny that altogether. 6283. {Mr. Barbour.) Would it go at a different rate of exchange ; assuming that it did not go in lai'ge quantities, would the rate of exchange be different ? — • Not permanently different, the rate of exchange, in my opinion, would be different until this exceptional pressure of bills had ceased or had adjusted itself, but having done so the Indian currency requires a certain amount of silver to keep up prices, and that would flow to India when this abnormal condition had been removed. 6284. {Sir T. Farrer.) I understand you to mean that if the India Government ceases to draw bills on this side, and the Government were to remit bills from India, in that case you say there would be no flow of silver to India, there would be no change, it would not affect the trade. But if the Indian Government were to stop drawing bills altogether, because they did not want the money, you do not mean to say that there would be no silver going to India then ? — Yes, there would be silver going to India. Silver would go in preference to anything else, because prices must be maintained in India. I am not quite sure that the point I am trying to make is clear. The assertion in London is that when the India Council go on drawing perhaps 2,000,000/. sterling more than their former annual drawings, that that fact changes the rate of exchange, and that this is shown they say by the fact that when they advertise a larger amount than usual to be sold, the price goes down. I maintain that the price goes down temporarily only; but it does not interfere permanently with silver flowing to India. 6285. You mean to say that if silver is more valu- able in India than it is here, it will go to India, Council bills or no Council bills ? — That is my view. If they stop the Council bills or draw an un\isual amount of Council bills, that will be adjusted, and silver will still keep flowing in its normal channel. 6286. {Mr. Birch.) If we owe a balance to India we have to pay our indebtedness. If we cannot get Council bills we have to send silver or gold 'i — Or commodities. 6287. {The Chairman.) Do you think that bimetallism would be a complete remedy for the evils to which you have called attention ? — 1 think it would not be a complete remedy. 6288. On what grounds ? — I have a table here v/hich gives in a general way — of course you under- stand all those figures are general — certain figures showing how bimetallism would work out at 1 to \6\ and 1 to 21. Estimated Amount of Money in Circulation. Gold Countries Silver Countries 900,000,000 «0,000,000 1,360,000,000 Standard of quantity of money in circula- tion about 1876, say, 100 : fall in 1887 to 91 Bimetallism at 1 to 15^ would give the following fiffures : — 1887. The above figure 69 would rise to The above figure 91 would lallto Gold Countries Silver Countries - 987,250,000 368,760,000 75J 75J 1,350,000,000 MINUTES Oi' EVIDENCE. 25 Bimetallism at 1 to 21 would give the following figures : — Gold Countries Silver Countries - 1887. 856,000,000 428,000,000 1,284,000,000 The above money flsure 69 would fall to 65i The above money figure 91 would fall to I assume that the gold countries have an estimated amount of money in circulation, gold and silver and paper of 900,000,000/. sfeiling ; and the silver coun- tries, 450,000,000/. st'erling. t take that as a basis at least. Now at 1 to 15|, the French ratio, the follow- ing would be the figures : in the gold countries there would be an increase of 87,250,000/. sterling of money which would have to come from the silver countries in silver. There would be 119,250,000/. of excess of money in the silver countries as compared with the gold standard that would have to be distributed over the world; 87,250,000/. sterling of silver then would come to the gold countries, and the balance of 30,000,000/. would lemain in the silver countries. The effect of the 1 to 15^ ratio would be that there would be 987,000,000/. in the gold countries, and 362,750,000/. in the silver countries. That would be on my calculation that the purchasing power of gold, which I represent by the figure 69 in 1887 as com- pared with 100 about 1875, would rise to 75f ; and the purchasing power of silver, represented by 91, would fall to 75f, so far as England is concerned, therefore the rise would be a rise in price from 69 to 75| as against 100 about 1875. 6289. Well, then, do you mean that it would not last, because that is uot a sufficient rise? — I think so ; that is not a suflBcient rise, and it is very doubtful if enough gold and silver are being produced in the world to keep it there, particularly in the face of increasing populations. I take the next ratio of 1 to 21, the present ratio, with silver at 44^rf. per standard ounce, and the Indian exchange at Is. 4\d. The gold countries would then have 856,000,000/. and the silver countries 428,000,000/. Now I call your attention to the fact that the total amount of money would be 1,284,000,000/. In the other case it is 1,350,000,000/. Now the reason of that is this, that in the gold coun- tries there is 250,000,000/. sterling — it may be a little less — of silver which at the present moment is passing exactly the same as if it were gold. It fulfils exactly the same functions as gold now, the same as if in France and the Continent of Europe the ratio was 1 to 15^, and in the United States 1 to 16. In order to establish the ratio of 1 to 21 they would require to recoin every 21 five-franc pieces into 16 five-franc pieces, and thus on those 250,000,000/. there would be a loss to those countries by recoinage of 66,000,000/, sterling. That would be a diminution in the present quantity of money in circulation of 66,000,000/. sterling, or from 69 in gold countries to Q6\, and from 91 in the silver countries to 86^. 6290. Then your view is, looking at what is re- quired for the arts, that the supply would not be enough to keep up that addition to the currency which alone could keep prices steady and prevent that dislocation which you have spoken of between the fixed income and the prices? — Precisely. If in Eng- land we have not had enough gold, and in India they have not had enough silver, to keep up prices, where are you to get gold and silver enough to keep up prices either at 1 to 15^ or at 1 to 21 ? Of course it remains to be seen whether the present ratio of 1 to 21 can be maintained, that is, silver at 44^«/. per ounce and the Indian exchange at Is. 4f rf. That might prove a point of adjustment for a year or two, it could hardly be longer, unless the production of gold was increased. 6291. Your view is that bimetallism would only make a temporary barrier ?— It is a palliative, and it would have the advantage of rendering the exchanges o 51080 between the gold countries and the silver countries in the world, you might say, uniform. Undoubtedly it would be a great advantage to have uniformity of exchange. 6292. It would not affect your view of the apprecia- tion of the standard in consequence of the depreciation of prices 't — Not at all. In England the ratio of 1 to \b\ would not restore anything more than from the - level of 69 to the level of 7.5f , and in all probability 75f could not be maintained. 6293. {Sir T. Farrer.) What would your remedy be? — I will state it as briefly as I can. As there is not enough gold and silver in the world for the increasing business of the world, as already England is suffering for want of coinage, and India is suffering for want of coinage, a normal gold country and a normal silver country so far as money is concerned, then if you had bimetallism to-morrow, if you have not enough gold and silver you must have falling prices, with bimetallism or with any metallic money system you choose to adopt. Now the question is this ; arc we going to try to find a money system that will pre- serve a tolerably uniform purchasing power ? If we are, then metallic money cannot possibly give us a uniform purchasing power. 6294. {Mr. Chaplin.) You mean metallic money limited to gold and silver ? — Oh, yes ; I am not sup- posing that they would take any other metals, so the question is just this ; you can raise the standard of money from 69 in the gold countries to 100 or to 90, and to the same figure in the silver countries if you decree by law to do so. It is clear that we have not got enough gold and silver to keep up prices ; then on bimetallism, if you adopt it to-morrow, you might have it at 75| or 65i in England ; but when you got it there it would immediately begin to contract, at least in the case of 75§. The proof is that we have not gold enough to supply the arts, we are consuming our stock of gold. If we wish to adopt a system of money where we can maintain a positive standard, the real way is to issue inconvertible paper money along with gold and silver on a tabular standard of value, that is, upon an index number like those worked out in The Economist tables. If we could have adopted some means by which, during the last 12 years, we could have added to the quantity of money in circulation enough to have kept our standard ave- rage prices up to 100, then it is unnecessary to say that this standard of average prices would not have fallen to 69, both present and future payments would have been justly dealt with on the basis of 100, and no mediatization of wealth could have gone on, at least not to any material extent. This would have been a tabular standard perpetually rectified in the interests of justice by the rectification of the actual standard itself, namely, of the amount of money in circulation. As we cannot depend on the production of gold and silver to give us the amount of these metals necessary to keep the purchasing power of money up to a fixsd standard, and as thus with gold and silver alone we must still have falling prices, it becomes necessary to find some means of adding to the currency, and this can only be done by the use of inconvertible paper money. Money would then approximate to a yard- stick or a gallon measure, though it would not be such an accurate standard as either of these. 6295. (Sir T. Far7-er.) You first get your tabular standard of value, and then you make any quantity of paper that is necessary to keep up your currency to a certain point, or you take away any quantity that may be necessary to reduce it to a certain point ? That is the proposal. Without this you have no means of making any real or approximate standard of value ; and so in the meantime contracting prices must go on ruining more and more the producers of the country, the class that in reality are needing protec- tion, that is to say, protection against an unjust and ruinous system of legal tender money. 6296. Have you thought how your tabular standard • ought to be constructed ?— The « Economist " index D Mr. J. Barr BoheiUon. 24 June 1887. 26 ROYAL COMMISSION ON GOLD AND SILVER. Mr. J. Ban- Robertson, ?4June 1887. number is an illustration of how it might be done. Suppose a Government department -were to thoroughly consider the entire question, it can be worked out. 6297. A Government department is, in the first place, by collecting prices of everything to make a standard of value, and then the prices are to be kept uniform by creating such paper money as is necessary ? — Quite so, enough to do justice. There is just thi.s one point, and I must say it is a very important point in this case, there is no trouble about establish- ing the 65| and there is no trouble about establishing the 75|, in I to 21, or 1 to 15^ ; but the law would require to decide whether you are to start with a stan- dard of 65^, or 75|, or 91, the Indian standard, or go back to the 100 of 12 years ago. It is for the law to establish that. The rectification of the injustice (hat has been done the last 12 years depends upon the extent to which the law would fix one figure or another. If it fixed 91, Indian prices would be in a general way stationary, that is if India received the amount of silver it is now receiving, and ours would rise from 69 to 91. 6298. Then would it not be necessary that a stan- dard of value should be fixed not only in this country but in all countries ? — It would be necessary. 6299. That would probably need an arrangement between all countries to make one uniform standard ? —Yes, 6300. One uniform standard for all countries, and then the quantity of paper that each must issue must also be arranged? — Eegulated entirely between the different countries. ( 6301. {Mr. Chaplin.) Then, do I understand you that the paper money is to be international money ? — No, rational money ; but each nation would issue enough to keep the fixed standard. 6302. The metal money, the gold and the silver, would, of course, be international legal tender ? — Yes. 6303. But the paper would be simply national } — Yes. 6304. Do you think that arrangement would work ? — I think so. The witness withdrew. Adjourned till Friday. Twenty-sixth Day. Friday, 1st July 1887. PRESENT : The Right Hon. LORD HERSCHELL, the Chaieman, presiding. Mr. D. M. Barbour, C.S.I. Mr. J. W. BiECH. Mr. Henry Chaplin, M.P. Mr. L. Courtney, M.P. Sir T. H. Parree, Bart. Mb. C. W. Feemantle, C.B. Sir W. H. Houldsworth, Bart., M.P. Sir John Lubbock, Bart., M.P. Sir Louis Mallet, C.B. Me. Geo. H. Murray, Secretary. Mr. T. Comber called and examined. t|/,. 6305. (The Chairman.) I believe you are a member r. Comber, of the firm of Messrs. Lyon, Lord, and Company, of Manchester ? — We have three firms, Lyon, Lord, and 1 July l£:87. Company, Manchester ; Lyon, Comber, and Company, Liverpool, and Lyon and Company, Bombay, 6306. And you have a house of business at each of those place.i ? — At each of those places. 6307. I believe you have devoted some consideration to the question of the gold standard of this country, and the proposal to substitute for a single gold standard a bimetallic standard ?— For the conduct of my business I have had to give consideration to what is termed the silver question generally, that phase of it as regai-ds this country and as regards other countries. 6308. Having a house in this country and also in India, and your trade lying between the two, you, of course, have necessarily had your attention called to the eflFect of changes in the value of silver in relation to gold ? — Certainly. 6309. And you have, as you say, studied the silver question generally ? — ^Yes. 6310. Amongst other branches of that question,- have you devoted attention to the proposals of those who are known as bimetallists ? — I have, as I under- stand them. 6311. Perhaps you will be good enough to com- mence by stating what are their proposals as understood by you, in order to enable us to judge of your criticisms upon them ? — So far as I can make out, under a good deal of conflicting statement, the main points of their contention, taken from the more intelligent exponents, and I may say that the authorities that I have principally gone by are the statement of the bimetallic theory appended to the Report of the Indian Delegates to the Paris Conference in 1881, and the book "The Theory of Bimetallism," published by Mr. Barbour, are as follows : — that gold and silver, apart from their value as mere commodities, acquire, when coined, a special status, which confers upon them a special value, as money, which is conferred on them by the fact that governments give them currency as legal tender ; that if, in thus making them legal tender, governments attach the condition that they shall exchange at a fixed ratio they must ex- MINUTES OP EVIDENCE. 27 change only in that ratio, and their value, as coins, must be regulated thereby. For purposes other than coinage the precious metals are used to so limited an extent that there is practically but the one market for them. Their value, as commodities, must therefore be governed by their value as coins within the limits of the charge for coinage. Consequently, if the principal nations that coin money combine to estab- lish a fixed ratio of value, vsrhich I term " legal value," this will become the relative value of gold and silver throughout the world, which I term " market value." Although there may be, at first, a tendency to offer for coinage only the metal which can be obtained at the least cost, say, under present circumstances, silver, and to melt down that which costs most, say, under present circumstances, gold, the increased coinage demand for the former and the increased supply in the market of the latter, must eventually bring about an adjustment of the rnarket value and make it correspond with the legal value. Lastly, that it is not the cost of production that determines tlie relative value of gold and silver, but the relative value which leads to the abandonment of the worst paying mines of one metal, and to the opening of fresh mines of the other metal, until the relative cost of production exactly cor- responds with the fixed ratio. 6312. You understand their proposals to include a free and unlimited mintage of whichever metal is offered ? — Whichever metal the public l)rings to the Mint. 6313. Now, what criticisms have you to make, assuming their views to be such as you have stated, upon those propositions? — Well, it appears to me that the inquiry falls naturally into two parts, first, whether it is possible to permanently establish a fixed ratio between gold and silver, and, secondly, whether it is desirable for this country to enter into such an international agreement in view of her own interests and the interests of India. 6314. Taking first the possibility of establishing a fixed ratio of value between gold and silver, what have you to say ? — Well, as regards the first question the possibility of establishing permanently a fixed ratio between gold and silver, I think our opinion should be guided by the experience of other nations that have established a double standard, that we should inquire whether they have succeeded in per- manently maintaining a fixed ratio ; and I would premise that for a double standard to be really main- tained I consider two conditions are necessary, first, that the Mints should be open to receive both metals whenever brought to them by the public, at the fixed ratio. The coins of whichever metal the mints will not receive are in reality current only as tokens. That both metals should be in actual circulation without either of them commanding a premium. There are three nations which during the present century have established a fixed ratio. France in 1803 established the ratio of 1 to 15^, the United States in 1834 established the ratio of 1 • 1698, and India in 1841 established a ratio of 1 to 15. In the United States silver was undervalued, so that it com- manded a premium, and was exported, and as it did not circulate the double standard was not operative ; the standard though nominally double was actually single gold. 6315. Just pausing there for one moment, was that in your view because France had a different relation of silver to gold? — Because the market value was different, and the demand in France was a factor in that market value, but not the sole factor. 6316. (Mr. Chaplin,) At what date ? — Between 1834 and 1853, 1 think. 6317. There was one standard, did I understand you ? There was nominally a double standard, but practically there was only gold current. In India gold was undervalued, and although some was coined, the coins commanded a premium and did not cir- culate. The double standard, therefore, in my opinion, was not operative, and when from the discoveries of gold in California and Australia there was a prospect of its becoming operative, the Indian Government ^ ;^^j^y_ promptly abolished it. ' 6318. (Mr. Barbour.) May I ask at what date j j^j^ jggy_ thev abolished it ?— 1852. 6"319. Was gold a legal tender before 1852?— From 1841 to 1852. 6320. Can you give your authority for that, because according to my information gold has never been legal tender since 1835 ? — I will read you my autho- rity ; you may take it for what it is worth. .A n Order in Council was promulgated January 1841, authorising officers in charge of public treasuriesto freely receive gold coins struck in conformity with the provisions of Act XVII. of 1835 establishing the 15 rupee pieces. This continued till December 1852, when the proclamation of 1841 was rescinded. 6321. That was an executive order of the Govern- ment, as I understand it, directing its officers to receive gold at a certain ratio, but I do not think there was any law or order of the Government de- claring that gold was a legal tender among the public ? — I may be wrong. 6322. Can you find anything more ? — Nothing beyond that. I go on the Government order of 1841. 6323. (The Chairman.) For the purposes of all payments which had to be made to the Government, as I understand, it was made a legal tender ? — It was made a legal tender. 6324. (Mr. Chaplin.) Were all creditors obliged to take it in discharge of their debt ? — I was not in India then, I only give you what I know. 6325. (Mr. Fremantle.) A ratio was established between gold and silver for certain purposes ? — The Government agreed to accept them at that ratio. 6326. (Mr. Chaplin.) But other people were not bound by it ?-^-I do not know about that. 6327. (Mr. Barbour.) Have you any evidence that other people were bound by it ? — I have no evidence, I was not in India at that time. 6328. (Mr. Chaplin.) Then in other words you have no evidence that gold v/as legal tender ? — Not beyond the amount that was legal tender at Government treasuries. It may have been legal tender otherwise, but that I cannot say ; I have given you all my authority. 6329. (Sir T. Farrer.) Do you know whether it was paid and received as a matter of fact ? — ^Never. 6330. (Mr. Barbour.) Was there never any gold paid to the treasury under the operation of the Act ? — I should think not. 6331. (The Chairman.) Would you be good enough to continue ? — In France I consider that the standard varied from time to time according to changing cir- cumstances. For a number of years gold was rather undervalued. Little was brought to the Mint, 18,000,000Z., as against 127,000,000/., during the 30 years ending 1850. It generally commanded a pre- mium, and did not circulate. The difference between France and India was, at that time, in my opinion, one not of kind but only of degree. The Napoleon did not go to so high a premium as the gold mohui-, but the French standard, though nominally double, may almost be considered to have been then actually single silver. When there was a large increase in the production of gold the market value of that metal changed, and it became overvalued at the French ratio. From 1851 to 1866 the quantity tendered for coinage was consequently largely in excess of silver, 224,000,000/. as against 13,000,000/. For a portion of this period tlie action of the Mint controlled the markets, and the double standard was really operative, but even- tually silver went to a premium, and did not circulate freely, and then, though the standard was still nomi- nally double, it is a question whether it should not be considered to have been actually single gold. 6332. Can you give us the date when you say that silver went to a premium ? — It was during the civil war in America, when the demand for silver for India set in. Afterwards there was a large increase in the production of silver. Market values changed and gold became again undervalued at the French ratio. D 2 28 EOTAf. COMMISSION OX GOLD AND SILVER : T Mr. Comber. 1 July 1887. For a time the action of the French Mint again con- trolled the markets, but during the years 1872 and ISVS nothing but silver was tendered for coinage and the Government eventually refused to coin it. Sinca then the standard of France has undoubtedly been actually single gold ; and her silver coins are as much toliens, in my opinion, as our own shillings. 6333. Do you attribute the refusal to coin it to the condition of things which you have just stated, or to the apprehension arising from the demonetisation of silver by Germany ? — It was the apprehension that silver would be much depreciated. The demoneti- sation in Germany was, of course, one main factor in tliat depreciation. 6334. Then you attribute it to the joint operation of the state of the silver market, owing to the in- creased production and to the apprehension excited by the proposed demonetisation by Germany ? — Yes, like other articles, excessive supply and apprehended diminished demand produced a fall in prices. 6335. {Mr. Barbour?) Do you know if the French Legislature has formally abolished the bimetallic system or has merely given authority to the Govern- ment to suspend the coinage of silver ? — To suspend the coinage of silver, I believe ; my contention is that it is equivalent to the suspension of a double standard. The experience of all three countries then appears to me to coincide and to show that a double standard cannot be permanently main- tained under conditions that liave heretofore existed. So far as it goes this is evidence against the main- taining of a double standard, even if the area over which the fixed ratio is established be extended. 6336. ( The Chairman.') What have you to say on the fact to which the advocates of bimetallism point, that down to the time that France, as you say, ceased to be bimetallic in 1873, the price of silver, notwithstanding variations in the production of gold and .silver, continued to be about the same ? — I say that it was largely due to the action of the French mints and to the accident that the fluctuations in the supply of the two metals found her with a large stock of the metal which was being under produced. When gold was being largely produced during the discoveries in California and Australia, the currency of France had been almost altogether silver, and she had a very large stock of silver with which to feed the demand for that metal and a large vacuum in her currency which could be filled by gold. On the other hand, when silver became largely produced her currency was principally composed of gold, she had a large stock of gold to supply to other nations, and a large vacuum whieh would have been filled by silver if she had continued the coinage. 6337. {Mr. Barbour.') I believe France did absorb a good deal of the German silver ? — I fancy so. 6338. Before she stopped the free coinage of silver ? — I think so. During those two years; 1872 and 1873, she coined nothing but silver. My contention is, that if the increase had been j ust the other way, if, when gold was largely produced it had been the production of silver that had largely increased, she would not have been able to have maintained the fixed fatio or to control the markets. 0339. Do you think that the operation of the French system prevented a fall in gold in 1848 ? — To a very considerable extent, undoubtedly. 6340. {Mr. Birch.) As you stated just now, by the silver disappearing and the vacuum being filled by gold ?— Yes. 6341. {The Chairman.') Then I understand your position to be that, in point of fact, the bimetallic system which existed in France did have an effect in steadying the price of both gold and silver at tw^o different times, but that that arose in a measure from the accident of the position of France with reference to tho possession of the precious metals respectively at those two epochs ? — I think so. I think the action of France has been compared to a parachute, and it is a verv^ood comparison, it prevents the balloon reach- ing the ground quite so soon, but it does not stop its coming there eventually. 6342. And do you think that the result would have been the same supposing not France only, but all the great commercial nations had been bimetallic i" — I have not given consideration to that question ; of course the larger the area the greater the action of the parachute. 6343. Do you then arrive at the conclu.sion, from the facts to which you have called attention, that the permanent creation of a fixed ratio between the two metals as standards is possible ? — I believe that it will be found impossible to permanently maintain a double standard, even when established over an ex- tended area, by international agreement, and for the following reasons:— The figures as to the annual supply of gold and silver from the mines show that the pro- duction of gold is becoming less profitable even with the increased buying power which it has of late possessed; while on the other hand the production of silver is evidently becoming more profitable, even at the lower value to which it has recently fallen in the markets. I should like to put in a paper here which, if the Commission have not had the figures before, will prove interesting to them. It is a statement of the total dividends paid by certain joint stock mines in America as prepared by the " Engineering and Mining Journal," for the three years 1884, 1885, and 1886, and it divides them into mines producing gold only, mines producing gold and silver, mines producing gold, silver, and lead, and mines producing gold, silver, lead, and copper, and the result of the com- parison, is this — that in 1884 the mines producing gold only distributed in dividends 2,222,000 dollars ; the mines producing gold and other metals distributed 356,000 dollars. Two years later the mines producing gold only distributed in dividends 1,567,000 dollars, being a decrease of 655,000 dollars, the mines pro- ducing gold, silver, and other metals, distributed 1,925,000 dollars, being an increase of 1,569,000 dol- lars, so that while the profits on the one very largely fell off the profits on the other were quintupled. The effect of a fixed ratio, inasmuch as it will materially reduce the buying power of gold, will be to further largely curtail the production of that metal. I believe that the production will fall much below the world's consumption for other purposes than coinage, and that the stock at present existing as currency will be year by year diminished, and that eventually gold will command a premium and disappear fi-om circulation. The production of silver will, on the other hand, be stimulated, for its buying power wiil be increased and an unlimited njarket will be secured for it by the opening of the mints under the international agree- ment. Silver alone will be tendered for coinage, and in course of time the metallic currency of the world will become wholly silver. 6344. {Mr. Chaplin.) Where would the gold go to if it disappears from circulation ? — The gold will be used up in the arts and manufactures, and in hoard- ing in India and elsewhere. 6315. The whole of it ? — The whole of it in course of time, a reasonable length of time. 6346. {Mr. Barbour.) May not that happen under the present circumstances, may not the supply of gold become less than the demand lor arts and manufactures ? — I do not think so, because the buying power of gold under the present system will increase, and stimulate its production. 6347. That is to say, gold will be saved from disappearing by a continual appreciation of the standard ? — Possibly so. 6348. {Mr. Chaplin.) Can you tell us what is the relative proportion of gold now in circulation, and geld that is hoarded, or that is used in manufactures ? ■ — I will give you some figures, but they are very conjectural. 1 do not profess to have any special knowledge on that subject ; I only take it from other authorities. 6349. What I mean is this, your statement would lead to the conclusion that the amount of gold to be iMI^aT'^ES oi' evidknce. •29 liojivded in the luture, and to be used in manufactures would be enormously increased ? — No, I could not give you a definite estimate of my own, but I cculd refer you to a deiinite estimate. I think there are two. There is one by Mr. Kimball, the director of the United States Mint ; in his report for the year 1886. 6350. {Mr. Courtney.) But your suggestion of the possibility of the gold now in currency being ex- hausted in the use in arts does not depen;l upon a considerable increase of the use of gold in arts ? — No, I do not think so. I am going to give you what I believe to be a fair estimate of the present consumption ; regarding the future I do not anticipate any increase whatever. 6351. (^Mr. Chapli7i.) No, but I understood you to say that the whole of the gold in circulation . under certain circumstances would ultimately disappear ? — Yes. 6352. And that it would be used either for the pur- pose of hoarding or in manufactures. "Well, there is a certain amount of gold in circulation now, and there is a certain amount, I suppose, used for those purpo.ses at the present moment also, but the amount of gold in circulation, I imagine, enormously exceeds the amount used for those other purposes, is it not so ? — Well, I will give you what I consider to be fair figures, but as I stated they are very conjectural, therefore it is very difficult to follow them. Assuming that the stock of gold now is 1,200,000,000/. 6353. Is that in circulation ? — ^No. Of which 700,000,000/. consists of coin, or of bullion held by the banks which may be considered as good as coin, leaving 500,000,000/. supposed to exist in the shape of manufactured articles and hoards. Then as to the consumption in the arts, you asked me a question, and I was going to give you the estimate of Mr. Kimball. It is the estimated annual consumption by the principal nai ions of the world. In the United States, 13,000,000 of dollars; in England, 11,500,000; in France, 8,600,000; in Germany, 8,20u,000 ; in Switzerland, 6,600,000; in other countries, 9,500,000; total, 57,400,000 dollars. But thai; does not include any consumption by India and eastern countries generally, nor by Mexico and South America. 6354. {Sir T. Farrer.') All these figures are necessarily very loose estimates, are they not ? — I believe so. I believe there is also Mr. Palgrave's estimate before the Commission on the Depression of Trade, and I believe that he estimates the con- sumption in arts and manufactures at 12,500,000/., and the outflow to India at 4,000,000/., making a total of 16,500,000/. 6355. {Mr. Courtney.) Pounds sterling, of course ? — ^Pounds sterling. 6356. {Sir L. Mallet.) How long, do you think, with the annual consumption of, say, 16,000,000/. of gold, the stock of gold at present employed in coinage of 700,000,000/. would last? — I will give you those figures, if you like. I take Mr. Palgrave's estimate ■ of 12,500,000/. for industrial purposes, 4,000,000/. for hoarding in India, and I add 1,500,000/. for hoardiug elsewhere, which I believe goes on, making a total of 18,000,000/. 6357. Well, that is nearly the whole annual pro- duction ? — Well, I consider that the annual production will be very largely curtailed, and will probably sink. It is quite conjectural what it will sink to, but I take 6,000,000/. That would give 12,000,000/. annually to be taken out of the estimated stock of gold, which I take as 700,000,000/. In the course of 30 years the 700,000,000/. would be reduced by one half, and I think' that long before then gold would go to a premium and would disappear from circulation. I think it even possible that, from the very first, capital- ists who hold reserves of bullion, would prefer to hold them fn gold, and I would instance the Bank of France, which, at the end of last year, to protect her reserves of gold, charged a premium of A\ to 6 per mille. . 6Z5d. {The Chairman.) A premium tor what?— For gold, when it was required for export or othc- Mr. purposes. ^'- Comber. 6359. {Mr. Barbour.) Although gold was the. ^ j-jJ^J'gg; standard of the country ? — Yes. ' "^ '' 6360. Really the standard ? — Yes. 6361. {Mr. Courtney.) But nobody is bound to pa/ in gold, not even the Bank of France ; it is not tiie standard in France ? — The debtor always has tlie option. 6362. {Mr. Barbour.) But France has got, at present, a gold standard ? — ^Yes. 6363. ( The Chairman.) A gold htandard, but with the option to pay in silver at a fixed ratio ? — Quite so. 6364. {Mr. Barbour.) But may not, under any circumstances, the consumption of gold in the arts and manufactures largely increase. For example, the production of gold in the beginning of this century did not average 4,000,000/. a year at the outside, and therefbre, apparently, 16,000,000/. a year or more for the arts and manufactures and hoarding is four or five times the production of that time ; so there must have been a very great inci'ease in the consumption of gold in the way stated since the beginning of this century ? — There must have been an increase, but as to the probability of that increase continuing I have not sufficient special knowledge to venture an opinion. 6365. But if a great increase has taken place in the past, and the world has not less wealth, but more wealth, is the increase not likely to continue in the future ? — It appears to me probable, but I have no special knowledge. 6366. {The Chairman.) That would appear to be the result you would anticipate from the extension of the general system of bimetallism to the com- mercial nations of the world .' — That is the result which, more or less, I should venture to anticipate, not tying myself in any way to the figures or the number of years which would be requisite to attain the end which I venture to foreshadow. 6367. {Mr. Birch^ But that is on the ratio of 15^ to I ? — That is on the ratio of 15^ to 1. 6368. {Sir L. Mallet.) Should you think that that would be an undesirable result? — V^ery much so. I think it is much better for gold and silver to perform what bimetallists call the function of money than for any one metal to perform it. It will be a natural appreciation. 6369. {Mr. Barbour.) Do you call the exclusion of silver from the coinage of Europe and the free coinage of gold a natural appreciation of gold ? — So far as this country is concerned, because its gold standard was established many years ago. 6370. When was the silver standard finally abolished in this country? — 1816. 6371. {The Chairman.) You have alluded to the fact that the purchasing power of gold is greater than it was before ? — ^Yes. 6372. Do you i-egard that as necessarily an evil ? — For this country ? 6373. Yes ? — No ; on the contrary, I think it is an advantage to this country. 6374. Will you tell us why you think it is advan- tageous to this country? — This country is a creditor nation. It has made large loans to foreign countries on a gold basis, and the annual interest it receives in the shape of commodities. When the purchasing power of gold increases the quantity of the commodities which it receives in payment likewise increases, and that is a benefit to the country. 6375. Is there any other respect in which you think it beneficial ? — I .think it is beneficial to a certain extent in India, because India is entirely differently situated. 6376. {Mr. Barbour.) Do you mean that the appre- ciation of gold is beneficial to India, or the depre- ciation of silver ? — The depreciation of silver.. It is the same thing. India is a producing country. She produces and exports sufficient to pay for her imports, for what has been termed the Government tribute, by which I mean the liabilities of the Indian Government 30 ROYAii OOMMISSIOK ON GOLD AND SlLA'Eh ; Mr. r. Comber, July 1887. in Londoh, and to receive a balance in treasure, largely composed of silver, from her debtors, viz., the^ re- cipients of her exported produce. The lower silver falls, the more silver she exacts from her debtors, just us the higher gold rises the more commodities Eng- land exacts from her debtors. I think both countries are benefited by the recent change in the value of the precious nietals. 6377. Do you think that India receives more from England, and England pays less for what she gets from India ? — I do not take it as between India and England ; I take it as between Ecgland and the rest of the world, and India and the rest of the world. 6378. Let us confine the question to India and England for the purpose of discussion ? — That I have not investigated. 6379. But you hold that England guins on the whole more than she otherwise would do, and India also gains more than iihe otherwise would do ? — On the balance of trade, yes. I enter into that explana- tion because 1 see, in a despatch of the Viceroy of India, that he points out that those persons who are of opinion that India has gained by the fall in ex- change hold, as an essential part of the same opinion, that England and all other countries with a gold standard have lost in an exactly equal degree. That is what I want to controvert. 6380. (T/te Chairman.) You do not agree with that ? — I do not agree with that. 6381. You hold that India has gained ; you do not hold that India has lost ? — I think not. 6382. {Sir L. Mallet.) I think you have said that one very great advantage to England is the fact of her being a creditor nation, that she lends money on a gold basis. The interest on that is paid in commodities, consequently she gets a larger amount of commodities, which is a benefit. Well, India is one of the countries to which these gold loans have been made. She has to pay a large quantity of commodities as interest on thos3 loans. How should that be an advantage to India ? If it is an advantage to England to get more, it is a disadvantage to India to pay more ? — 'The item to which you have alluded is only one item in India's balance of trade, and it is more than counterbalanced by the other items. 6383. {The Chairman^ So that in the result, including that item, India is a creditor nation ? — Yes, India is a creditor nation, and has to receive payment for the balance due to her. She exacts part of it in largely increased imports, and beyond that she also exacts payment of the balance in treasure. 6384. So that I understand youi: view to be this : that if you were to regard only that one item in the account between India and other countries which con- sists of a payment of interest on gold debt, she would be a loser by the depreciation of silver in relation to gold, yet allowing for that disadvantage, when yoTi look at the total position of India as a \vhole, that disadvantage is more than counterbalanced by the advantages ? — Exactly so. 6385. {Sir John Lubbock.) The silver debt of India is much larger than the gold debt ? — I think they are pretty nearly equal, but I have not got figures, it is only a general impression. You will get that from other people much better than from me. 6386. {The Chairman.) Now with regard to the alleged depression of trade and agriculture in this country, owing to the suggested appreciation of gold, what have you to say ? — I think that it is, as regards trade, much more largely due to other circumstances. 6387. What are the other circumstances to which you would call attention ? — A great deal of loss un- doubtedly has been sustained by the commercial com- munity in consequence of the fall of gold prices, but I attribute that fall of gold prices largely to other causes than the absence of a fixed ratio. 6388. {Mr. Barbour.) Do you attribute it partly to the absence of a fixed ratio ? — Partly to that. I think it is much more largely attributable to the ches^ier production and over supply of various com- modities ; to the cheapening of the cost of transit, both by land and by sea; to the elimiuatioii of middlb men so that produce roaches the market without passing through so many hands ; and to the cutting down of trade profits resulting from the increase of competition. As to the second of those items, the cheapening of the cost of transit both by land and sea ; I should like to place before you some figures which have been prepared for me by one of my neigh- bours in the Bombay trade who is much mure largely engaged in the wheat business than I am. The decrease in the value of wheat from 1875 to the pre- sent time may be taken at 10s. a quarter. He has calculated the cost of carriage fronj Cawnpore to Liverpool, and he finds that the cheapening of it during that time has been, from Cawnpore to Bombay 2s. per quarter ; from Bombay to the United Kingdom 7s. 3d. a quarter, making a total of 9s. 3d. reduced cost of transit, or very nearly as much as the reduced price for wheat. He has also calculated the cost of transit from Chicago to Liverpool. He finds the reduction in the land carriage from Chicago to New York was 3s. id. and the decline in the cost of sea freight was 4«. lOd. a quarter, making a total of 8s. 2d. 6389. {Mr. Chaplin.) That is from America?— From America. 6390. {Mr. Barbour.) May I ask what rate of freight is taken from Bombay ? — He has taken 50s, in 1875 and 20s. now, I think. He is more largely engaged in the charter of steamers than anybody in the trade. 6391. {Mr. Chaplin.) What is the price at which he estimates the wheat in 1 875 ?— He takes it at 45s. a quarter iu 1875 and 35s. a quarter now. 6392. {Sir John Lubbock.) And to those figures of 9s. 3d. and 8s. 2d. would probably have to be added something further for the facility you have in getting to Chicago or Cawnpore ? — Chicago and Cawnpore are taken as being more or less the centres of the producing districts, for some wlieat which came from .n, further distance it may be more, but some may be produced much nearer the shipping ports, and he has taken those places as an average. 6393. At the same time those are not the actual spots at which the wheat is grown, and to those figures there would certainly have to be made some addition? — If they all came through those spots it would be so, but some comes without passing through Chicago to New York; some might be grown quite close to New York. 6394. Clearly on whatever wheat comes from places farther ofi'. than Chicago, of course there would be an additional saving ? — No doubt. 6395. I am not speaking of the wheat which came necessarily further, but of the wheat which came through those centres. There would not only be that reduction, but there would be some further reduction from the place at which it was grown ? — This would be so. 6396. {Mr. Chaplin.) It would depend upon whether between 1875 and 1885 there had been any variation in the cost of bringing them to those centres ? — I have no special knowledge of the rates of -carriage in America myself, but I take it for granted that if the railway carriage from Chicago to New York is reduced, the chances are that the rate of carriage from the point of growth to Chicago, on such portion as comes through Chicago, would also be reduced. 6397. But would not your faith in that calcu- lation be somewhat shaken by the fact that I find that in the year 1877 the average price of wheat was 56s. a quarter ? — I did not prepare those figures myself, they were prepared by Mr. Nixon, who is largely engaged in the trade, more largely than I am, and I presume he selected that year as being a fair average. 6398. In that particular year, 1875, it is true it is put at 45s. 2d., but two years later than that it is 56s. Qd., or nearly 60s. a quarter, and it is now a good deal less than 35s.; therefore the increased rate of transit would not suffioien*ly account for the fall ?— The 35s. was not the average price, it was the price at the date he made up his calculation. My object in putting JtlNUTES OF EVIDENCE. 31 ■ forward tlie figures is merely to show Iiow largely the cost of transit has decreased since 1875, -when the fall of silver first began. 6399. {Mr. Sarbour.) Do you think that the lowering of the cost of production of commodities, and the cheapening the cost of carriage, would affect the relative value of gold and silver ? — I do not think so at all. 6400. That is a separate question ? — Quite. 6401-3. {The Chairman.) I suppose if half the crop failed in India the price would go up, and if there was double the average crop the price would go down, but that would not afiect the fact that in either case they would be able lo charge 8s. id. less than they would have done if ^they had not had that reduction in the cost of transit ? — Yes. 6404. {Mr. Barbour.) Would you not ordinarily expect that the opening out of a new market for Indian wheat by a reduction in the cost of carriage to Europe would tend to increase the price of wheat ? — I should expect that it would have that effect, 6405. {Sir T. Farrer.) Then you account for nearly the whole of the fall in the price of wheat by diminu- tion in the cost of production and transport ? — I do not wish to go so far as that, I merely wish to show how greatly the cost of transport has decreased. 6406. But you do not add the diminution in the cost of transport to the exchange, and say that is the diminution in the cost of wheat? — Exchange has helped to put down the price of wheat, and a thousand and one other things have affected the price of wheat. I am merely mentioning how much the cost of trans- port has been reduced, which will be one of the forces that will produce that effect. 6407. But the figures that you have given account for pretty nearly the whole of the fall in the price of wheat.' — Very nearly, but they vary trom year to year, as has been pointed out. 6408. {The Chairman.) What you mean is, that supposing the present year and the year 1875 were what we may call normal years, as regards production and demand in India, the difference in the cost of transit would account for the difference in the price between these two years? — Largely account, not altogether. 6409. Now with reference to a general fall of prices as affecting trade; do you consider that an unmixed evil? — ^While it is in process it produces loss, but when it has taken place I think it produces safety. 6410. Can you give your grounds for saying so ? — When prices fall merchants, who always hold inore or less stock, merchants and dealers throughout the country, lose on their holding. 6411. Yes, that is the loss while it is going on, but what is your reason for saying that it leads to a con- dition of greater safety afterwards ? — There is less room for a further fall. 6412. {Mr. Barbour.) But are you not looking too exclusively to the interests of the merchants ? We must also consider the producers. A fall in prices is a fall for the producer too. It is unpleasant, no doubt, for both parties while the fall is going on, but it takes a longer time for things to adjust themselves to that lower price for the producer than for the merchant ? . By the producer do you mean the farmer ? 6413. The farmer in his capacity of producer would lose ? Yes, the farmer would lose, until he could get his rents adjusted, but when he gets his rents adjusted he makes a living profit, whether he makes it at 1/. an acre or 31. an acre. 6414. He passes the loss on to the landowner ? — He passes it on to the landowner, and the landowner undoubtedly suffers. 6415. And the process of havmg the rent ad- justed to correspond with the prices may be a very troublesome one, as we see in Ireland?— It may be, but I think in the long run it will be effected. 6416. {The Chairman.) Should you dispute the proposition that a variation in the purchasing power of the standard, depending on the greater scarcity of the metal which formed the standard, was a Mr. disadvantageous thing ?— I think the steadier the '^- Comber. standard could be kept the better. July 1 887 6417. As regards fixed payments that have to be ^ made al a future date, it does alter the obligations of the debtor to the creditor substantially if the standard varies between the date when that obligation was contracted and the date when it has to be performed ? — I think that is self-apparent. 6418. And of course, if it could be avoided, you would not deny that it would be desirable to avoid it ? — Just so. 6419. What have you to say with regard to the suggestion that, trade being largely carried on with money borrowed from capitalists, there has been a disturbance in the relation of the trader to the lender, owing to a change in the value of gold ? — I think that it has been very largely exaggerated by some of the people who have written on the subject. I do not think that the trade of the country is so largely carried on by borrowed capital as some of the writers on the bimetallic side have contended. 6420. {Sir T. Farrer.) And would the loans be permanent loans, or would they be loans from day to day, the terms of which would be altered according to the state of circumstances ? — The greater part of the loans would be temporary loans, but of course the joint stock companies borrow very often in debentures. These may be permanent loans, but the greater part would be fluctuating and temporary loans. 6421. {The Chairman.) Your view is that even if you adopted the double standard with a fixed ratio such as that suggested, it would not really make your standard less variable than it is at present ? — I think so. 6422. {Mr. Barbour.) Would not the average of the two metals have the eft'ect of producing a more stable standard than if you allowed them to vary independently ? — My opinion is that within an appre- ciable time you would only have one and you could not take the average of two. 6423. But that would be on the whole the cheaper metal of the two, would it not ? — The cheaper metal of the two. 6424. I mean there would be less appreciation of that metal ? — It is cheaper in one sense ; at present it is worth only one twentieth part of the other, but it might appreciate or depreciate. 6425. It might appreciate or depreciate, but what I say is this : you have two metals at a fixed ratio and one of them appreciates aS you may say out of existence as money ; clearly the other or the less appreciating standard is the one that would remain ? — The less appreciating certainly, it may very largely depreciate. 6426. {The Chairman.) Then whilst those who have fixed payments to make have suffered from the greater purchasing power of gold, and those who have fixed payments to receive have benefited, what have you to say with reference to the wage earning classes? — Wages are very slow to feel the -in- fluence of any change in the standard of value, and they have not decreased as much as the prices of pro- duce have decreased ; consequently the condition of the wage earning class is now very much better than it was 14 or 15 years ago. 6427. {Mr. Barbour.) You think their wages have fallen something ? — In particular instances they may have fallen. 6428. Take an average if it is possible to do so ? — I should like you to refer to some tables which were prepared by my partner, Mr. Lord, for the Commission on the Depression of Trade, in which he showed that although the rate of wage given to cotton operatives in Lancashire had declined, the weekly earnings of the operatives in consequence of the larger amount of work which \)y better machinery they were able io turn out had very considerably increased, but that is not as between 1873 and now, but as between the time at which he spoke and 30 or 40 years ago. 6429. But as between 14 or 15 years ago and the 32 KOIAL COMMISSION ON GOLD AND SILVEK 1 r. Mr. Comber. 1 Julv 1887. present Jay ? — I should think that, speaking generally, -wases had decreased very little. B430. Very little, but something ? — Something. 6431. {Mr. Courtney.) Money wages? — Money wiiges. 6432. Eeal wages ? — Eeal wages, that is to say the buying power that the wages represent, have risen I think decidedly. 643 J. (it//'. Barbour.) That is owing to the cheap- ening of ihe cost of production of commodities ? — A man can buy for his reduced money wage a great deal more thiiu he could 14 or 15 years ago. 6434. That cheapening of the cost of pioduction of commodities would not be lessened by the adoption of bimetallism? — In so far as relates to the reduced cost of transport and. so fortli it would not. G435. {The Chairman.) Therefore your view being that the larger proportion of the diminished cost of commodities has arisen from causes other than the standard, there would be nothing in Ihe adoption of bimetallism to prevent all those other causes acting still ? — I think not. 6436. {Sir T. Farrer.) But so far as alteration of the standard goes and a diminution of the purchasing power ol'gold, it would have the effect that you speak of on wages ? — There is no doubt. 0437. So far as bimetallism had the effect of depre- ciating the standard ? — It would largely increase the price of various commodities to the wage earning classes. 6438. ( The Chairman.) I am not quite sure that I follow that. Why should it largely increase the price of commodities if the diminished price of commodities has chiefly resulted from causes other than those which have relation to the standard ? — It would largely diminish the purchasing power of, I was gping to say gold, but gold and silver combined, the standard. 6439. But why should it do that ? — Because silver is produced to such excess that the large quantity of it that would be tendered for coinage would very largely increase the currency, and that always has the effect of raising prices. 6440. {Mr. Chaplin.) You mean that one effect, at all events, of the adoption of the bimetallic theory would be to increase prices generally ? — Yes. 6441. Largely, you say ? — I think largely in time, as the production of the mines comes into the cur- rency. 6442. {Mr. Barbour.) And supposing that the adoption of bimetallism at 1 to 21 was chosen, what would be the effect on prices as compared with present prices ? — I should think very little for a time. 6443. And ultimately ? — Ultimately, if the pro- duction of the mines was very largely increased, it would tend to send them up. 6444. {Sir W. H. Houldsworth.) Would not the same effect that you say wovdd be produced on the commodities be produced on wages ? — I think so. I think that the wage earning classes are quite able to take care of themselves. 6445. And therefore their relative position between the wages and commodities, although both had risen, would be the same ? — I think the wages would be slower to ri.se than other things. 6446. {Sir L. Mallet.) You say that you think on the whole that the effect of the increased purchasing power of gold has been favourable to the wage earning class ? — I think so, yes. 6447. Are you aware that that opinion is entirely opposed to that of a great many very eminent econo- mical authorities, more particularly I might refer to Professor Cairnes, who is very well known to most of us, and who wrote a series of very valuable essays on the gold question, in which, after arguing very elaborately and with his usual great power of exposi- tion and skill, he comes to the conclusion that although the result of those gold discoveries has been an ad- Tantage in many respects, on the whole it has been unfavourable. Still in spite of that he distinctly came to the conclusion, as regards the wage earning classes, that it was a decided advantage; and that opinion, I think, would be held by a great many authorities. It is curious to find a diametrically opposite opinion on that very vital question held by both sides of this argument ? — I have given you the best opinion I can form quite independently. 6448. {Mr. Barbour.) I believe between 1848 and 1873 the condition of the wage earning class improved immensely? — I fancy so; I believe so. 6449. Everbody says it did ?— Yes. 6450. The standard of value was pretty steady between 1848 and 1873? — The standard of value; that was while France still maintained the double standard. G451. Notwithstanding the great production of gold, (I believe the production increased to 10 times what •it was before,) the operation of the bimetallic system almost kept the standard steady during that time ? — I have already given my viev/s that it did at times. And during that time, while the standard of value was pretty steady, there is no doubt that trade and manu- factures largely increased in this country and that the operatives increased their wages. 6452. {The Chairman.) The extent to which the adoption of bimetallism at any ratio of gold to silver would affect prices, would depend upon what the real relation is between prices and an increase or dimi- nution of the volume of the currency ? — I think so, I do not quite follow your question. 6453. Well, you have assumed, I rather gather, what some people question, that an addition to the volume of the currency must directly and extensively affect prices ? — Y'es. 6454. And when you say that prices would largely rise if you adopted bimetallism at a particular ratio, it is upon the assumption of the direct relation, which some people doubt, between a change in the volume of currency and the prices ? — ^It is quite so. 6455. {Sir T. Farrer.) Supposing that price did not depend upon a direct relation between the volume of currency and the transactions of commerce, but upon a value of the standard unit of metal, the value of that standard unit of metal will still be affected by the demands which are made upon that metal for the purposes of currency ? It is proposed, is it not, by bimetallism that silver shall be made equally with gold the currency of the world ? — 1 understand so. 6456. And the effect of that would be to increase the value of silver, and to diminish the value of gold, considered as metals ? — Y'es. 6457. Therefore, what are now gold prices would be ' altered and would rise, even though there wfi-e no direct relation between the volume of currency and the individual transactions, because there would be a less demand upon gold and a greater demand upon silver ?— Gold prices would then cease. What are now gold prices would rise when they came to he currency prices, and what are now silver prices would fall when they came to be currency prices. 6458. {The Cha.irmaii.) Supposing that you did not alter in the slightest degree the volume of the currency, but substituted so much silver for so much gold,- and had the same volume as before, taking the two at a fixed ratio, why should there be any altera- tion of prices at all ? — After the change, caused at first by the adjustment of exchange, I do not think, under these circumstances, that there would be. 6459. {Sir T. Farrer.) But what ratio would you take. Taking it at 1 to 21 there -ssrould be no dift'er- ence ? — No difference. 6460. Supposing that you adopted bimetallism for the whole of the civilized world, including India, and that you adopted it at a ratio of 15 to 1 instead of the present r.itio of 20 or 21 to 1, what would be the effect on prices in India, and what would be the effect ou prices in England ? — Prices in India would undoubtedly fall considerably, and prices in England would rise, 6461. {Mr. Barbour^) And supposing there was an increased production of silver owing to the adoption of this new ratio, what would be tlie effect of that MINUTES OP EVICENOE. 33 on India ? — As the volume of the currency increased I should think prices would tend to rise again. 6462. Do you think that if the value of gold and silver altered to-morrow on the London market from 44rf. an ounce to 6Qd. an ounce, that instantaneously all values all over India would fall in proportion ? — I do not say instantaneously, but in the course of a comparatively short time. 6463. Do you think it would be a short time or a very long time ? — I should say it would be a short time. I know that at ports for shipment the prices would change immediately. 6464. Do you think an immediate change would take place in the silver prices of articles produced in the interior of India and wholly consumed by the people of India ? — As the production of them would be affected by the production of the other articles. If you would allow me to explain, wheat and seeds and cotton and indigo and a very large proportion of what India produces is exported to other countries. If the price of those articles fall, as I think you admit they will fall, the cultivator would tend to produce much more largely those articles the price of which has not fallen, and by that larger production he would eventually reduce the prices of those articles to which you have alluded, and which are not exported from India. 6465. The question is what length' of time would that process take to affect prices generally in India, not of articles exported, but of the articles consumed in the country ? — I should think a year or two. 6466. {The Chairman^ I am not sure yet that I quite understand your view. Supposing that you fixed for the great commercial nations a ratio of 15| to 1 to-morrow, why should prices in this country thereupon rise ? — ^I have attributed the fall of prices partly to what is generally termed the appreciation of gold. 6467. But you attribute it very little to that ? — Well, to that extent, I think, prices would at once rise. 6468. That I understand, but I thought that your view was that although the fall of prices very little depended upon that, if you fixed the bimetallic ratio there would be a very large rise of prices ? — It would depend a good deal upon the ratio that was fixed. 6469. I am supposing 15^ to 1 ? — I think then that there would be a rise in prices. 6470. {Mr. Courtney.^ But is there any difiiculty in reconciling the two propositions. Supposing silver did not exist at aU, and that our currency was simply gold, might there not have been during the last 10 years a great diminution in prices, owing to the dimi- nution of the cost of production, of carriage, and other circumstances to which you have referred ? — I think that a considerable amount of the fall that has taken place has been caused by the decreased cost of transport and other things which I have enu- merated. 6471. Quite so, and if we could blot out of our experieiice the fact that there is such a metal as silver the same sequence of cause might have been in opera- tion, bringing down gold prices which would then be gold prices ? — Bringing them down, but not quite to the extent to which they have fallen. 6472. But stiU largely operative to bring down prices as they have been brought down ? — I think so. 6473. Well now, if upon that supposition you add this other that henceforth any person, who is bound to pay an ounce of gold, should be equally at liberty to pay 154 ounces of silver; if the 1.5^ ounces of silver are much cheaper in the market than the ounce of gold, would not the effect of that alteration in the condit on of payment at once cause a very considerable change in prices to ensue ? — It would depend a great deal upon the cheapness of the silver which was brought into the currency. 6474. I take it that l&\ ounces of silver are to be an equivalent, for the purpose of payment, to one ounce of gold. If, as we know by experience at this moment, 15^ ounces of silver can be produced at a much less rate than one ounce of gold, the efiect I have referred to would follow ? — That would be the effect. o 51080. Undoubtedly there would be a rise, but until the . Mr. amount of silver in currency largely increased I do not T. Comber. think the rise would be very material. j , 6475. The difficulty to which the Chairman has ^ ' referred appears to be this, that you cannot have a rise of prices, according to the theory of money, without a commensurate increase in the volume of the currency. Would not the effect of mtroducing such a capacity of payment as I have referred to, of 15^ ounces of silver being worth one ounce of gold, at once produce a movement, going on pari passu, an increase of the currency and a rise of prices, not one as the cause of the other, but two conditions flowing from the same cause, namely, the fact that the 15^ ounces of silver are worth for the purposes of payment one ounce of gold, and that they may be obtained with much less cost than one ounce of gold. The tendency undoubtedly would be to cause a rise of prices if the cheaper silver were brought in, and the currency at the same time were to be augmenf ed ? — Yes, certainly. 6476. They would go on together ? — They would go on together. 6477. They are conditions of one another, rather than causes of one another? — As the currency in- creased higher and higher would go the prices. 6478. ( The Chairman.) I thought that, according to your view, as the silver went in the gold would go out, therefore the volume would not be greater ? — ■! am assuming that there is a very large increase in the pro- duction of silver. You put it to me as part of the question, that the volume of the currency should largely increase, and I answered it on that hypothesis. 6479. What I wish to put to you is this : the extent to which this affected prices, even in the view suggested in the question put to you, must depend on this, must it not? We are supposing that that fixed ratio extends to all commercial nations, so that everybody in England, France, Germany, Italy, and the United States would have an equal right to dis- charge the obligation of one ounce of gold by 15J ounces of silver. Then the extent to which that would affect prices would depend upon the amount of silver that would be available for all those creditors to get hold of to discharge their obligations with ? — Yes. 6480. {Mr. Courtney.) That could be poured in from month to month, you might say ? — The effect on prices even in a silver country where they already have an option of paying in silver would be to eventually cause a rise in prices. 6481. {The Chairman.) I was talking of the gold using countries adopting a bimetallic standard, where, I understand you to suggest, because your suggestion would not apply to England alone, that if all the gold using nations became bimetallic, prices would rise everywhere else as much as in England ? — They would rise in all gold countries. 6482. Well, the extent to which they would rise must depend, must it not, upon the amount of silver which you suppose it would be advantageous t6 the debtors to pay ? — There would be an immediate effect, because silver is cheaper than gold, and when silver is brought into the currency, that reduces, as it were, the average of the currency in my view, and would of course cause a rise in prices. 6483. I am looking at it apart from the considera- tion of currency at all ? — I cannot consider prices apart from currency. 6484. Apart from the volume of currency. What I was going to ask you next was this, whether; if it were so advantageous to all the debtors in all the great commercial countries of the world, whose debts would be very largely in gold, to pay silver instead of gold, there would not be immediately such an increase in the demand for silver as to be likely to raise the price of silver, and therefore make it less and less advantageous to take that course ? — The present price of silver would change at once, immediately, instantaneously. 6485. And rise ? — And rise, yes. 6486. {Sir T. Farrer.) What would be the effect upon the different countries ? France holds a quantity E 34 ROTAL COMMISSION ON GOLD AND SILVER: Mr. T. Comber. 1 July 1887. of silver, the United States holds a quantity of silver, India holds a quantity of silver. Would all that silver rise in value ? — Certainly, when the fixed ratio was established. Its value with relation to gold would at once change, its gold price would at once change. 6487. Then silver in all those countries, the value of the property which those nations hold in silver, would rise ? — Yes. 6488. And the gold of those nations which hold gold would fall in proportion ? — I think so. 6489. Therefore the adoption of bimetallism at the ratio of 15J to 1 would be a gain td the silver possessing countries and a loss to the gold possessing countries ? — It would be a gain to a country which held a large stock of silver, so far as that stock of silver was concerned. 6490. (Mr. Barbour.) And if a country happened to hold both gold and silver, as India does, and I believe France, the loss and gain might balance .'' — It might if the quantities were about equal. 6491. And in any case the loss or gain would be exactly equivalent to the gain or loss from the abandon- ment of the old ratio ? — So far as the effect of the currency is concerned, but value has had many influences brought to bear upon it since that time. 6492. {Mr. Birch.) I understood you to say that prices have fallen where the competition from the silver using countries, from India, for instance, had come in, while India had benefited by the exchange ? — I have given my reasons for thinking India should benefit. 6493. Then she would lose that benefit supposing the ratio were raised to 15| to 1 ? — ^Yes ; I think India, as a whole, would very decidedly and very greatly suffer if the ratio of 15^ to one were adopted. 6494. {Mr. Barbour.) Who do you think would get the benefit of that loss to India ? — Those nations which hold a large stock of silver, and more especially the owners of silver mines. 6495. {Mr. Birch.) We were told the other day by one of our witnesses that should a ratio of 15J of silver to one of gold be established, not another quarter of wheat would be shipped from Chili, aad not an ounce of copper, that it would stop the shipping, therefore it would raise the price here by keeping that competition out of our markets ? — I do not know anything about Chili. I do not think it would stop the import of Indian wheat, for instance. 6496. The export from India ? — The export from India, and the import into this country of Indian wheat. To a certain extent it would check it, it would not be in favour of it, but I do not think it would stop it by any means. 6497. Can you tell us the proportion of grain that India ships to this country, compared with what she consumes herself? — No, I do not know what she consumes. 6498. {The Chairman.) One disadvantage of the present system, in which the change in the relative value of silver and gold ai'ises, has been said to be that it checks the investment of British capital in silver using countries ; what have you to say with regard to that ? — I think as regards loans it has that efiect. Capitalists will not lend money to incur the risk of interest and principal being repaid in silver, which may be still further depreciated, without having a quid pro quo in the shape of larger interest j but as regards investments in industrial undertakings, I do not think it would have the effect of checking outlay of capital in silver countries. 6499. What is your reason for that statement ? — The reason is that if the value of silver were io decline, the value of every industrial undertaking, other things being equal, would advance in exact pro- portion, so that the gold value would be the same. 6500. {Mr. Barbour.) That is on the assumption of which we spoke a little time ago that the value of everything alters with the alteration of the gold value of silver ; that silver prices alter very quickly after the gold price of silver is altered ? — As regards India, certainly. 6501. {Sir L. Mallet.) Is it not a fact that in con- sequence, I suppose, of the present price of silver the Government of India has found it impossible to get railways constructed in India except by giving a guarantee? — I have no special knowledge on that point. 6502. That is the fact. She has been compelled to give a guarantee and interest in gold at an increased rate, in consequence of the impossibility of finding British capitalists willing to embark in i-ailway enter- prises. One railway was started, you know, without any guarantee at all, and that movement was entirely checked ? — ^I have never had anything to do with the raising of capital for Indian railways. 6503. {Mr. Barbour^) If yon will allow me, I will read to you what a Bomlay merchant wrote to me last September on the subject of the investment of capital in silver countries. I may mention that the enterprise in which he is engaged is a very prosperous one : — " There can be no doubt that the uncert;ainty " of exchange has checked foreign capital, j^7o sane " man would bring out money here with the uncsr- " tainty as to what it would be worth later on. Our "... capital we brought out at 1*. llrf. I could " send it home to-day at 1*. 4| July 18S7 the same price, and he gets a profit out of it, and he increases his general wealth, 7456. {The Chairman) He gets the same profit on a larger production. Because there is an increased demand he finds that be can increase his production, and yet mal. {Mr. Montagu.) I think you will find that the indemnity was paid to Germany by means largely of silver or silver bills, bills on Germany itself and on Holland and Belgium payable in silver, and therefore it is no guide as far as the transfer of gold from France to Germany. I do not think you can draw much argument from it ? — I do not wish to press that at all because I have no minute information, and 1 do not want to speak of what I do not know, but I certainly do think that as far as the evidence of the oney market goes, it has not shown a scarcity of gold within the last 15 years. I think it is right to mention the story of the circulation within the laat 30 years in our own country, because it illus- trates the point that I was referring to, very strongly. If you take the circulation in 1845, 1847, 1854, and 1885, the Bank of England circulation in 1845 was 21-73 millions, the country 7-7, Scotland 3-29, Ireland 6-95, making a total of 39-67; in 1847 the figures were Bank of England 20-11, country 7-6, Scotland 3-55, Ireland 6-01, total 37-30 ; 1854, Bank of England 21-83, country 6-80, Scotland 4-15, Ire- land 6-29, total 38-97 ; and in 1885, Bank of England 25-2, country S'O, Scotland 6-2, Ireland 7-0, total 41-40. In 1885 the total is 41 millions against 39 millions in 1845, an increase of only two millions, although we have had such an enormous increase in the business of the country. I think that strongly illustrates the point that the business is actually done, I was going to say, without money. 7800. {Mr. Birch.) By instruments of credit?— By instruments of credit. It is one of the most remarkable set of figures that you could possibly have hefore you in discussing this question. I want to add one word with regard to M, Cernuschi. Mr. Montagu expressed some doubt as to what M. Cernuschi had said as to the scarcity of gold. In the Economist of 24th April 1886 he wrote as follows : " The fall in prices which is complained " of is not due to what has been called a scarcity " of gold, which is purely imaginary. If by an MINUTES OF EVIDENCE. 113 " enchanter's wand all the silver francs, all the " silver marks, all the silver dollars were converted " into gold francs, gold marks, gold dollars, the " European and American prices would remain un- " changed." 7801. (Mr. Montagu.) Excuse me, I do not think you will find that I maintain that gold is scarce, and M. Cernuschi's remarks apply more to this, that whereas silver now is a large portion of the circulating medium, if you change that silver into gold you would still have the same circulating medium, it would not affect it in any way ? — ^I only quoted that because you disputed the other day whether he had said that or not. Then Lord Herschell asked me last time whether there was any new evidence as regards the extension of cheques and so on in the country. I have obtained some very interesting figures from Messrs. Barclay, who permitted me to use their name. The one set of figures is their country clearing for the months of November 1882, 1883, 1884, 1885, and 1886, and the result is summed up in a letter from one of the firm in this way : " They show an " increase in the number of articles of 16 per cent., " a decrease in the aggregate amount of 2 per cent., " and a decrease in the average amount per article of " 17 percent." 7802. {The Chairman.) Between what dates are those ?— That is between 1882 and 1886. Now I say that shows manifestly that the cheques are going lower down, that the class of people who are using cheques is becoming smaller and smaller in one sense, but if, is larger and larger in another, that there are more people of what I may call the humbler class of traders beginning to use banking facilities. And I find from inquiry that that is the impression very strongly of country bankers. The figures are as follows : — Country Cleaking. " In-paid." No. of Cheques. Total. 1882. £ November 24 5,940 193,800 „ 25 - 6,010 169,300 „ 27 - 8,770 248,200 „ 28 - 6,140 180,500 „ 29 - 5,730 172,600 „ 30 - 6,080 199,000 38,670 1,163,400 1883. November 24 5,800 180,500 2o 9,110 229,800 „ 27 - 6,620 209,700 „ 28 - 6,490 196,700 „ 29 - 6,550 196,600 „ 30 - 6,140 182,600 40,710 1,194,900 1884. November 24 9,110 226,200 „ 25 - 6,490 186,300 26 C,350 211,600 „ 27 - 6,830 210,200 „ 28 -- 6,420 179,000 29 6,550 179,500 41,750 1,192,800 No. of Cheques. Total. 1885. £ November 24 7,110 181,200 „ 25 - 6,830 159,100 26 6,490 161,900 „ 27 - 6,280 147,300 „ 28 - 6,550 194,700 „ 30 - 9,110 212,000 42,370 1,056,200 1886. November 24 6,830 170,700 25 7,180 191,300 26 6,700 189,900 27 7,460 180,200 29 10,100 228,400 30 7,040 170,800 45,310 . 1,131,300 November 1882 - 38,670 1,163,400 1883 - 40,710 1,194,900 1884 - 41,750 1,192,800 1885 - 42,370 1,056,200 „ 1886 - 45,310 1,131,300 Mr. 'W. Fowler. •11 Nov. 1887. Another set of figures I thought might interest you is as follows : — This is the receipt at the bank in Lombard Street on the 11th November 1886 : " Coin " '65, bank notes 1'65, country notes "18, cheques and '•' bills 97-52 = 100-00." There is only one oiher remark I wish to make. With regard to the index numbers I wish to say that I omitted to refer to the fact that in the index numbers all reference to the cost of wages and living and so on is omitted, and I thought it would be interesting to refer to a paragraph in Mr. Strachey's pamphlet, page 9, in which he gives the results of the cost of living in the Hamburg hospital, and it comes to this, that if the years 1847 to 1850 be taken as 100, the cost of living has risen to 232, which is certainly a most sui-prising result ; and that as to the rent of houses in Hamburg if the year 1850 be taken as lOO, the year 1885 comes to 208, which is also I think a very remarkable result. 7803. {Mr. Barbour.) Does he say whether there is any improvement ? — There is an improvement, but he thinks that the administration has always been " scrupulously economical," and during the period taken the same system of purchasing and doing business has been observed. 7804. But the patients may be better treated? — They may, but it is an enormous difference of the cost. I think I mentioned that I thought the Eco- nomist figures were much injured by there being two cotton figures in the index number, but really there are four. I should particularly ask the atten- tion of the Commission to pages 11, 12, and 13 of Mr. Forssell's book on the question of the index number. " If, with this reservation, the table of prices " of the Economist is closely examined, it is found " that the prices in the twenty-two columns there " represented during the periods in question, as com- " pared with the same prices during the period 1845- " 50, which are taken as 100, give the following pro- " portional figures : — " 1851-60. 1861-70. 1871-5. 1876-80, 1881-85. 114 141. 127., 115.« 104., o 51080. " These averages, as well as the yearly prices quoted " above, seem at first sight to prove that prices have " considerably declined during the last 10 years, not " only when compared with the speculative era 1871- " 75, but still more in comparison with the previous 114 ROYAL COMMISSION ON GOLD AND SILVER : Mr. W, Fowler, 11 Nov. 1887. " period of 1861-70. What, then, is more probable, " than that the increased supply of gold during the " 1850 period was the principal factor in the rise, that " affected all prices in the following decade, or that the " declining production of gold since 1870 has caused a " change in other directions, and from 1880-85 has " exercised its full influence in depressing prices? " Visibly, the gold is depreciated when its production " increases ; again, it is appreciated when its produc- " tion decreases. The post hoc is almost irresistibly " converted into a propter hoc. The truth about these " phenomena presents itself as plain and palpable as " any complicated economical process can be, and may " be demonstrated by means of statistical average- " curves or figures. Butbeware of statistical averages ! " How treacherous they may be, in all their attractive " simplicity, it will be particularly easy to show in the " present case. Thus, for instance, it is only necessary " to remove one link from the chain, in order entirely to " destroy the evidence obtained from the above series " of figures. The article Cotton plays a most important " part in the Economist price-tables. It represents as " many as four numbers out of the 22, that is, more " than a sixth part of the total. But the price of cotton " and cotton goods rose 100 to 300 °/^ in consequence " of the American war, and not through any super- " abundance of gold. If, therefore, we only exclude " these four articles, our figures undergo the following " change: — " 1851-60. 1861-70. 1871-75. 1876-80. 1881-85. " 114-0 125'3 128-4 119-5 107-0 " If we also exclude tobacco, which rose to thrice its " former value during, and in consequence of, the " Amepican war, the proportional total index number " for 1861-70 sinks to 119. By such slight changes " the enormous rise in prices, which seemed to dis- " tinguish the years 1861-70 wholly disappears. In its " place the period 1871-75 is coming up as the highest " point of the series. Prom this point the fall in " prices during 1880-85 is nevertheless yet very con- " siderable." 7805. {The Chairman.) When the Commission adjourned on the last occasion you were giving some facts with reference to the fall in value of various articles contained in the index and other lists, as explained by circumstances affecting the particular articles. I think the last one you had dealt with was copper ? — Yes. It seems alinost needless to refer to iron and coal. The rise in 1873 was so extra- ordinary and abnormal that hardly anyone would expect that the then price would continue, or anything like that price, or that it was necessary to suppose that any question of money would enter into the price. But the figures given in Mr. Wells' article are very extraordinary. I will read one or two : The production in the United States for instance increased in one year from 1885 to 1886 by 1,638,803 tons, or 40 per cent., and in our own country the increase has been very great indeed in the amount of iron in the last few years. In 1870 Sir L. Bell told the Royal Com- mission that the world's production was 1 1,505,000 tons, which increased to 14,345,000 tons in 1872. *' From " that date the ])roduction continued almost stationary « until 1879, when it was 14,048,000 tons. After " 1879 an extraordinary change became apparent in " the volume of the make, for during the ensuing " five years the average make was 18,000,000 tons, " and in 1883 it rose to 21,063,000, or nearly 50 per " cent, more than it was in 1879." It is rather difiGicult to avoid mixing actual facts as to the fall with the causes of the fall, but I have referred later on to some figures as to iron which perhaps it might be convenient to bring in here. Sir Lowthian Bell's figures are very interesting, and he says that he thinks nothing has contributed so much to the fall in iron as the discovery of new and cheaply-worked supplies of iron ore, both here and abroad. I would only mention a few ; in the north- eastern district the tons of ore were, in 1860, 1,483,000; in 1884, 6,103,000. In Scotland they had slowly fallen off between 1860 and 1884; in Wales they had fallen off; in Staffordshire they had increased by 300,000 tons ; in Cumberland they bad increased by a million and a half ; in Lincolnshii-e they had increased from 112,000 to 2,628,000; and the imported ores had increased from 23,000 in 1860 to 3,153,000 in 1884. But the total consumption by foreign countries is a very curious point. Sir Lowthian Bell considers that in 1870 there were received from the United Kingdom by foreign countries, 3,472,000 tons of iron; in 1884, 4,308,000; but the make of foreign nations had increased from 5,602,000, in 1870, to 12,469,000 in 1884; therefore, the total consumption by foreign nations, including their own make, and what we sent them, had increased from 9,074,000, in 1870, to 16,777,000 tons in 1884. And it is not, perhaps, very satisfactory to find that we are rather falling back as regards our proportion of the make of iron, but I do not think we can be surprised at that. I do not want to dwell on those figures, excepting to say that I think they show an enormous fall in the value of the article, without any money question whatever. The same remark applies to coal. Of course, coal has fallen greatly, but the production of coal has quadrupled since 1850, and the price of course has fallen since 1870-72 very rapidly. 7806. (Mr. Birch.) Do you not consider that that enormous rise in 1872 opened out a great number of new mines all over the world ? — Tes, a great number in our own country and in other parts of the world. 7807. For instance, great mines in Spain, in the United States, and elsewhere that were known to exist, but would not pay to work, were then opened up ? — Yes. Mr. Wells says that, " The increase in " the product of the five chief coal-producing countries " of the world. Great Britain, the United States, " Germany, France, and Belgium, from 1870 to 1886 " inclusive, has been in excess of 80 per cent. ; Great " Britain increasing her product from 109,000,000 " tons in 1870 to 159,351,000 in 1885 ; and the United " States from 38,468,000 in 1870 to 112,743,000 short " tons in 1886. On the other hand, the amount of " coal displaced from use in the United States in 1886 " by the introduction and use of natural gas is esti- " mated by the United States Geologic-tl Survey at " 6,353,000 tons, valued at 9,847,000 dollars. In " Germany the increase reported was from 36,041,000 " tons in 1873 to 55,000,000 tons in 1883." I think those figures also prove distinctly that the cause is one of the simplest in the world. 7808. {Mr. Barbour.) I suppose there must have been a great increase in the demand for coal simulta- neously with the increase of the production ? — There has no doubt been a great increase in the demand, but the fall was so rapid that it is impossible to believe that it could have anything to do with money. The capital was poured in. I remember myself being told by various people at the time, 1872, 1873, of the great fortunes they were making out of their coal, but in about three or four years we heard no more about it. One man told me in our own office in Lombard Street that he had sold the whole of his make to a gas company at 21. a ton for a twelvemonth. 7809. {Sir T. Farrer?) And there also have been great economies in the use of coal ? — Very great indeed. 7810. And very great economies indeed of iron in the use of steel ? — ^Yes. 7811. {The Chairman.) Then what is the next article ? — The article of wool is perhaps the next article. I do not know that it is necessary to refer to it minutely, but there has been there an immense increase. According to Mr. Wells the increase in the world's supply of raw wools from 1860 to 1885 was about 100 per cent. I think if that figure be correct, there can be no doubt whatever about the cause of the fall. I remember Messrs. Windeler and Bowes, who are a very great authority in this trade, gave some remark- able figures, which I think I have quoted, as to the state of the wool trade. Mr. Wells says that " the *' wool clip of the United States increased from MINUTES OF EVIDENCE. 115 " 264,000,000 pounds in 1880 to 329,000,000 in " 1885." There has, of course, been a great demand for wool, but there has also been an excessive supply. Formerly, I remember we used to discount a great number of bills for Americans who came here to buy wool. They used to get credits and bring them here to discount, and then buy the wool in the English market. Latterly we have seen much fewer of those. I suppose America is getting to be more self-supporting in the matter of wool than she was. 7812. {Mr, Birch.) You are probably aware that an enormous amount of wool now goes direct which formerly used to come through this country, goes direct from Australia ? — I notice a great falling off. 7813. A very important change has taken place in the wool business ? — There is another interesting trade that I would like to refer to for a moment, that is, paper. Both in America and in England, the falling off in the value of paper is astonishing. 7814. {Sir John Lubbock.) You mean the price of paper, do you not ? — The price of paper has fallen so much. Mr. Wells considers that paper has declined, since 1872, to the extent of fully 50 per cent. There are great complaints, in this country as well as in America, of the falling ofE in the vahie of paper. One great cause, of course, has been that new materials have been brought to bear. Then, in the glass trade, window glass is another illustration. Now, of course, that is a very important article, and there has been an extraordinary fall in the value, but it has arisen from the great improvement in the mode of making the glass. I inquired of a m&ker of fine glass in reference to the best glass, and he said there was very little change in the price of the best glass, but that the ordinary glass had gone down. I remember quoting the Times as regards the falling off in the value of glass in Charleroi, where the result was that there was a sort of revolution from the change in the supply, and that was in consequence of a most extraordinary invention which is there described. I do not want to go more minutely into other articles. It seems to me that when you go through the list you find the same everywhere, that there have been ample causes for the fall throughout the whole list of articles, one after the other. As you examine them, you find special reasons why they have fallen, and where there are no special reasons, sometimes you find even an advance, and sometimes the article is stationary. T mentioned the other day the case of cotton. That has been remarkably station- ary in price since we got rid of the effect of the American war upon the cotton trade, and, as the Commission have heard from others, there are other articles which not only have not fallen, but which have a tendency to rise during the very period when we are told that gold has been scarce, and that in consequence of that scarcity there has been a great fall of prices. Well, of course, if the fall in prices was caused by a scarcity of gold, the effect shpuld be, practically, on all articles, not merely on certain articles out of the list, but on all important articles, and you do not find that to be the case. 7815. {Mr. Chaplin.) You said just now that there was sufficient reason to account for the fall in price in almost every commodity ? — So far as I am aware. 7816. And apart altogether from any scarcity of money ?— I am only speaking about the scarcity of gold. What I meant was, the more you examined into each article which has fallen, the more clear it becomes that there are other causes which have led to the faU, and that there is no occasion to go to money in order to account for the fall. 7817. Among those causes you include the rate of exchange ? — Yes, I think there are cases where the rate of exchange has had the effect of increasing supply. ^ ,^ 7818. {The Chairman.) You come now to excep- tional cases where the prices have not fallen ?— Yes, but I should like to refer to what Mr. Tooke has said with respect to former case| of great fluctuation of prices. I cannot expect tl|ie Commission to read Mr. Tooke's history of prices; it is much too long a book, but there are passages in his work in which he analyses the causes of fluctuation at previous periods, which I think are well worthy the attention of those who have such an important question before them. They show most clearly that there were in former times, before this question arose at all, most extraordinary fluctuations of price, far more wonderful than those which we see now. 7819. You mean at, the time that there were no monetary changes ? — Well, when the monetary changes were unimportant at any rate, but when there were extraordinary fluctuations owing to war, and various changes of that kind. I will mention one or two. 7820. {Sir T. Farrer.) And seasons especially ? — Seasons. In regard to corn that was what he laid great stress upon throughout his book. Of course the condition of things at the end of last century was peculiar. At this time people seem to think fluctua- tions are very bad, but what we should have done at the time of our forefathers I cannot think. To quote my own words, p. 33, note, " It can hardly be disputed " that fluctuations of price were moi'e severe in former " than in recent times, the influence of modern dis- " covery tending towards far greater uniformity of " supply in different parts of the world. At any rate, " fluctuations were formerly excessively rapid and " violent, as may be seen throughout Tooke's great " work. If supplies fell off, they could not easily be " filled up before the days of steam and telegraph, nor " could a superabundance be easily removed. So, in " the early days of the century, a good harvest would " cause a terrible fall in corn, and a bad year would " be followed by, famine prices. The history of " British India is full of illvistrations of an excessive " diversity of price under one Government, and there " can be no doubt that the railway, the steamer, and the " telegraph have done more to prevent local famines " than any action of Governments." Now take these few figures : — Cotton, in 1782, was from 2s. to 3s. 6d. a pound; in 1800, 2s. 3d.; in 1810, 2s. ; and in 1822 it fell to llrf. Copper was 84*. a cwt. in 1782 ; 140s. in 1800; 160s. in 1810; and 100s. in 1822. Iron was 6^. a ton in 1782; f>l. 10s. in 1800 ; Ql. in 1810; and6Z. in 1822; but it rose to 12/. in 1825. Rice was 25s. a cwt. in 1782, with a duty of 7s. 4J. ; 40s. in 1800, when it was free; 30s. in 1810 ; and 20s. in 1822. Sugar was 50s. a cwt. in 1782, with a duty of 12s. M. ; 35s. in -1800, with a duty of 20s. ; 40s. in 1810, with a duty of 29s. ; and 30s. in 1822, with a duty of 27s. Tea was 5s. a pound in 1782 ; 5s. in 1800 ; 3s. 6d. in 1810, with a 96 per cent, duty ; and 3s. in 1822, with a 100 per cent, duty ; and wheat was 50s. in 1782; 100s. in 1800; 90s. in 1810; and 40s. in 1 822. And then there was a very great outcry in regard to the ruin that was coming upon everybody, and very shortly after that there came a bad harvest, and everything was put on its legs again, as far as the condition of the agricultural world was concerned. 7821. {Sir T. Farrer.) A bad harvest was at that time good for the agriculturist, a good harvest good for other people ? — Mr. Tooke goes through many cases where he gives the number of millions added to the agricultural interest by the rise in prices. And some of us can recollect when wheat was 90s. a quarter and upwards, and how great were the changes in our own times. And no one will suggest that these fiuctuations were caused by anything but ordinary commercial or political causes. I say that from a carefu,! analysis of the prices that I have made, it seems that in all these cases, without an exception, one can find ample causes for the fall in price, without going to the question of money at all. With regard to articles that have risen or tended to rise, there is no doubt, till a very recent period, meat for instance was very high, and I think Mr. Chaplin will bear me out, that up to 1883 meat was very high indeed, and the price of stock, was very high. 7822. {The Chairman.) At all events you say as high as it was in the period prior to 1 873 ? — Yes, and a great deal higher than I can recollect. But what I P 2 Mr. W. Fowler. 11 Nov. 1887. 116 ROYAL COMMISSION ON GOLD AND SILVER : Mr. W. Fowler. 11 Nov. 1887. mean is that beef is a lirst-rate article, and if gold v;as scarce, and was to drive everything down, beef ought to have fallen. When I first began housekeeping I paid Gd. a pound for my beef. 7823. (Mr. Chaplin.) It has fallen very much now ? — That has been a sudden fall. Everybody was complaining of dear meat for a long time. 7824. A gradual fall. Sellers are all complaining of low prices of stock ? — That may be. I think up to 1883 stock sold well and meat was very dear. Mr. Chaplin says a gradual fall, but a very decided fall has taken place in a short time both in the value of stock and meat. I should just like to read this list of articles, the comparison of 1854 and 1884, in all of which cases there was a tendency to rise : — Bacon, beef, brandy, butter, cheese, cocoa, coffee, cotton, cur- rants, eggs, hides, oats, oxen, pepper, potatoes, raisins, sheep. It is a very curious list, but I take it as I find it. Those are imports into the United Kingdom. And then there is another list : — Beer, cloth, fire-arms, fish, horses, leather, salt, silks, spirits, yarn (cotton), yarn (linen). Those are exports which between 1854 and 1884 tended upwards, the same date as the others. Now all I say is without pledging myself to every one of those cases as very important, they seem to mo to destroy the theory tliat you have a cause which is always tending to depress prices all round. If it was so, it seems to me that such a number of articles, in the absence of some very extraordinary causes in each particular case, would have tended downwards with the others. Why they have not tended down- wards with the others is easily explained, I believe, by the fact that there has been a very large demand for many of these articles. 7825. (The Chairman.) And no such increase of the production as to necessitate a fall ? — In the cases that I have referred to before there has been an immense supply which has driven the article down, but as I said, if it was some overwhelming cause like the scarcity of money, surely it would be universal and obvious in its effect. 7826. (Mr. Chaplin.) You tell us that these imported commodities that you name have risen between 1854 and 1884. Are you in possession of figures to enable you to tell us what they have done between 1873 and 1884 ? — I have not tliose figures at hand at the moment. I could easily procure them. 7827. You do not know whether they have risen since 1873, or whether they have fallen ? — Some of them have certainly not fallen materially. 7828. Some of them may have fallen ? — Some of them may have fallen, but I cannot tell you exactly how that is. 7829. Then you cannot tell us what really has happened to these commodities since the time when silver was demonetized ? — I am very sorry it did not occur to me to do that. I would have done so with pleasure. But as regards many of these articles it is notorious that they are still high, some of them, I apprehend, not so high as they were in 1884. 7830. But still what I want to get at quite clearly is this, that as regards these commodities which, you tell us, have all risen between 1854 and 1884, as between 1873, when silver was demonetized, and the present time, you are not able to tell us whether some of them have not actually fallen ? — I have not got the figures before me at the moment which tell you that, but I could easily procure them for you". 7831. (The Chairman.) Is there any other specific article to which you wish to call attention ? — I do not know that there is any special article that I wish to mention particularly. I only mention this fact, that some articles have risen as not to be lost sight of in the question of prices, but I must say I give much more importance to the fact that the great fall can be explained in each case without reference to the question of money. 7832. In your judgment what have been the causes, speaking generally, of "the recent fall in prices that are not related to the scarcity or plentifulness of money ? — Well, I think one considerable cause has been that we have now, since 1873, come into the full effect of competition with other countries. I think before that time the condition of Europe and various circumstances had tended to this result, that we did not know the full effect of the competition to which we were exposed as a nation, and of the inventions and dis- coveries which, even up to that time, had been made, and, of course, there have been many inventions and discoveries made since 1873. But 1 think since the Franco-German war was concluded, during the long peace, we have realised, as it were, our position, and the competition between one nation and another has become intensified to an extent unknown in former periods in the history of commerce, and that is one cause which has led to a great fall in prices in some of the greatest articles of consumption. Then the second cause, which to my mind is the important cause, are the inventions, and above all things, of course, the inventions arising out of the use of steam and the telegraph. I sometimes think that we hardly realise, until we examine into it, how prodigious has been the change in the times in which we have lived as regards the supply of articles. 7833. That, it would be said, had occurred prior to 1873 ? — I should like, if this is the right time, to refer to that remark. It is quite true that some inventions had been made before 1873, but I do not think that they had come to their full bearing till after 1873. I should like to read a general observation made by Mr. Laughlin in his remarkable essay in The Quarterly Journal of Economics of Boston on that question (April 1 887, p. 339). He says :— " Surely no one will " contend for a moment that improved processes in " particular industries will not lower the value of " commodities relatively to gold, if gold has remained " unchanged in its conditions of production. This " would lead one to suppose that the prices of many " articles before 1873 must have shown a fall, had it " not been for the vast extension of speculation and '' overtrading and the influences of the new gold. But " now that the inflation and abnormal conditions of the " pievious period have been left behind, the effect of " improvements has become more clearly apparent. In " fact, when one considers that, with all the unparalleled " development of cheapening processes since 1850 in " almost every industry which ministers to human " wants,prices are no lower or, by the Hamburg figures, " even 10 per cent, above the level of prices in 1 847-50, " one is penetrated by the conviction that prices are still " buoyedupby thehigh tideofan abundant gold supply. " Else why should prices not be much lower than in " 1850 ? ' If, under such circumstances,' says Cairnes, " ' prices did not fall, that could only be because " ' money had not remained the same, but had fallen " ' in value.' Or it would be more correct to say that " the cost of producing money had fallen; for, if prices " arc! now nearly the same as in 1850, in reality the cost " of productions of both commodities and money has " fallen, leaving them relatively to each other in very " much the same position as in the beginning. When " we once fully apprehend the influences of the progress " of society on prices we cannot admit that a fall of " prices is connected in any necessary way with a " scarcity of gold." I do not know whether it is neces- sary to go with much minuteness into what is so clear, but I think some things mentioned by Mr. Wells, as referring to the railways, are very interesting. I re- ferred to several of the facts in my paper, but I prefer to give another authority rather than my own. He says, speaking of the reduction of the cost of transporta- ■ ■ in : " The investigations of Mr. Atkinson show that, had the actual quantity of merchandise moved by the railways of the United States in 1880 been subjected to the average rate per ton per mile which was charged from 1866 to 1869, the difference would have amounted to at least 100,000,000/., and perhaps 160,000,000/. more than the actual charge of 1880. Comparing 1865 with 1885, Mr. Atkinson further shows that, taking a given weight of goods to be moved from Chicago to New York, 1,000 miles by the New York Central Eailroad, 58 per cent, of tion : MINUTES OP EVIDENCE. 117 " the original value was absorbed in transportation and " depreciation of the currency in the former year, while in 1885 only 20 per cent, was so absorbed, the'charge " per ton per mile having fallen from 3-45 cents in " 1865 to_-68 of a cent in 1885. The fall in price for " the carriage of commodities by sea has also been as " remarkable as the decline in the cost of carriage by " land. Freight, on the average, between Calcutta and " England had experienced a decline of about 50 per " cent, in 1885 as compared with 1875. In the case of " Indian wheat transported to England vid the Suez " Canal, the decline in freights was from 71s.3d. per ton " in October 1881 to 27*. in October J 885, or more than " 63 per cent. Between 1873 and 1885 the tolls and " pilotage on the Suez Canal were reduced to the extent " of about 33 per cent. ; but this, it should be mentioned, " is an element included in and not additional to the " decline in freights. Freights from New York to " Liverpool declined from 1880 to 1886 as follows " (maximum and minimum) : On grain, from 9\d. to " id. per bushel ; on flour, from 25s. to 7s. 6d. per " ton ; on cheese, from 50s. to 15s. per ton ; on cotton, " from ft?, to -^d. per pound ; and on bacon and lard, " from 45s. to 7s. 6d. per ton. Subsequently, prices " recovered somewhat, but by no means to the extent " of the rates current in 1880 and preceding years." I do not think it is necessary to dwell very minutely upon that excepting to this extent, that it is a fact which is of the very first importance; I think it is perfectly clear that but for the railways, the wheat from the western states of America could never have come here, and but for the cheap freight by sea pro- bably it would never have come here. And so with India. Indian wheat would never have come here but for the low rates by railways in India and the low freights of steamers. I know it will be said those would not have been brought here but for the exchange. I am not to discuss that for the moment, but it is obvious that no fall in the exchange would have brought the Indian wheat if there had not been also this extra- ordinary reduction of charge for carriage both by land and by sea. 7831. {Mr. Chaplin.) You have told us of the fall in the cost of transport in the case of Indian wheat, could you tell us what proportion the fall in transports bears to the value of the article imported, that is to say, what was the original cost of transport and the value of the article ? — I cannot tell you that ; but I was talking in Manchester the other day to a gentleman largely engaged in the cotton trade with India, and he told me that the reduction in the rate of freight by railway in the last few years had, in many cases, been as much as 50 per cent, as compared with the old rate by railway. 7835. ( The Chairman.) Yes, but Mr. Chaplin asks if you can say what proportion the rate bore to the cost of the article ? — I cannot off-hand say, but I could easily discover that for you by inquiry. 7836. (Sir John Lubbock.) You have spoken of exchange several times; do you mean exchange strictly so called, or are you alluding to the fall in silver ? — I was alluding to the fall in silver affecting the Indian exchange; I was not referring to anything else but that, and also according to Mr. Gibbs' view, affecting the shipments from Chili and Eussia. 7837. A fall in exchange, strictly speaking, is quite a different matter, is it not ?— Yes. Now I men- tion some figures with regard to the shipping. I looked at the Joint Stock Returns for 1883, and I found that there were three millions and a half paid up by shareholders in one year in limited shipping companies, besides bogus companies, and Mr. Wil- liamson, whose testimony I am very glad to take, because he is opposed to me on this question, says : — " That the combined capacity of our sailing and steam- " ships was in 1875, 9,975,000 tons, and in 1883, " 14 G46 000 tons," an increase altogether " wild and unius'tifiaijle," and that of course has led to an im- mense reduction on freights. It may be interesting to give the figure of 1874 and of later years as regards the net tonnage of the United Kingdom in the Eastern ^pg^ier trade. ' Eegistehed Net Tonnage sailed from the United Kingdom to India, China, and other Eastern Ports, and the Australian Colonies. i-1 Nov, 1887. Sailing Ships. Steamers. Net Tons. Net Tons. During the yeai 1874 - 1,626,792 654,498 ,, ,, 1875 1,640,858 710,560 »» ji 1876 - 1,640,704 723,039 ,) ,» 1877 1,772,298 862,919 >i )» 1878 - 1,484,368 751,595 »i »i 1879 1,462,073 808,208 }» j» 1880 - 1,646,559 1,125,991 i> » 1881 1,577,774 1,606,841 )) )i 1882 1,493,955 1,587,400 »» 1, 1883 1,333,046 2,072,427 »» 1, 1884 - 1,325,151 2,145,635 1, j» 1885 1,448,961 2,274,767 And then of course everybody knows there is an extraordinary economy, so that one steamer will pro- bably take as much stuff", with the same labour, as two would have done a few years ago. All these things, combined as they are with a great saving of capital through the mode of doing business by telegraph, have led to a complete revolution of business, a change so great that one often wonders that the disasters have not been greater in the commercial world. 7838. (Sir T. Farrer.) You are now speaking, are you not, of changes that have taken place since 1873. I mean you are rather addressing yourself to that point? — Well, I say since 1873, and also the result of inventions that took place before 1873, which have developed especially since 1873. It is absolutely impossible to draw a line and say that these things only began to operate in 1873. I do not think any- thing of the kind ; they have been freely going on, gradually developing, and I think the full effect of the inventions is now being felt in a way it never was before. 7839. (Mr. Chaplin.) Do I understand you to say that in your opinion the effect of the great changes in the inventions of science is felt and has been felt more since 1873 than it was before ? — I think decidedly more for one reason if for no other, namely, that Germany has developed in an extraordi- nary degree since the Franco-German war. That alone has been a continual cause of anxiety to English merchants ; I mean the great development of German industry and enterprise. France is also active in certain respects ; all these countries are competing with us. 7840. And you hold it is only since 1873 that their full effect has- been felt ? — I think their effect was decidedly felt before, but it has been felt more since ; and I attribute that a great deal to the comparative quiet that we have had, and the removal of the chances of war from the German mind. 7841. (Mr. Barbour.) But would not the great burden of the French and German military system affect them in their competition with England ? — Undoubtedly it does. I do not know what the power of Germany would be but for that. 7842. And France has suffered from that cause ? — France is suffering terribly, no doubt. I think the competition with England, if Germany and France were like the United States, would be far more intense than it is now. With regard to the telegraph, I should like to mention an anecdote which is of some interest, I think. In the year 1877 I met at Pitlochry, in Scotland, a partner in one of the first houses in the Eastern trade, and in the American trade, and he said to me : " I " can do my Eastern business with one-fifth of the " capital I used to do it with." I said, "How is " that ?" " Oh," he said, " everything is done by tele- " graph, and there is no necessity to keep the stocks 118 BOYAL COMMISSION ON GOLD AND SILVER : •^'■•. " of goods that used to be kept, and I do my business W.^ow^er. „ ^.j^j^ comparatively little money. I bring the monfey 11 Nov. 1887, " home." About the year 1882 I mentioned this remark to his brother, who was a member of the House of Commons, and he said: — "Yes, it is quite true, " but the difference now is that our function is " gone, nobody needs us at all ; a great deal of our " business has gone away, and a small man in Man- " Chester telegraphs to a small man in Calcutta, and " the business is done without the intermediary " of the great merchant at all, and practically with " hardly any capital except the capital of a bank " advancing money on documents, or something " of that kind." So that the change in the trade, especially with the East, is great. I suppose the same thing would apply in the American trade. I remember Mr. Morgan saying to me, some years ago, that he did not believe in the American trade, that there was one-third of the bills running that there used to be in the old days for a given amount of business, so much of the payment and so much of the work being done by telegraph. I suppose you must consider that a great advantage to the world, but it produces great inconvenience and loss to individuals. 7843. {Mr. Birch.) I do not exactly see that; will you explain where the loss to individuals would occur ? — Well, where a merchant loses his business, I mean. 7844. (Mr. Montagu.) Two small merchants would get it perhaps ? — Yes, but the big merchant loses the business, does he not ? 7845. ( Chairman.) Is there any other point on this appreciation of gold which you wish to observe upon ? — There is only one thing. I have heard it said, " We do not want to raise the prices by making this change." 7846. Is not that coming rather into the question of bimetallism ? — No, I think not, except that they are so closely mixed up together. I only want to make one observation. It was said to me one day by a very intelligent man, " I do not care about raising prices, but " what I do want is to prevent a further fall." Well, if the description I have given and the description which is elaborated in these papers of Mr. Wells is true, I cannot imagine how any such change as is proposed could prevent such falls as we have seen in prices through the causes which have been mentioned. I do not think, supposing we wanted to check a fall of prices, that we could depend upon effecting any such change through altering money in any way. If prices do not depend upon the condition of money but upon the condition of credit, on supply and demand, on rapidity of production, and on rapidity and cheapness of dis- tribution, then to alter the value of money in any way would not prevent a fall, and would not have prevented a fall, so that really we come back to the great question, about which I am anxious to bring out the view that I have taken, namely, that price does not depend mainly, and depends only exception- ally on merely monetary questions. 7847. {Mr. Chaplin.) Do you hold, for instance, that the suspension of the Bland Bill in America would have no effect upon the prices of commodities ? — I am not prepared to sayjt would not have a temporary effect in this way, that if you repeal the Bland Bill you might put upon the market a great amount of silver. What the effect of putting on the market a great mass of silver would be, I cannot say. I think it very likely that it would depreciate silver even more, and might for a time cause great disturbance, I have never said changes of money would not cause temporary disturbances ; what I say is that the permanent changes of prices are dependent not upon money, but upon supply and demand. 7848. I gather from your evidence that, except in a very small degree, you do not attribute the fall in prices in any Way to the scarcity in gold? — ^.IMo, because I began by saying that I do not think there has been a scarcity of gold, and that it is begging the whole question to say that the fall of prices is caused by the scarcity of gold. 7849. {Mr. Barbour.) Would you also say that if there had been a scarcity of gold it would not have had much effect upon prices ?■— Well, I should imagine cases where it might have great effect if it produced discredit in a country, 7850. A temporary effect? — A temporary effect, and a very important effect. We have seen a very large fall in prices in 1857 when gold was very plentiful, 7851. It was recovered from i" — It was recovered from. 7852. But you think that scarcity of gold would not have an effect upon prices ? — I do not think it would permanently. 7853. {Chairman.) If it were large enough to support the credit which it now supports, or any increased amount of credit which increased business might demand ? — Yes. It might be interesting to the Commission if I mentioned that when I first came to Lombard Street it was a common thing to have the bank reserve down to 4,000,000/. or 5,000,000/, for weeks and weeks together. We got accustomed to it, and the rate of interest was six and seven per cent, for a long time ; but by degrees people have got afraid of that state of things, and now we consider it a bad thing if we have less than 10,000,000/, of reserve, I mention that only as showing that I do not deny that gold has an important effect as a maintainer of credit. 7854. {Mr. Chaplin.) Then I understand you to hold this opinion, that an addition to the monetary mass of gold in the world would have but very little effect upon the prices of commodities in general ? — Yes, but you must bear in mind there is this qualifica- tion. Take, for instance, the Australian discoveries. You have a sudden influx of precious metals. You may have a great demand for commodities, and that may cause a very active business to arise, as did happen after the discovery of gold, but it did not in my opinion permanently affect prices, except indirectly, by causing great demand for commodities. It was not the quantity of gold qua, gold, but it was the excitement of business, the speculation that it caused, and the demand caused by the enormous consumption of the miners and other people connected with the discoveries, 7855. But then you do admit this much, at all events, that a large addition to the monetary mass of the world would, even though only indirectly, probably create some rise in prices ? — I think it did create a rise in prices, 7856. You admit that the discoveries of gold in California undoubtedly produced a rise ? — But I dare- say you are aware that it was nearly 1 00 years before the Spanish American discoveries in the middle ages had any effect whatever on the prices in Europe. That is what I think is laid down by Adam Smith. 7857. {Sir T. Farrer.) And that at a time when there was no such development of credit as there is now ? — It would be much quicker now than it was then, because with the communication of the world the whole thing would operate much more quickly. 7858. And be more quickly exhausted ? — That may be. 7859. {Chairman.) On the point Mr. Chaplin just asked you about, if the increase in the production of gold" simply arose from an increased supply from existing mines now in process of being worked, so that the supply was, we will say, doubled in that way, I understand you in that case to think that no material effect would be produced on prices ? — I think if you had a very rapid and constant production of gold leading to excessive demand for all kinds of commodities, it would affect prices, 7860. Supposing the supply were doubled, and rose from 20,000,000/, to 40,000,000/., the world's supply now, but got from the same mines simply by an increased production, that might create perhaps 20,000,000/, additional demand for commodities, but that 20,000,000/. would form but a very small proportion of the total demands spread over all commodities all over the world, and might not, you MINUTES OF EVIDENCE. 119 think, produce any sensible effect ?— It might produce no great effect now, because the total amount of gold now is so far greater. I think I proved to you from Tooke, as far as I could prove anything from quota- tion, that adding 174,000,000/. between 1848 and 1856 had no sensible effect on prices whatever, and that upon a total stock of gold of 560,000,000/. in the world. Now you are far above that; therefore, an addition of 20,000,000/. is a much smaller per-centage, and would not produce, I think, any material effect upon the condition of prices. 7861. But would you compare as to its effect the 20,000,000/. with even the existing stock of gold ; would you not have to some extent to compare it also with the credit which is supported ? — Oh, certainly. I should have said that as regards the influences upon prices. If I am right in ray view about the causes which influence prices, the total that you have to deal with is so enormous that it is very difficult to calculate ; because the credit which is floating about in this country, for instance, is an aggregate, in com- parison with which the bullion that we possess is a mere nothing. 7862. (Mr. Chaplin.) What you mean, I under- stand, is this, that the mass of actual legal money as compared with the commodities of the world is trifling? — ^That is quite true; but then I think I explained last time that what you have to consider is not merely the strict money, the bank notes and the gold, but you have to consider the cheques and the bills, and the credit which does the business of the world. Now we have had in our own country hardly any increase in the bullion held by banks in the last 40 years. 7863. But although the bullion, as you term it, is comparatively small, I yet gather from you that any large addition to the gold of the world, any large fresh discoveries of gold either in existing or new mines, would indirectly have a certain effect on the price of commodities ? — I think it might. I do not prophesy that 20,000,000/. might have any sensible effect, but it might liave some effect, judging from what happened in Australia and California. 7864. Judging from what happened in Australia and California, you think it might have some effect on prices in the future, though not a large one ? — I think I explained where I think we have gone wrong in our views about prices is this, that we dwell . upon the quantity of money as the great factor, I do not believe that it is the great factor. 7865. Supposing that instead of large new discoveries of gold the silver which has been demonetized was to be remonetized by law, would that have the same sort of effect as you think that large new discoveries of gold might have ? — I should think it excessively difficult for any man to prophesy what the effect would be. I think, if I am not anticipating what is coming afterwards, that one effect might very likely be that we shall lose all our gold. 7866. I will put it in this way to make it clear. If by fresh legislation you restore to silver the same legal financial position that is now occupied by gold at a given ratio between the two, would that have any- thing like the same effect as large discoveries of gold ? No I do not think it would, because I do not think that as far as I can make it out there is any such large amount of silver as would have any important effect. 7867. I am not limiting myself at all to the silver that is already coined or in circulation, but I am speaking also of the silver in the mines as well. I want to know whether, if the silver in the mines and the silver in circulation was all given by legislation the same position as that which is now occupied by gold, would not the effect be the same as large fresh discoveries of gold ?— The last output of silver that I have a record of was, I think, about 20,000,000/., rather more than 20,000,000/. I cannot pretend to prophesy what the effect of that would be upon prices. I do not know. 7868. At all events, you are not prepared to say that it would not affect prices ?— No, I would not like to say it would have no effect, provided it. did this : Mr. if it produced a great additional demand for commo- W.Fowter. dities. The mere addition of so much money without jj ^^^^ jggy_ the result of an extra demand for commodities would '_ not, I believe, affect prices much. 7869. But you think that the addition of a large sum of gold indirectly would have a certain effect upon prices, and now I understand you to say that if silver was made a legal money in the same way as gold that that would have the same effect ? — I think it is extremely difficult to say, because I say that, taking by far the most careful analysis ever made of the first discoveries of gold, which were enormous between 1848 *nd 1866, Mr. Tooke says that though gold was of course money at once, it had no effect upon prices. Now that being so, I am not going to pledge myself to say that even the remonetization of silver, of the new sUver, would have a serious effect upon prices ; I am not at all sure that it would. 7870. (Chairman.) But supposing you remonetize silver at the existing ratio — say 20 to I, would you explain how that could have any effect in raising prices ? — You would have so much more money of course, I suppose, to work with ; that would be the only way in which it would operate. 7871. How could it operate, because now the man who has the silver could turn it into gold or get credit for it at the ratio of 20 to 1 ; how could your remonetizing it at the ratio of 20 to 1 have any effect upon prices ? — I am not at all sure that it would. I cannot see how silver turned into money would be different to silver as it is now. Take a miner at the present moment. He sells his silver, he gets money for it, he gets the power of buying other things as it is now ; would he be in any different position if you called it money ? I apprehend all that would occur would be this, the man would get rather more for his silver than he would get now. 7872. (3Ir. Chaplin.) What does gold derive its value from now, its legal status or its intrinsic value ? — Tou raise there a question of extreme difficulty, that would be a very large question to enter upon. 7873. But it is the question that you have been arguing. What I understand you to say is this, that if you gave silver the same legal status as gold occupies in this country just now, that its value would not be increased ?— Well it would be increased to a certain extent of course, because the man would get more at the mine than he does now. 7874. (Chairman.) Would he if you monetise it at its present ratio ? My question was if you monetise it at its present ratio could that have any possible effect upon prices ? — I do, not see how if you put it that way he could get more than he does now for his silver. 7875. (Mr. Chaplin.) You admit that large dis- coveries of gold, either in fresh mines or in existing mines, would probably add something, though not much, to the prices of commodities ?^ — For a short time they might, judging from the effect of the Australian discoveries, where I am told that they had, at first, some effect. But I wish you clearly to understand that in 1856 it was the opinion of the best authorities that it had no permanent effect on prices whatever. 7876. Well, then, I will ask you this; in your opinion would the adoption of what is known as the bimetallic theory have the same effect, what- ever that effect may be? — Well, my reply must be this, that I do not believe that an increase of the amount of money in the strict sense of bullion or coin would have a permanent effect upon prices. It might, judging from the effect in Australia and California, have an effect for a short time, but having regard to the very slight effect, if any, which was caused by the immense discoveries of gold between 1848 and 1 856, I do not , believe that the change proposed, though it might cause immense inconvenience and confusion of all kinds, can be depended upon to materially raise prices. ' 7877. Then it might raise prices temporarily ? — I cannot make a prophecy as to vhat would happen. 120 KOYAL COMMISSION ON GOLD AND SILVER: Mr. W. Fowler. 11 Not. 1887. but I think it is conceivable that such a great change might cause, at first, a great speculative feeling. I believe the price of stocks and shares, for instance, might be materially aflfected. Suppose the immediate effect was to cause a large addition to the banking reserve of the Bank, for a time it might cause an idea that we were going to have very abundant money for a considerable period, and that might raise stocks and shares very much, but I greatly doubt whether it would have much effect upon the price of commo- dities. 7878. And I suppose might produce speculation which might affect the price of some commodities at all events for a time ? — Yes, but a violent speculation would be certain to be followed by a violent relapse, which would cause a great fall. 7879. But whatever the effect was or whatever it was caused by, you think that the adoption of the bimetallic system would have the same effects as large discoveries of gold ? — I am not prepared offhand to say that it would, but I think it is possible that it might have a considerable effect, and that is one of the things of which I have been fearful lest it should have the effect of inflation, causing the idea that we were going to have a new supply of money in the money market ; and we know very well that if once that idea got abroad, stocks and shares would be affected, though I apprehend that the price of stocks and shares is very different to the price of commo- dities, as being much more influenced by other causes than are commodities, and I believe that in the end the real price of articles would be settled by supply and demand, and not by any alterations in the standard. 7880. That is permanently ? — That is permanently. 7881. But temporarily they would be affected ? — I can conceive a change temporarily taking place, and I think any man would be very foolish to attempt to prophesy what the exact consequence of such a change would be. 7882. {Mr. Barbour.) When you say it would cause great variations do you refer to bimetallism at 1 to 15^ or at the ratio of to-day ? — I mean anything which would give the idea that we were going to have a new supply of money, that is, stuff on which the Bank of England must issue notes ; anything which gave that idea in the monetary world would in my opinion tend to cause inflation and speculation. 7883. But do you think that if the market ratio of to-day were adopted that there would be any such impression as that ? — I cannot tell you. I think very likely there would. That is one of those things as to which it is very difficult to prophesy what the con- sequences would be. i am very much inclined to agree with Mr. Montagu, that the consequences might be much less than you suppose in that way, but they might on the other hand be very serious, because you would have an addition of 20,000,000/. yearly as I under- stand it. The silver from the mines would have a different position in this country to what it had before. - 7884. (Sir John Lubbock.) You expressed the opinion the other day, at question 7722, that the public have a most exaggerated idea of the effect of the quantity of money on prices. " I believe, speaking " generally, that the quantity of money has remarkably " little to do with it, except so far as it affects credit, " and that the great factors in all prices are the '' supply and demand of the article you are going to " deal with." Atid you have expressed the same opinion to-day, I think, several times ; but would you not admit that the price of, say cotton in gold, depends on the supply of and demand for cotton on the one hand, and gold on the other, so that the relation between the two would depend on changes in the supply of and the demand for cotton on the one hand and gold on the other ? — ^No ; I doubt it. 7885. Why should you think that the relation between the value of gold and of cotton would depend upon the changes in the supply of and the demand for the cotton, and not on the supply of and the demand for the gold ? — Well, I consider that the prices are affected far more by the condition of credit ; far more than they are by gold. 7886. That I grant. I quite admit that the supply of and the demand for the cotton would be touch more fluctuating than that for gold, but as there must be fluctuations in the supply and demand for gold as well as the supply and demand for the cotton, although in much less degree, T fail to see why you should consider that the relation between the two was affected by the change in the supply or demand for the cotton, and was not affected by the change in the supply or demand for the gold ? — It is clear that any one year's supply of gold compared with the total gold floating is very small, but the supply of cotton being used up every year, any addition to the new supply is of great importance. 7887. Granted ; and that is the reason why, as I admit, the supply and demand for cotton would have a much greater effect upon price than the supply and demand for the gold, because in the one case the supply makes so very much less difference upon the stock, but still, so far as it goes, would you not admit that the supply of and demand for the gold must also affect the price ? — I cannot connect the two things. The price of cotton depends on the supply and demand in the cotton market. No man asks about the gold when he goes to buy cotton. 7888. Then I may take it that you are prepared to affirm that although the relation between cotton and gold does depend upon the supply of and demand for the cotton, it does not depend in any way upon the supply of and demand for gold ? — I do not think it depends in any way on the supply and demand for gold, excepting when that supply and demand affects credit, and the condition of the money market, so that a man, for instance, going to buy cotton is afraid to buy. That has arisen before now, everybody wanting to sell and nobody wanting to buy because the Bank of England is in trouble, that is to say, the reserve in the Bank of England is too low, everybody is frightened, business is affected, credit is bad, and so the market is .affected ; but as to any direct connexion between the quantity of gold and the quantity of cotton I, judging with the greatest care possible, and upsetting all my. own old theories, fail to see it. 7889. You contend, if I understand you rightly, that the low rate of interest which has prevailed of late years, disproves the view that tliere has been any appreciation of gold ? — I say that it points verj' strongly in that direction. 1 do not know that I used the word that it disproved it. I certainly think that, judging from a very constant watching of the money market, the evidence goes to show that there has not been any scarcity, seeing that ours is a bullion market, and that if we want bullion we have to raise the rate of interest to get it ; and we have had to raise it less within the last 13 years than we had in the 16 years previous. 7890. And you think you cannot have an appre- ciation of gold and a low rate of interest ? — I did not say that. 7891. I rather understood you to think that the low rate of interest was an argument against there being any appreciation of gold ? — I think it is, so far as it goes, that it tends to show as a matter of fact that there has been no scarcity, and I understand the appreciation to mean that it is scarce. I think that the low rate of interest tends to show that there has been a sufficient supply. 7892. {Sir T. Farrer.) Sufficient in proportion to the demand ? — Yes. 7893. {Sir John Lubbock.) Let me put this case to you ; you do not deny the possibility of an appre- ciation, but you think that the evidence is against it ; that is what I understand ? — Yes. 7894. Well, the rate of interest between two contiguous countries, such as England and France, we will say, would generally bear a definite relation to one another, would it not ? — Well, I have often thought they did not. MINUTES OF EVIDENOK. 121 /895, Could there be permanently any great difference between the rate of interest in two first- class countries ? — Yes ; I have known the time when we have had money dear in London and cheap in France. 7896. Just for a time ? — For weeks and weeks together. 7897. Not for years ? — I think for a long period about 1864 and 1865 the bank rate in France was below ours. There was, I think, a diiFerence of three per cent. 7898. That was a very exceptional period, but as a general rule and for be§t bills does not the rate approximate ? — I suppose the tendency must be that way, because the French will buy our bills if they get a profit on them ; they do buy them. 7899. Well, supposing cur gold currency re- maining at the same value, supposing the French have a silver currency falling in value, would you consider that their rate of interest would fall in such a case, and ours would remain stationary ? — Well, you see, the rate of interest depends on the demand for capital and the supply of capital in the money market, but that does not absolutely depend, does it, upon the character of the metal ? 7900. That is just what I wanted to ascertain your view about, because I had rather thought that you had been arguing that the gold had not risen in value because the rate of interest had been so low. Then I put to you the case of two contiguous countries in whicli the rate of interest would be generally approximately the same, and I suppose that one of them has a gold currency which remains stationary, steady in value, the other a silver currency which falls 20 per cent, in value. I ask you then whether, in your opinion, the rate of interest would remain stationary in the one case and fall in the other ? — You see the two things are not absolutely connected, because you may have the supply and demand for capital in this country, say, pretty even, and without any very great demand, and in the other country the same, though with different metals. The assumption is that prices rise in France, and in this country there is no change. Well, if prices rise very much in France, I suppose the effect would be that the French would buy goods here, would it not ? I do not quite understand how you wish to put it to me. I am not quite clear what the connexion would be, because you might mean that the supply and demand for capital in the money market have not affected the rate of interest materially for a long time after you had got a depreciation of the silver. That would cause a rise in prices, and in the end might afiect the money market, but exactly how it would aSect the money market is not easy to trace out in the first instance without more consideration. 7901. Then in that case the rate of interest would depend more upon the amount of capital than the actual value of the currency ? — I think it does ; and all I said was this. I said 1 did not see any evidence in our money market of a scarcity of bullion, seeing that ours is a bullion market, and if we want bullion we have got to pay for it. That is all I said. I did not say that the condition of the money market was an absolute evidence that there might be no change in prices. I did not go into that question. I merely said that as far as I could see there was no evidence from the money market of any scarcity of gold. You know, of course, we cannot issue a single bank note without gold, and therefore we have to attract gold if we want the money. 7902. And therefore, whatever may be the case temporarily, the permanent rate of interest depends more upon the amount of capital than it does on the actual value of the metal of which the currency consists ? — Yes, and of course it might happen that the metal might be changed. We have seen it our- selves ; prices very high and a great demand for bullion, and we have seen prices very low and no demand for bullion, o 51080. 7903. {Mr. Montagu.) At pages 7 and 8 and at Mr. the commencement of your book you state yoiir sur- W. Fowler. prise that there was no advance in silver from 1852 jj j^^^ ]gg7_ to 1857. I would ask you how could silver rise '_ when France had enormous quantities of five-franc pieces available for the exchange of gold ? — Well, I merely mentioned that as an illustration of the extraordinary way in which you may have a great addition to the quantity ot gold, and yet no apparent change in the value of silver. 7904. But if you have a country with 100,000,000 _fr. of silver available for the exchange, silver cannot rise above the price of that currency until that currency is exhausted ? — Well, I know. What the operation was I am perfectly aware. I merely mentioned it as a curious illustration of how little the mere quantity of gold had to do with the price, even of silver. 7905. Then you quote Tooke, and you have said this, that the Australian gold discoveries had very little permanent effect on prices. Now are you aware ' that almost all the surplus gold from Australia and California went to Prance and to other parts of Europe in exchange for silver, and that silver was used up for exportation to the East, on accomit of the cotton famine, and therefore you might consider that the Australian gold actually disappeared in the shape of silver into India and China ? — I do not quite understand what you ask. 7906. You adduce a statement of Tooke's to confirm the view that the Australian gold had no permanent effect upon prices in this country, but you lost sight, I believe, of the fact that the Australian gold fiUed the void created by the demand for silver, and consequfently, could not have a permanent effect as it disappeared ? — You do not mean the 126,000,000/. went in those years. 7907. I should think quite 100,000,000/. ? — It may be so. I think it is a stronger illustration still of the great danger there would be in assuming that a sudden increase of gold would make an enormous in- crease in price, because the course of commerce is such that yon do not know what the effect would be. 7908. But would it riot be the case if a larger amount of gold were discovered that it would affect prices, providing that circumstances which affected the gold supply from Australia and California did not renew themselves ? — I have great doubts about it for the reasons I have given, i 7909. Now, you have constantly stated that there was no scarcity of gold. Would not that rather imply that there was no scarcity of currency, than that the actual metal gold was ' scarce ? — There never is any scarcity of currency if you have credit. 7910. But I mean in the world. I suppose you infer that there was no scarcity of gold generally in the world? — -I gave as an illustration the enormous increase in the reserves in the banks. 7911. Well, I am coming to that, but is it not the fact that, say, 180,000,000/. sterling of silver de- posited in the various banks serves as the basis of the issue of paper money in those countries, and conse- quently renders available silvbr in the same way as gold, and frees gold to that extent ?-— It is quite true that if you were suddenly to say that no notes should be issued upon that silver it ■ would of course cause considerable difficulty, but it does not follow upon that that gold is scarce. 7912. But supposing that from so-called natural causes silver was becoming so depreciated that it became generally discredited, the 180,000,000/. dis- appearing from all those banks as the basis of paper, would not that cause a great scarcity of gold ? — Well, you are assuming that there is to be this prodigious supply of silver which is to upset everything. * 7913. Not supply, destruction ? — I have never advocated aiiy destruction. 7914. Supposing silver was to cease to be the basis of bank notes ? — I have never suggested that it should, J 7915. I am not saying you Tiave sugge'sted that it should, but if no arrangement sliould be made Q 122 ROYAL COMMISSION ON GOLD AND SILVEH ; ™. ^''■, intevnationally that might arise, you would then ■ ""* '"^' admit that there would be a ^reat scarcity of gold ? — 11 Nov. 1887. If you demonetize 180,000,000/. of silver for any reason it might have a serious influence on gold, I quite admit, that is quite possible. 7916. You state also in pages 11 and 12 that the new demand for gold which arose in America, Ger- many, and Italy was not an absorption of gold, and did not aifeet the supply of gold in other countries or tend to lower prices ? — I say it is not an absorption in this sense that the money went into the reserves of the banks and therefore is useful as money. 7917. But is this quite correct. Does not an increase in area or in the number of people using gold affect the supply of gold ? — It may or it may not. Now in our own country it would have very little effect, because credit does the work, and we are told there is a vast increase of credit, both in France and Germany. 7918. But surely if we are accustomed to carrying sovereigns in our pockets and the number of people wanting sovereigns was increased very materially, the demand for gold would be increased ? — It is not in this country. I have shown that we are going on very comfortably, and the obvious increase of gold has been as nothing in this country for the last 40 years, and look at the population and wealth. 7919. You gave iu your evidence a statement in regard to the large reserves of gold in the State banks of Trance, Germany, and Italy. Are you not aware that those banks will not part with their gold freely ? —I am quite aware of that. 7920. And Germany will put a banker in the black list if he wants to export gold ? — I know it. 7921. And that in Italy you cannot get any gold at all ? — I have been told so. 7922. Would you then consider these reserves of gold in these different State banks as available as if they had been in this country or in other countries where they would be available ? — It is not the same as it is in this country, but they issue notes against it, I understand. 7923. (Chairman.) Is it not as much in circula- tion as if it were gold and silver that was in circula- tion ? — It is ; but you cannot get at it for international purposes. 7924. (Mr. Montagu.) We are not speaking of circulation but actual gold. You maintain that gold, having been sent to Germany, Italy, and America, was not " absorbed." Now Germany issued about the same number of notes against silver in those days and therefore would it not be the fact that gold was absorbed in the senseof being rendered less available ? — It is less available for international purposes than it would have been if it had been here. 7925. Or than it would have been if it had been in France, say, where they part with it at a price ?— . Certainly ; still it has not gone out of the world. 7926. {Mr. Fremantle.) It would be a domestic regulation ? — Yes, it would be less available for inter- national purposes, because they will not let you have it if you want to buy it. 7927. {Chairman.) But suppose they issue notes to its full value, it would not matter what country it was in ? — Not internally in the least, the money will be just as available for the purpose of th« commerce of the country as if it was in circulation ; and I maintain that gold against which notes are issued in that way is not absorbed in the sense of being put under the earth. 7928. But for international purposes would not a man take a note, for example, of the Bank of Ger- many in this country, which was issued against gold there ? — Certainly ; and he could sell that note. 7929. {Mr. Montagu.) What I want Mr. Fowler to tell us, is whether the effect of the resumption of specie payments on gold by Germany, and Italy, and America, and if it should be also the case with Austria and. Russia, would render less available the existing stock of gold if we wanted it ? — I think that for in- ternational purposes these countries have taken a very benighted course, and have tried to keep their gold to themselves more than we should, or more than France would, if that is what you mean ; but I do not think it is absorbed in the sense of being gone out of the money of the world. 7930. But you say it has lessened the available supply which this country might look forward to. For instance, it might be the case, might it not, that if Germany, and France, and Italy wanted gold, v/e might raise our rate to a very high figure without attracting the gold from those countries ? — I have been told it is so j that the German Bank will not discount bills for a banker who takes gold away, and of course, however foolish that policy may be, it is a fact ; I believe it is a fact, and in that sense of course the gold has got an infirmity with it wheu it once gets into those banks, but I do say that the gold is not absorbed in the sense of being gone out of the circulation of the world. 7931. Then you mentioned that people were alarmed at the withdrawal of a million of gold from the bank ; that you consider it desirable that the Bank of England should have a much bigger reserve of gold, and that it might pay the country to enable the Bank to have a larger reserve of gold ; would it be possible, under the circumstances that I have stated, largely to increase the reserve of the Bank ? — It is all a question of paying for it, in my opinion. I only made that as a casual remark, that I thought that our system was worked rather close sometimes, and that I have known the time when a million of money going from the bank caused interest to be raised and a great deal of disturbance and loss, and that I had made a remark casually many years ago, I think it was to Baron Rothschild, that I really thought it would pay the country to pay the Bank of England to keep a bigger reserve. I do not use it more than as an illustration. 7932. Is it not the fact that the withdrawal from the bank or adding to the reserve of the bank of two or three millions of gold, changes the money market completely ? In your experience in later years have you not found that the vrithdrawal of two or three millions of gold from this country will tighten the money market, and raise the rate to a very high point in the endeavour to keep it ? — There is no doubt that that has been so occasionally, but I must say nothing like so much as it was when 1 first came to Lombard Street. In those days, when the reserve, as I said just now, was kept at say 4,000,000/., 5,000,000/., or 6,000,000/., a very slight export of gold caused a complete disturbance. At the present moment the reserve of the bank is very rarely under 10,000,000/., and the consequence is that we retain a far more steady money market than in those days. 7933. I asked you last Monday if you could estimate the burden cast on trade by a rise in the bank rate of one or two per cent. Have you been able to arrive at any conclusion ? — I have not. It is very difficult to say how many bills are going at any par- ticular moment, I mean to say in the market, liow many bills are waiting for discount, how many bills are discounted each day. You would have to calculate that, and then the currency of the bills would have to be considered. I think it would be an enormously difficult calculation. 7934. And besides that of course there would be the additional charge on all loans on the stock exchange, and the loans made by them to their customers? — The total additional charge to com- merce of one per cent, upon the bank rate iu certain states of the market must be a very large amount of money undoubtedly, but you are perfectly well aware that there are other states of the market where the Bank of England is almost powerless, and even if it raises its rate one per cent., the rate upon bills is hardly altered at all. 7935. Do you not think that with that burden thrown upon trade gold is purchased somewhat dearly, I mean the one, or two, or three millions that we endeavour to attract here? — I perfectly agree with you there. Ever since I have had to do with the money market, Minutes of evidbnci:. 123 1 have said that 1 thought we kept our reserves much too low. 7936. And the recent rise in the bank rate from two to four, has it attracted any gold materially ?— It has attracted all that was wanted, I suppose. 7937. It has not attracted half a million, I think ? — I thought more than that, at any rate the money market from being tight has "become quite comfortable. 7938. That rise has had the effect of increasing the bank reserve materially ? — Increasing the bank reserve, certainly. 7939. {Chairman.) I suppose that might arise from the efflux ceasing and a small flow really taking place ? — I will tell you, the real cause ^s that we are getting quiet about the American proceedings. We were afraid of a great demand from America. That fear has somewhat ceased by reason of the action of the Treasury of the United States. 7940. {Mr. Montagu.) Then you stated that you thought low prices advantageous. Do you not think that the state of transition, of declining prices, stops enterprise? — I have no doubt tliat declining prices are very unpleasant to those who have to produce, and that it does tend to diminish enterprise. But if what I have been saying is true, declining prices of later years have been inevitable. 7941. And the diminished enterprise and t\e smaller stocks of goods held, and the shrinkage of values generally, would account in a great measure for the decrease of bills of exchange, and the increase in the circulation ? — I do not know. It has something to do with it, but I think, as 1 said on the last occasion, there is a vast increase in the amount of business done by cash. 7942. Then you spoke of the export of Oats from Eussia, owing to the paper excliange. Is not that of the same nature as what is complained of in the Indian exchange, and is it not the fact that the Russian rouble is maintained in value because the Government has been latterly reducing the quantity of notes in circulation ? — You call it maintained ; it is very low now. 7943. Supposing an international arrangement were made, say, for 20 years with the other great powers, establishing a ratio of, say, 20 to 1, that is what you allowed to be equal to 47<^. per ounce, with identical mint arrangements, charging a seignorage of 1 per cent, on bar silver presented for coinage, directing the State banks to buy bar silver, say, at 4£^d., and to sell it at 4S-^d., issuing notes against bar or coined silver held ; do you see any objection to this plan ? — I really must read that over carefully before I can answer it. 7944. {Sir T. Farrer.) You have been asked about the absorption of gold by Germany. I find in Neuman Spallart, a statistician of great authority, that the German clearing system, which only got into operation in 1884, had got so far in 1886 as to clear 600,000,000/. If this is so, does it not show that great economies of gold are in progress in Germany, and that there is probably room for much further progress ? — I have no doubt that as the credit system develops both in Germany and France, there will be a great economy of gold. 7945. And there is great room for that development in Germany and France ? — Certainly. Now I will give you an illustration from what happened to myself when I was at Cannes two years ago. I was in a very large hotel, — the man was worth, perhaps, 60,000Z. or 80,000/!., the whole hotel belonged to himself, — and I was talking to him one day about paying my bill, and I said, "Who is your banker?" " That is my banker," he replied, pointing to a big chest in the corner of the room. I said, " Do you not keep your money in the bank?" He said, "I lost " 400/. by a banker who failed, and I will not keep a " banking account. All my money I have here." I believe we have no conception of the extent to which that is carried on in France, the number of people who do not keep any banking account, and to whom the credit system is practically unknown. 7946. {Mr. Birch.) Surely the value of the currency has in a general way nothing whatever to do with the rate of discount in a country ? — No. 7947. Suppose in Paris there was a depreciated currency and a full value currency in this country, would there necessarily be any difference in the rale of discount in the different countries ? — They have nothing to do with each other. The discount is the price paid for a loan of capital, and its rate depends on the supply of and demand for loanable capital. Supposing there was a great scarcity of such capital in this country or in France, then the rate would be affected. What I think is if prices rose very much in France it might affect the commercial relations between this country and France if prices did not change here. 7948. A depreciated cui-rency in France would affect the exchange with other countries, and this would be shown immediately in the exchange with England ; but the rate of discount in either country need not be affected ? — My answer to you would be this, that you might have a depreciated currency and yet you might have very little demand for loanable capital. You might have also prices falling and very little demand for capital, and therefore a low rate of discount, and you might have prices rising and a depreciated currency, and a great demand for capital. We have seen something like it since I can recollect in Lombard Street. 7949. Then again with regard to the relation between gold and cotton, the reason is very clear that one is the standard of value, and is an established quantity ; whereas the other, the cotton, is always varying in supply. It varies year by year enormously. Day by day the price varies from an infinity of causes, but the sovereign, unless for some extraordinary I'eason, a large amount of gold being taken away, or a very large amount of gold coming in, would not affect the price of cotton at all? — My only objection to your statement is that I would rather call it the measure of value than the standard of value. Mr. W. Fowler. 11 Nov. 1887. The witness withdrew. Adjourned till Monday. Q 2 124. ROYAL COMMISSION ON GOLD AND SILVER : THIRTY-FIFTH DAY. Monday, 14th November 1887. PRESENT : The Right Hon. LOED HEESCHELL, the Chairman, presiding. Mk. D. M. Barbouk, C.S.I. Me. H. Chaplin, M.P. Sir T. H. Earrer, Bart. Mr. C. W. Fkemantle, C.B. Sir W. H. Houldsworth, Bart., M.P. IVIr. S. Montagu, M.P., and Mr. GrEO. H. MuRRAT, Secretary. Mr. J. C. Fielden. 14 Nov. 1887. Mr. J. C. Fielden recalled and re-examined. 7950. (Chairman.') There is one question I shoidd like to ask you with reference to the evidence which you gave on the last occasion. You have given with reference to several trades the number of unem- ployed now as compared with a previous period ; are you able at all to give the number of those in employ- ment as compared with the same period ? — I am not ; but I wish to say that since I was last before the Commission I have prepared a table which summarizes the number of people that are members of societies, and the number of unemployed at each of the periods, with the growth of the societies at the same time, and the average annual amount expended in the relief of unemployed members in the years 1871 to 1875 inclusive and 1882 to 1886, and I think it is a very instructive return. 7951. Would the growth of the society in numbers, do you think, be a rough indication of the growth of the number of employed ? — I think it would be rather a greater growth than the growth of employment in the country. It would be a greater growth because there is a tendency on the part of the skilled artisans more and more to join the societies, because of the pro- tection it affords them during periods when they are out of work. 7952. But in the case of one of the societies, for example, though the number of unemployed has increased from a few hundred to upwards of 3,000, yet the number belonging to the society has increased by 20,000 ? — I have given the increases in this table in the societies' membership as well as the increases in the unemployed and the increased demands of the unemployed, and I have taken every society that has data that extend as far back as 1871. There are many of the societies that have not those data, and I may say that this return is absolutely corroborated by Mr. Burnett's return. Mr. Burnett is now the assistant at the Board of Trade for the Labour Department. 7953. Yes, but what I rather wanted to see was what your figures pointed to. It would be consistent with this that the total number unemployed is greater than it was, and considerably greater, though the number of employed is also greater ? — If I were to summarize this return in a few words it would give you perhaps what you desire to know. This return covers 10 societies. In 1871-75 the average member- ship of those societies was 98,640. Now in 18S2-86 the membership of those 10 societies averaged 139,338, so there was an increase in membership of 47 per cent. Now during the same periods exactly the per-centage of unemployed from 1871 to 1875 was 2 ■ 18. In the years 1882-86 the average number of members unemployed was 7 • 22 per cent, so there had been a rise in unem- ployed over the whole of the area of these 10 societies of over 5 per cent. 7954. Yes, but that would be consistent with the total number of employed being much greater in the later period than the earlier ? — I can give you some details to show that employment is not growing very rapidly, 7955. (Mr. Chaplin.') I think you said last time that the population was growing four times as fast as employment ? — In Lancashire, in the cotton districts. 7956. (Chairman) The growth of the employment has to some extent diminished, has it not, in recent years by vastly increased economy of production ? — There are always such tendencies. For instance, in a bad time the tendency is to increase the speed of machi- neiy and to improve machinery. As profits diminish and vanish this tendency becomes greater. 7957. And that has been the tendency of late years more than in the earlier periods ? — It has been the tendency for 50 years, but it has been intensified of late. I could summarize almost in one word what would show the position of the cotton districts. The machinery engaged in the cotton trade in the cotton districts has increased 18 per cent, since 1874, but the employment has only increased about 5 per cent. 7958. (Sir T. Farrer.) Do you mean by machi- nery the number of spindles and the number of looms ? — The number of spindles and looms has increased 18 per cent. Looms have increased 21 per cent, and spindles 14; so that, taking the average, the spindles and looms have increased 18 per cent., but the employment has only increased a little over 5 per cent. That is, the number of workpeople engaged in the mills is only 5 per cent, more than it was in 1874. 7959. (Sir W. H. Houldsworth.) Dealing with your question with regard to the numbers employed for the same work, that would tend to lessen the cost of producing the article ? — Undoubtedly, 7960. And would not the natural tendency of that be to increase generally the consumption of the article, so that those who were thrown out of employ- ment by this improvement of machinery would naturally, if matters were in a healthy state, be taken up again by the greater develooment of the trade ? — If there was nothing to stop the legitimate development of our trade, there is no doubt a cheapening process, would tend to extend our trade. I mean we have always found in the cotton trade that anything that cheapened largely the cost of production began also to extend the area of consumption and thereby give increased employment, 7961. (Chairman.) But is it not conceivable, without any other cause to account for it, that you might have an increase of population and the increased economy in production proceeding so rapidly as to outstrip the increase of the number required for employ- ment ? — I can quite conceive that we are tending in that direction, and even if we have the most ample facilities for our trade, population is increasing so rapidly as to outstrip the possibility of employment ; that is the natural tendency. On the other hand the question arises, whether anything has come over our business that has distinctly arrested its usual develop- MINUTES OF EVIDENCE. 125 ment? Now we can see a continuous development up to a certain period, but then we can also see quite a decided stoppage in 1874. 7962. I do not quite understand the sense in which you mean a distinct stoppage, because you tell us that since that time the amount of machinery has increased by 18 per cent., and that the total amount of machinery did, at all events, a greater amount of work than was formerly done ? — Certainly. 7963. I do not quite understand how that shows that the development has abated ? — I ought to have said a distinct falling off in the rate of increase. That, perhaps, would be a better expression. 7964. Of course you are aware that, quite apart from any currency questions, there are other causes which it is suggested may have contributed to that, such as inci-ease of industrial activity in Germany, and of late years greatly increased activity in America, too, and consequently more competition ? — Well I have paid a vei-y great amount of attention to foreign competition, and I may say this, that we have never had a successful competitor in a neutral market for the cotton trade before this silver difficulty. Germany may manufacture under her tariffs, the United States may manufacture under their tariffs, that is the point to consider. The United States, like India, grow their own cotton, but they are obliged to protect themselves by a 35 per cent, duty against our goods or else we should invade them completely. 7965. Tes ; but I am not referring only to competi- tion in neutral markets ; but did we not formerly send goods to markets which did not manufacture themselves ? — For instance, if you take from 1861 to 1885, the growth of the Continent of Europe in the consumption of English cotton goods is 70 per cent. 7966. What is the evidence, then, that the growth of trade has been checked ? — My evidence is to this effect: that if you take from 1861 to 1874, we have a considerable growth, but from 1874 that growth diminishes. 7967. Can you tell me how much the machinery had increased from 1861 "to 1874 ? — I cannot tell . the machinery, but I can tell you the consumption of cotton, and that means the employment of the machinery. 7968. {Mr. Montagu.) Tou say unemployment has increased from 2 per cent, to 7 per cent. odd. That 5 per cent means that the number of unemployed has trebled ? — That is so ; there is no doubt that is so. 7969. Therefore it is not a rise of 5 per cent., according to you it is 200 per cent. ? — Well, of course it is 5 per cent, on the number employed. 7970. It is three times the number of unem- ployed ? — Yes. 7971. {Chairman.) The other is the more accu- rate way, the per-centage is more important ; for instance, if you have three unemployed and nine un- employed the number is trebled, and yet it is not a very important matter. But do the pauper returns indicate" what amount of skilled labour is out of em- ployment ? — The pauper returns, to a very gi-eat extent, are only the returns affected where every member of the family is out of work. For instance, it is a well-known fact that rather over two persons in every working family are employed in this kingdom. The average number of workers is a little over two per family. Now it is quite clear that if one member of the family is out of work that the other member or members would still obtain sufficient earnings to keep the family above the rate per head under which they are admitted upon the pauper returns, and that is why the pauper returns form no real index to the state of affairs as to the number of unemployed. 7972. (Sir T. Farrer.) You said that the con- sumption of cotton shows a diminution since 1874 that it did not show before. I ;have here the net auautitv of cotton imported into the United Kingdom as given iu the Report of the Depression of Trade Commission. These are the figures for the different periods of five years : Net Ij viPOUTS OF Eaw Cotton. Per Head of Annual Average. Population. Million Cwts. Lbs. - 8-1 298 - 11-2 39-3 - irO 36-6 - 13-2 41-8 Mr. J. C. Fielden 14 Not. 1887. 1865-9 - 1870-4 - 1875-9 - 1880-4 - 1972a. Do those figures bear out your statement ? — I have only taken the last 20 years. From 1866 to 1870 is my first period of five years, and I go up to 1881-5, which completes my last period of five years. The total quantity of cotton retained for home use — that excludes cotton which simply comes to the ports and is sent out again — in the period 1866 to 1870 was 4,955 millions of lbs. The next period 1871-5 was 6,396 millions of lbs., showing an increase of 1,441 millions of lbs. Now we come to 1876-80, and we have 6,348 millions of lbs., being an absohite decrease of 48 million lbs. as compared with the previous five years. And 1881-85 7,178 milhons of lbs., being an increase over the former period of 830 millions of lbs. Now these figures show a distinct falling off in the rate of growth. 7973. But do you not think that as regards the growth between the iirst two periods the fact that the first period had just been preceded by the cotton famine may have had something to do with the great increase in the second period ? — I do not think so, because the normal condition of the cotton trade was restored before 1870. 7974. Was it completely restored by 1866 ? — Probably the first year only of that period would be a deficient year so far as cotton supply.* 7975. A comparison between 1866-70 and )'our next period is hardly a fair average as representing the normal rate of increase ? — I think it is quite likely that the year 1 866, out of the five years in the first period, was the only year in which there was any limitation of cotton for use, by the fact that they had not restored the growth of cotton after the American Civil War, but all the rest of the period was a very busy period, with the machinery fully employed. 7976. Yes, but would it not be an extra busy period, even on account of the previous lack of the material ? — Well, I think myself that there is all the forces at work now for a very much larger trade if we had had an opportunity of doing it without exchange fluctuations. 7977. ( Chairman.) Is your view that if you found, between any two successive periods of four years, an increase in the production of 30 per cent., you ought to expect to find, notwithstanding improvements in machinery, or economy of production, a growth of 30 per cent, going on in every succeeding period ?^ I do not absolutely say that the cotton trade must of necessity increase 30 per cent, in any given time, but what I say is this, that in the period antecedent to the separation of the standards you had a certain growth which is here clearly shown. Now since that period you have had nothing like the same growth ; that is my only contention. 7978. You take that date because you find a different state of things before and after the date when the change in the standards took place. Now have you looked at the last poor law returns ? Are you aware that the date when the change of the standards took place is the date fixed for comparing pauperism, because up to that time, in every year from 1858 to 1873 it was greater than in any year from 1873 down to January last? — Will you allow me to say once for all with regard to my figures that I never pick figures to illustrate an argument. These figures are the natural periods ; they are not picked at all. 7979. I was not suggesting that you had picked them, but you were assuming that because you found a state of things before 1873, and another state of things * I have since examined the figures for the period 1866-70 and I find 1866 -was a full average year -without a scarcity of raw cotton. 1^6 JBOYAL COMJVilSSIOJf ON GOLD AtifD SILVER : Mr. J. C. Fielden. 14 Nov. 1887. after 1873, that it T^^as iu cousequence of a monetary change made in 1873. I was only pointing out to you that that argument would go to prove that the monetary change in 1873 had diminished pauperism for many years subsequently ? — With all due respect, at present I only saj- that my facts are concurrent with that change. By-and-by, if necessary, I will show the connexion. With regard to the question of pauperism, I hold that the pauper returns arc no index of the state of employ- ment in this country. There are many reasons why. 1 have already explained one. I say that the poor law returns are a measure of absolute destitution, and that there are an enormous number of agencies at work to prevent a real, genuine, respectable operative reaching the parish. 7980. (Chairman.) That is just what I was suggesting to you, that the pauperism returns would not be an indication of the amount of skilled labour out of employ particularly, because they have their funds and a variety of other resources, and do not come upon the parish readily ? — There never was a time, probably, when I should say there were more agencies at work to assist the people. As a matter of fact people's hearts have expanded. I am speaking now from a very large acquaintance with the people, and also with people in good circumstances, so that the pauper returns can only be regarded as a measure of relief to those operatives who when out of work have no friends and no members of their family in work, in fact the friendless and only those in absolute destitution. Now in regard to the imports and exports, in considering these I noticed one reply of Mr. Giffen before the C/'ommission on the Depression of Trade which is calculated to create a most mistaken notion, and that is that the growth of imports and exports indicates the growth of employ- ment. He wished the Commission to understand that the growth of population in this country is about one per cent, per annum, and then he proceeds to show between 1865 and 1885 a growth in the consumption of law cotton of 60 per cent. Well, bearing in mind the previous remark of one per cent, of increase of popu- lation it looked as if population had only grown 20 per cent., while the consumption of cotton had grown 60, and therefore that there must be abundant employment in these districts. 'Now, as matter of fact, the error in that is that first he takes a special trade, and in taking that special trade, which is localised, he should have taken the population growth in that particular district, which is 46 per cent, during that 20 years instead of 20 ; and then, in the next place, you have to take into consideration the constantly improving machinery that tends to a bigger output without giving additional employment, and thus you get an entirely different conclusion. 7981 . Have the economies in the production, changes in machinery, and so on, which have diminished the number of persons employed for a given production effected any economy iu the amount of the material employed ? — Well, I should think that is another point which would also show as against the employment of the people. During very high prices of the raw material every cloth is skimped and cut down ; with cheap prices you get better articles made, because more people can afford to buy them ; with cheap raw material you get a better cloth, and more cotton is used for a given amount of employment, therefore the growth of the use of cotton would not indicate an equivalent growth in the employment on this head alone, because it is a fact beyond all doubt that cotton goods are now made with more cotton in for a given yardage than in the same yardage before 1874. 7982. Ton have given us, I think, now all the figures that you were prepared to lay before the Commission? — I desire to put in this summarized statement of the 10 trades, and it is only limited to 10 leading societies, because I could not get similar data for more, showing the growth of membership, the want of employment, and the actual amount paid in relief per annum by these respective societies at the same periods. {See Appendix.) And I desire to say in the first place that I have only given lO because there are no more than 10 to be had, not because they are selected ; and in the next place I desire to say that in my opinion these 10 represent the skilled artisans of the country, and that the state of employ- ment is worse outside the trades unions than in them. 7983. These do not cover the whole of the trades of the country, do they ? — Not at all. 7984. You have not any of the woollen trades, I think ? — There is not. The cotton trade is not included in this at all. There is not a single society in the cotton trade of what you may call a trades- union character in the ordinary sense of the word. They do not give relief to those out of employnvent, with the exception of the spinners, the weavers not having a single organisation where they can rel'eve those out of employment, unless it be through a break- down or a calamity. Then the society bears the pay- ment until the place is repaired, that is all. These are miscellaneous societies of different occupations covering a pretty large amount of ground, and based upon this return it would indicate that we have about 700,000 people out of work in this country. 7985. That is estimating that all other trades are as bad as these ? — It is assuming that this is a repre- sentative case, and taking the number of people unemployed and comparing it with the people em- ployed. 7986. (Mr. Chaplin.) Can you give us any esti- mate as to the numb3r of men that are in employ ? — Yes, about 9,000,000, excluding domestic servants. I could give you, if you like, the employments as they are classified in 1881 by the census. I have taken my data from the census as far as employment is concerned . 7987. (Sir T. Farrer.) Employed at what ?— Oh, all kinds of artisans, skilled and unskilled, engaged iu agriculture and all our other trades, and I think agri- culture is a little worse off than our cotton trade. The total number is 9,000,000 of men, women, and children that are employed in the country earning wages, and the 700,000 is the estimate based upon those. I venture to say that those societies are more than a fair representation of the case. They take a great deal more care in getting the unemployed members off their books by finding them work than is possible for the people that are outside the unions. 7988. (Chairman.) Yes, but take the woollen trade, is that in as unprosperous a condition as any of the trades you have mentioned ? — I know a little of Bradford only ; at times Bradford has been in a very- bad state during the last 10 years. 7989. Yes, and at times in a very prosperous state ?— Certainly. They are bad now, I take it, because last week they passed a fair trade resolution. I am a thorough free trader. I have only to say with regard to the completion of the employment question that I put in a Table, which shows the growth of quantities of raw cotton retained for consumption in our factories for 20 years in periods of five years, the growth of the population of Lancashire, and all the comparative statistics of the cotton trade with regard to population, spindles, looms, operatives, &c. (See Appendix.) 7990. (Sir W. H. Houldsworth) I think the bearing of your evidence on the examination we are making here is with regard to whether wages have a all fallen since 1874. Now you have given us evidence that there is a very much larger amount of want of employment than there was before 1874. Would that, in your opinion, mean that though the wages rate were exactly the same, there is an increased want of employment, and that really wages have fallen ? — Wages necessarily fall through an increase of want of employment, that is one of the conditions precedent. 7991. And we may take it from you that though the lists that we have access to and the rates that we have access to may not appear to have fallen, still the fact in Lancashire is that the wages received by the working classes have considerably fallen by the want of employment ? — I gave an estimate in the previous examination covering the whole of the cotton trade, MINUTKS OF EVIDENCE. 127 and based upon the most accurate data, that the fall in wages in Lancashire was 15 per cent, in the cotton trade, and that the fall had been mitigated by increased earnings through speed of machinery, and improved machinery, to 7i per cent., so that it had been practically divided. And then I also stated in my own estimate that the average loss through want of employment in the cotton trade was 5 per cent, Mr. Andrews, who is perhaps the best authority upon the spinning trade in Lancashire, the secretary to the Employers' Associa- tion, estimates that at 8^ per cent. I only estimate it at 5, so that the only estimate besides my own is a very much larger one than my own ; so that really I estimate the loss to the cotton trade operatives, taking irregularity of employment, and taking the fall of wages, at ] 2^ per cent. 7992. {Chairman^ That is taking into account that it is Vl\ per cent, less to the increased number who would or might now be employed. \rx arriving at that per-centage you take into account the increase of population ? — ^I do not take into account the fact that there is a very large increase of people who cannot get work. It is simply the loss to those who are in employment from irregularity of employment and the fall in wages. You know in the cotton trade you can have very great irregularity of employment and still have the factory running full time. 7993. Yes, but I mean the number upon which you arrive at your basis is larger than the number in the earlier period ? — 21,000 larger. It was about 483,000 the number of persons engaged in the cotton trade and it is now 504,000. It has taken 12 years to grow employment for 21,000 people in the mills. 7994. {Sir W. H. Hoiddsworth.) But may I take it that what you mean to convey to us is that through the want of employment, although the list rate remains the same, that effect has been produced which would be equivalent to the rate being reduced 12^ per cent. ? — I wish to say on that, that the list rate is aibsolutely reduced 15 per cent. ; it is an established reduction upon the list of 15 per cent. 7995. {Chairman^ I observe something in your table which does not altogether accord with an answer you previously gave. You put here the period 1861 to 1871 as that of the cotton famine. Now I understood you to say a little while ago that the effects of the cotton famine had entirely ceased after 1866 ?— -In this table I have simply given the popu- lation of Lancashire for 80 years, in ten year periods, and I have explained that the period 1861 to 1871 was that of the cotton famine, showing that there was a less increase of population during that period of ten years and that the reason that accounted for it was the cotton famine. 7996. Now I should hke to ask in your view does that increase, taking the last ten years, 1871 to 1881, entirely arise from population, owing to the birth rate exceeding the death rate, or does it result from migration into Lancashire ? — It results also from the fact that agricultural employment is constantly diminishing, and we keep absorbing the surplus from farming districts. You have a diminution in the number of people supported by agriculture from 1851 to 1881 of from 4,000,000 down to 3,000,000, so that country people who cannot find work mainly come into the textile districts of Lancashire and Yorkshire, and we have a constant migration, and we cannot stand it unless we have our trade perfectly free. 7997. {Sir T. Farrer.) With regard to those figures, are they from the census, the 4,000,000 and the 3 000,000? — Well, I cannot just state for the moment, but I think you may take it that I have based it on the census. 7998. {Mr. Chaplin.) To summarize what you gaid upon the questioa of employment, I think your evidence comes to this, that the loss in real wages to the workmen employed in the cotton trade amounts to 12* per cent. ?— That is so. 7999. And that holds good with regard to the various' othe» trades that you mentioned?— I think much more, because those that are engaged in mining and in some of the midland counties, such as the Potteries down to Birmingham, are in a more distressed condition. 8000. So that in some of the other trades the loss is even considerably greater than that ? — As to the building trades, I have put in Mr. Neill's statement, and he says the loss in the building trades is \d. per hour, that is 14 per cent. 8001. And concurrently with this loss in wages I understand you to say that there is a great and grow- ing number of people out of employment altogether ? — Concurrently with this loss of wages, employment has not grown in its usual proportion?, -while popula- tion has, and therefore that there has been an increased pressure among the working classes. 8002. What I mean to ask is this, that besides the loss in wages to those people who are in work there is a vast number of people out of work altogether ? — Yes ; there is not the growth of trade, and conse- quently there is not the same opportunities of getting work ; there is a larger number of people necessarily kept out, seeing that the population increase is constant. S003. Amounting, I think you said, to 700,000 or 900,000 unemployed out of 9,000,000 employed alto- gether ? — My estimate of 700,000 is based on the strict proportion of the 10 societies put in; but at the Trades' Conference at Wolverhampton the delegates representing all the principal trades estimated those out of work at 900,000, and I think they are very much nearer right than I am. 8004. Well now you speak with very great know- ledge and an intimate experience of the condition of the working classes, and I understand you to say that it is an entire delusion to suppose that the working classes have been gainers by the fall in prices since 1 874 ? — What I say is that there is a certain section of economists who believe that the working classes have suffered nothing practically from the changes that have taken place. Supposing for a moment that we attribute the fall in prices to the fall in silver or to the fall between gold and silver, these economists think that they have before them a period when the working classes are open to be cut down in wages, their work- ing hours extended, and a lot of changes that will enable them to fight the battle of foreign competition and restore profits. And I say that has already taken place, that this loss has already fallen upon them. In the case of commodities the wholesale fall does not represent the retail benefit, and I say also that upon a large proportion of the expenditure there has been no economy whatever, and that therefore the actual reductions and loss in wages that have taken place are fully equivalent to any cheapening of com- modities to them. That is my case as far as the working men are concerned. 8005. It practically comes to this, that on the balance you think the working classes are the losers ? — I think on balance they are the losers, and I think, to show this clearly, that on considering the question for the working classes, whenever you consider cheap- ness, which is a very important thing, you must also consider that employment is much more important. Cheapness is a very important thing, but employment is more important. 8006. I understand your view to be that, as regards the cotton trade, the injury which it has sustained in some respects arises from the competition of India, which has become possible owing, in your view, to the depreciation of silver ? — Yes, that is one cause, and then another is owing to the fact that all the free markets that we have in the world are silver- using countries. All the gold countries are quietly yet firmly protected against us. Now, as matter of fact, the cotton trade has 900,000,000 of people to serve in silver-using countries, and the chief portion of our trade has to go there. Now it is quite certain that their money will not buy as much. For instance, you have depreciated the actual silver in India 70,000,000/. sterling through this action of the separation of the Mr. J. C. Fielden. 14 Nov. 1887. 128 ROYAL COMMISSION ON GOLD AND SILVEE : Mr. J. C. Fielden. 14 Nov. 1887. standards. The currency that is circulating in India has gone down 70,000,000/. iu relation to gold. 8007. What do you include in the silver-using countries ? — China, India, Japan, some of the por- tions of South America ; Egypt is partly silver and partly gold ; down the Persian Gulf there arc also silver-using countries. I have not got the figures, but that is roundly the figure according to the best authority. 8008. {Sir T. Farrer.) Is not a good deal of South America silver ? — Yes ; I am not much acquainted with South America, but I am extremely well acquainted with the trade to the East and Eastern Asia. I am well acquainted with all the trades in the further East known as Hither Asia. 8009. {Chairman.) Has Indian cotton gone down in the same way as the rupee has ? — Oh, yes ; in fact Jevons, when writing on money in 1875, says distinctly that if either of the precious metals goes down commo- dities will follow the failing metal. Well, it is quite certain that commodities have followed the falling metal, therefore the rupee for all purposes inside India is practically the same in value, and from this arises the power of India to compete against Lancashire in the markets of silver-standard countries. 8010. At present the competition of India is limited to the coarser cottons ? — That is so, but it is only a question of time. They may begin to import American cotton and use it to the same advantage, or Egyptian, because, as matter of fact, the rupee question tells as distinctly on other makes as well as coarse makes, and it is only a question of time what part of our trade they will take away unless we act and secure rated money. 8011. I do not quite follow the reason why the depreciation of the rupee should enable tliem to import the American cotton and compete with us better than they could before ? — It is because the depreciation in the rupee has cheapened everything they produce when they came to the exportation of it to a neutral market ; it has cheapened all their labour in a com- parison with our labour. 8012. But they would have to give more for labour in the United States ? — They would have to give more rupees ; then they would get more rupees back for the raw material when it is sent out in the form of the finished article. 8013. You attribute the competition of the Indian cotton mills to the change arising from the depreciation of silver ; and you have also pomted out that in your view the depreciation of silver prevented consumers in India and China from giving so high a price for our cotton goods as they otherwise would. Will you now give us what you say as to the cost of production here, and then, with your authorities, what you say as to India ? — The first statement that I have to put in with regard to the cost of production is for India. It is the statement of A. T. Whittle, Esq., who is him- self a cotton spinner and manufacturer in India, and has carried on business there for six and twenty years — ^his own concern. He went out to India to establish a business there. I have the most distinct corroboration of his labour costs from other sources that have never either seen him and never known him at all. The total cost of producing 20's cotton yarn is 28 • 61 pies ; a pie being one-twelfth part of an anna. Well, that is translated into English money about 3|c?. a lb. for the production of 20's yarn. 8014. What do you take the exchange at to arrive at that ? — That is taking the rupee at 2s. That includes the cost of fuel, wages, stores, interest, insu- rance, depreciation and loss in waste in the process of working. Every item is separated, and Mr. Whittle has given me this copied absolutely from his own books. He does not know that I am going to use it for this purpose at all. Well, in Lancashire we can produce that yarn for 2d. — 2\d. at the outside. 8016. It does not include the cost of the raw material ? — Oh, no ; everything but the cost of the raw material. It is the manipulation. For the raw material we are on equal lines ; there is no doubt about that. For instance, if we buy our cotton in Bombay and brjng it to England we get so much more for our gold in buying cotton; that is, our gold goes farther. What we gain in buying goes back in the loss on the exchange when selling. 8016. Have you not some cost beyond what they have in respeet of freight and insurance ? — I simply wish to say that there are just two points in which England is supposed to be at a disadvantage. One is that they grow their own cotton, and the second is that they are supposed to haye cheaper labour. Now I shall show you that the outlook of our trade is very serious indeed so far as India is concerned. 8017. T think we had better keep to the question of comparison apart from loss to trade ? — Now with regard to the growth of cotton and the transit from India to Lancashire, including all charges, insurance, and freight, the transit charges on the railway to the mills, the sending of the yarn back again and the selling of it, either in India or in Japan or in China, I have got the most careful estimates made in Manchester by merchants who are engaged iu the trade, and you can put all that down at |rf. per lb. That is, we have got ffZ. per lb. to pay for transit that they have not got to pay. 8018. {Mr. Fremantle.) That is, taking the rupee at 2s. ? — Taking the rupte at 2s. 8019. {Chairman.) But are you aware that the rupee was only 2s. for a very brief period for the last 30 years ? — I will take the rupee at the average price. Is. \0d. or 1*. \0\d. 8020. {Mr. Chaplin.) They have a gain of \d., you say, in transit .' — There is a natural protection to the Indian manufacturer of \d. by the fact that he has his cotton there and his products in his market, so that there is always that natural protection. This is Mr. Andrews' return of the cost of spinning the same yarn in Oldham. Mr. Andrews says the whole cost of production (that is inside of the mill) would be from 2d. to 2\d. per lb. Now I state it at 2\d., so I exceed Mr. Andrews' estimate. Now there is a very important item in Mr. Andrews' retru'n. He says that the cost in wages would be j^'Jg- of Id., that is the wages in a factory in Oldham. Now I have a letter here ; it is from a gentleman connected with a very old and highly esteemed Manchester firm, and who has spent many years in Bombay. I am not at liberty to use the name, but I will hand in the letter. " My figures for the mills are in Manchester and I " cannot give you the exact cost of wages per lb. of " yarn, but approximately the cost for an average " count of 15's is 7 pies per lb. ; this includes the " wages of reeling, bundling, and baling. 7 pies at " Is. 5d. exchange is | of a penny. Learners begin " at Is. per week, and an experienced hand will get " about 3s. per week. This last is 50 per cent, more " than labourers and domestic servants can earn in " towns, and 100 to 120 per cent, more than the pay " of agricultural" labourers, so that the work, owinc " to the system of shift, is relatively easy ; it is " evident that the introduction of factories into " Bengal has been an immense boon to the natives. " Instead of being oppressed, overworked, and under- " paid, they have easy times, splendid airy rooms to " work in, and much higher wages than they can " get outside. This applies to Bengal. In Bombay " they work with a single shift." Taking the rupee at I7af., it absolutely costs ^^ of Id. to produce a lb. of 15's inlndia. The letters I have handed in show distinctly the cost with the exchange at 17d. to be ■^ of Id. for labour'. Now we are -j-w of ^d., so that, as matter of fact:, you may take it with the ex- change at ild., we are quite as cheap for labour because ours is given for 20's yarn whilst this is given for 15's in Bombay. 8021. {Chairman.) But is that included in your 3| ? — Certainly. I wish to say that the common delusion of all authorities upon the Indian mill question is this, that they think that there is very cheap labour in India. It is a fact that there is a smaU number of rupees paid for a week's or a month's work, MINUTES OF EVIDENCE. 129 but it takes five times the number of persons in India to tent the same amount of machinery that is tented by a number in Lancashire. I am not basing this upon a single factory, but I take it upon the whole of India. Every spindle and loom they have got we could tend with 15,000 people, and it takes them 77,000. I only want to establish this position, tliat labour is not cheaper there and that it is not the cheap labour of India that is boating Lancashire. 8022. {Mr. Chaplin.) But how do you account for the necessity of employing so many more there ? — Well, I apprehend that the cause to a very great extent is the long training and education we have had in this country and the better stamina of our workers. We have had 100 years of it in Lancashire, and, as I stated when I was last here, the operatives are apt and naturally very fit for the work. 8023. {Sir W. H. Houldsworth) Is it not a fact that there is a smaller number in the cotton trade in Lancashire employed to produce a certain quan- tity of either yarn or cloth than in any other country in the world ? — Certainly. 8024. The same remark applies to America as well as India? — Yes; the Indian cotton trade, growing out of monetary dislocation, which is of the same character as protection ; it is attempting the growing of oranges on icebergs ; it will go out whenever this currency question is settled. 8025. (Chairman.) The result i^ to show, if you are correct, that it costs something like \d. a lb. less to make it in England, even with the disadvantage of having to import the cotton, than in Bombay ? — If you take the rupee at its old value — 2s., for which it is practically current in India — there is no doubt that we are fully ^d. a lb. cheaper. 8026. You always insist on taking the rupee at 2s. Is it your idea that in order to produce this financial result we must put back the rupee to a price which was only maintained for a brief period?— So far as putting back the rupee to any given price is con- cerned, I may say that as at all being supposed to represent Lancashire opinion either amongst the capitalists or the working men, Lancashire does not want to survive by protection in any way or shape, not the slightest. We are quite prepared to fight our battle if we have fair play. 8027. Would it not be better for the purpose of comparison to take the rupee at that which was its general rate for many years prior to the demonetiza- tion of silver, rather than at the exceptional rate which it attained then? — ^Well, suppose we take it at 1*. \Qd., then the advantage between Lancashire and India would be I of a \d. We should still be that cheaper ; and I wish to state the reasons why in a few words. We run a mill of 34,000 spindles at a cost of 800^. for coals. I have the balance sheet of one mill in India where the cost of coal for precisely the same number of spindles is 3,400Z. They pay 25s. a ton for coals in Bombay, or about four times the price that we are paying for them in Lancashire. 8028. {Mr. Barbour.) They use English coal in Bombay now ? — Well, I think so, but I have never been in India ; I have to depend upon the best authorities I could get. 8029. {Mr. Montagu.) You say that the cost of labour in India is not the difiiculty; but what is the difScultyP— The exchange. 8030. No; but you say the exchange even at Is, bd. only brings the labour to the same ; what is it besides the labour that makes the difierence ? — Because, you see, when we send our goods into t'hina or Japan or India the exchange affects not only labour, but it affects the running of your factory, it affects everything that enters into the cost of production. I only men- tioned labour because there is a strong impression among those who look casually at the case— that, whilst America with its cotton could never beat us, India has got both cotton on the spot and cheap labour also and it is from these tviro factors that they think o 51,080. India is able to do what America cannot do, take possession of one of our markets. Therefore I want to show you that they have not cheap labour ; that, taking efiective production, the actual quantity put out, spread over the wages of a mill they are not as cheap as us to-day. Even with the rupee at Is. 5d. they are barely as cheap as us. 8031. Could you give us the figures that enter into your calculation for the cheaper production of India irrespective of silver ? — There are only two factors in the whole of the production in which India has any advantage, or appears to have any advantage, on the face of it. The first factor I admit at once shows |rf. a lb. of a,dvantage of position ; India saves that in transit communications. The second — ^labour — I dis- pute, and say that labour still is as dear in India, even with the rupee at 1*. 6d. I^'ow in every other thing that goes to make up the cost of production India is very much dearer than wo are. For instance, you build a mill, and the interest of capital and depreciation of the machinery constitutes a large item of annual charges. Well, it costs two and a half times as much money to build a mill and fill it with machinery in India than it does in Oldham. Taking the present position, even buying with all the advantage or disadvantage to-day, whatever it may be just as it is looked at. At the present time the cost of a mill in India is from 30 to 32 rupees per spindle. Now if you take the 32 rupees at \s. 5d. it is about 46«. We can build a mill and equip it thoroughly to-day in Lancashire for about 21s. per spindle. The average cost of the mills in India has been about 3/. per spindle. With us the average is about 22s. to 25s. according to the character of the work they have to perform. Now the annual depreciation is a very serious item and the interest also that we have to charge. So far as the cost of stores, the cost of coal, the cost of the original buildings, the cost of the machinery, we have a decided advantage over any country in the world in these points and particularly over India. The only two factors in Ihe dispute are those that I have drawn attention to besides exchange. Now I can show you what the eflfect of exchange is because I have prepared three examples which show you what the effect of lowering exchange has been upon the Oldham spinner. At the end of the year 1885 good Dhollera cotton was selling in the Bombay market at 180 rupees per candy of 784 lbs. At the same time 20's yarn was selling in Bombay at 6f annas pei- lb. Allowing 1 16 lbs. of cotton to spin 100 lbs. of yarn, we have the following results : — With Exchange at 2s. per Rupee. Mr. J. C. Fielden. 14 Nov. 1887. 100 lbs. yarn sold for 116 lbs. cotton cost - Rs. x. d. - 39-84 or 79 8^ - 26-63 or 53 3^ Margin for cost of spinning - 13-21 or 26 5 or 26s. v)d. =3-1 Id. per lb., out of which the Lancashire spinner has to pay the freight and charges both ways, placing him at a natural disadvantage. With Exchange at Is. 6d. per Rupee. Es. s. flf. 100 lbs. yarn sold for 116 lbs. cotton cost - 39-84 or 59 94 - 26-63 or 39 11^ Margin for cost of spinning - 13-21 or 19 9| 19s. 9^d.=2'4:7d., out of which the Lancashire spin- ner has to pay transit charges as before, whilst Bombay is unaffected by the change, and has a margin of 13 • 21 rupees as in the first transaction. Supposing, how- ever, the rupee appreciiated to 2s. 6d., we should then find that an advantage accrued to the Lancashire spinner, thus : — 130 ROTAL COMMISSION ON GOLD AND SILVER: Mr. J. G. Fielded. UNov. 1887. With Exchange at 2s. 6d. per Rupee. 100 lbs. yarn sold for 116 lbs. cotton cost - Es. s. d. - 39-84 or 97 7 - 26-63 or 66 8 Margin for cost of spinning - 13-21 or 30 11 30*. llrf.=3-71 -r. 8107. (Chairman.) Why do you say 9s. .?— Because the fall has been within the last few years very much greater than the fall in silver. Well, if you take the fall in silver and you take the rupee at Is. iOd., and it is now down at 1*. bd,, the fall would be about 24 per cent. Supposing that Indian wheat now is selling in this market, say, at 30«. or 32«., 33 per cent, would bring it up to 41s., so that practically 8s. or 10*. would be the change supposing it went back to the full point with money. But there are other processes of cheapening; there are the improved communications, that have been one of the elements of cheapening in the supply of wheat as well as in all our other foreign trade. I expect that it might send up the price of wheat Is. or 8s. 8108. {Sir T. Farrer.) Now how do you suppose it would do that ? Suppose that the price of Indian wheat were raised to-morrow by your action and that the Indian wheat were kept out of the market, do you suppose that other wheat would all rise to that extent ? — Certainly. 8109. Now at this moment I am told that the wheat which rules the market, and which is at the lowest price, is Eussiaii wheat, and that the quantity of Indian wheat coming is diminishing and the quantity of Russian wheat is increasing ? — 1 should presume if Eussian wheat is ruling the market it is because they are offering it cheaper in the market, because it is a fact that whenever you have a full supply of any article the producer who ofi"ers the cheapest, taking qualities to be equal, is the man who rules the market. 8110. Of course he is. How would restoring silver afiect the price of Russian wheat ? — I suppose Russia has roubles. 8111. It has paper, no silver? — Well I cannot say. As I said before, that is one point to which T have paid little or no attention, the question of paper money. I do not understand how it affects this question, nor do I think it does. 8112. And you never examined as to what have been the causes of the fall in the price of Canadian and American wheat so far as regards competition with Indian wheat ? — Well, I examined them in this respect. As a manufactarer having to do with daily produc- tions and in s elling cloth I know that when the market is pretty well stocked the man who offers the cheapest article fixes the price. If the market was not stocked he might not, he would not; but with the market overstocked the man who offers the goods at the lowest price fixes the price. 8113. And a very small excess lowers the price ? — I know it from experience. 8114. You mentioned a great number of trades as being in a very bad condition. It is impossible to go through them all, but I do happen to know something of one of the trades that you mentioned and that you have referred to to-day, and that is the pottery trade. I have the following statement from one of the first manufacturers in the Potteries : — " Josiah Wedgwood and Sons, Etruria, have paid 44 " per cent, more wages in 1887 than they did in 1877, " and have sold 57 per cent, more goods, the class of " goods being more ornamental will account for the " greater increased per-centage of goods sold over " wages paid. I believe there is more ware made to- " day in the Potteries than ever was made before, and " in this belief 1 am confirmed by the opinion of other " manufacturers. One Longton manufacturer told me " that last week was the largest get-off' of ware from " Longton Station they had ever had. Another told " me that though certain works were on short time " the aggregate amount produced was largely in excess " of what it was ten years ago, as they had so many " new works since that date in operation. The " manager of the Manchester and Liverpool District « Bank, speaking without reference to books, thought " there was no doubt that more money was paid in " wages now than 10 years ago. Some works are " making short time, and some branches of the bnsi •■ " ness are working short while others are workiuo- " full time. This will always be the case from variout " causes, change of fashion, of the character of trade, " the introduction of machinery, &c. Thus, although " we are working full time generally and are paying Mr. T. C. Fielden. 14 Nov. 1887. 136 EOYAL COMMISSION ON GOLD AND SILVEE Mr. J. C, Fielden. 14 Nov. 1887. " SO mucli more wages Ihan we did ten years ago, " certain branches, as tlie plate makers and earthen- " ware potters, are only working four works a " week. That is due partly to change of markets, " but chiefly to the introduction of machinery enabling " one man, or in some cases one woman, to do the «• work of three formerly. Three fourths of the" wages " paid are piece-work. In 1873 there was a general " rise of 5 per cent, all round amongst potters' prices, " other branches participating in the rise in greater " or less degree, and prices reached the highest they " have ever attained. In 1878 or 1879 Lord Hather- " ton as arbitrator awarded a reduction of prices all " round of Id. in the shilling. This reduction has " not been questioned since by the men, and obtains " still though the penny is no longer deducted from " the weekly wage bill, but is allowed for in the " revised list of piece-work prices. So far the wit- " ness's statement is true. But the purchasing power " of the reduced wages is greater now than it was " in 1873. Then the 4-lb. loaf was 7^^., now it is4d. " Our foreman of potters says the men were much more " discontented when the rate of piece-work prices " was higher than they are to-day. Life was harder " for them. They are better fed, better clothed, and " betterhousedto-daythanthey were in 1873. In fact, " he says 20s. to-day goes farther than 27s. did then. " He says there is no excess of labour over employ- " ment now. He has only had one application for a " pottei-'s place in the last three months, and in bad " times he is pestered with applications. The present " state of things is much better in this regard than is " usual from the men's point of view. The relieving " oflEicer for Hanley, a town of 50,000 inhabitants, " tells me there is no distress in his district ; indeed, " the working man is, he thinks, better off than he has " been for some time. The Committee of the Hanley " Charity Organisation Society concur in this opinion, " The Hanley Sick Visiting Society reports that they " have unusually little sickness to attend to. The " secretary to a large sick club in Newcastle having " 500 members reports that there is no difficulty in " getting their payments from the members regularly. " The fines for non-payment were 961. for the five " years 1876-80, and 97/. for the five years 1881-85. " since which date their code of fines has been altered " and is not therefore a fair test. The following are " the investments with, and drafts on, the Commis- " sioners of the National Debt of the Pottery Central ' ' Saving Bank : — Investment. Drafts. £ £ 1878 — 5,000 1879 — 5,250 1880 — 1,500 1881 - — 2,500 1882 — 1,800 1882 1,700 1,700 1883 700 — 1884 500 1,000 1885 - i;00 3,000 1886 — 2,200 1887 500 1,100 " This is a working-man's saving bank mainly, and " though the sums are not large thty show that the " savings are larger of late years tlien they were 8 to " 10 years ago. The Post Office Saving Bank is also '' doing a large business." Now that is the account I get of the Potteries, which you stated was in a very bad state, I only say that there is another side to the question ? — Quite so, of course diflierent sources of information may differ a little, it depends entirely vipon the width of ground you cover. Now take the last statement, the savings banks are increasing their annual investment. It is easy to understand why the men put their money into them. It is simply because other methods of investing the money of the working — classfcf; have become less profitable. 8115. But that is not so in the Potteries. Ihappen to know that the working people there invest largely in their own houses ? — In nothing has the suflfering been more serious than to the property of smallholders. Several of the greatest building societies in this country are in liquidation. In Manchester alone the falling off on investments in such societies is over two millions per annum. 81 16. I give you these facts which are given to me by an extremely good authority in the Potteries, and which are certainly not consistent with yours ?^I desire to say that my principal remark about the Potteries is based on the factory inspector's report on the district. He stated distinctly in his report last year that there was deficient employment in tlie Potteries. 8J17. lam speaking of the pottery trade, not the iron trade ? — I also gave a general sample of the Potteries from a report specially prepared for me. I can only say that whatever may be the facts I have given or the conclusions that can be formed upon my evidence it has been honestly prepared, not on pur- pose in the slightest degree to give anything but what is fair and right. 8118. Certainly, 1 only mean that there are two sides to a question ? — That is so. 8119. With regard to a point of argument, not of fact, you said, I think, that two fifths of the expendi- ture of the country was fixed, and that in respect of those items no advantage was reaped ? — Yes, conven- tionally fixed. 8120. I .should like to ask you whether persons do not benefit in respect of prices, not only by paying less but by getting moi;e and better things for the same price ? — Undoubtedly in some respects ; for instance, supposing that for the same money he gets a better service, but that does not affect the man's income and spending power. He has to do a certain thing and he only has so much with which to pay for it, he must put up with the worse service rather than pay more. 8121. But supposing he pays the same price and gets better service, that is the same as if he was able to pay more ? — No, it is not the same thing. Now I will take a man who has a certain sum of money to pay per week for a family of five. Well he may get a better service for a given sum of money as he might get a rather better article ; but if he divides his money out, and he can only pay a certain amount for this or that, the better service is no advantage to him from a saving point of view. 8122. Yes, but if the same amount is paid and a better service is got for it he is better off ? — I think not, when you consider changes in employment and wages. 8123. If you take the different items which you have mentioned, you will find that in almost all of them we get more for our money. I will not go through them in detail. But, for instance, local taxa- tion gives better water, better police, better streets, parks, and buildings. Then you spoke of hotels and everything that was sold at publichouses. We get very much better accommodation, far better than we did when I was a young man, and probably the working man does, though he may pay the same money. Take, again, railways. I could show .you by very detailed figures what an immense advantage (although the penny a mile may remain the same) the working man has got in improved quickness of service, in third-class carriages being attached to every express train, in workmen's trains, in cheap trips. The working man, although the actual rate of a penny a mile may be the same, surely gets for his penny infinitely more than he used to get? — Well, I thinki could go through every one of those items and explain them precisely. If a workman has only 6d. a week to come into this city to serve his employer, so far as economy it does not matter to him whether he has a better carriage or not, the 6d. is the important point, and if he still spends that he makes no economy. 8124. I will only give you two figures; the number of third class passengers in 1873 was MINUTES OP EVIDENCE. 1S7 455,000,000; the number of third-class passengers in 1886 was 726,000,000. Does not that show that the poorer classes have had some benefit? — Yes, but will you allow me to tell you that the natural growth of railway traffic is practically only indicated there. 8125. And all these third-class trains are far better than they used to be ?— They are better served, I admit; improvement is a tendency in all these things. 8126. Th(m, again, as to workmen's trains, trains which actually carry the working men at a very cheap rate, some of them at about ^d. a mile; in 1872, there were out of London 38 workmen's trains, now there are 113, and the number of persons carried by them has more than doubled. And so I might go on ? — Tn Lancashire the passenger traffic doubles of itself every 10 years. As matter of fact, these increases must not be put down as in particular arising from the service but from the natural growth of traffic in the country. 8127. That shows that the workmen get more facilities of communication than they did? — You see the whole of that question has to stand on this point : Given a certain amount of reduced income, can. a working man effect certain economies ? He may get better .service, but can he effect certain economies and devote the surplus to other things ? 8128. If he gets more for each Id. ? — He does not get more, he gets the same service better rendered. I did not include in that estimate of 400,000,000 a very large item that I have thought of since, viz., the cost of recreation and amusements. They are all growing dearer and they come to a very large sum per annum. 8129. (Mr. Fremantle.) You said a little while ago that this country had no part in the bimetallic arrangement which was in effective operation before 1873. Is there any special reason now, do you think, why this country should join in an agreement of that sort ? — The special reason is this : supposing that it be a fact that we are suffering by this dislocation of money and that the Governments of the world will not again undertake to maintain a fixed rate without England taking a share in the work. That is the spe- cial cause of delay in fixing up again rated money. 8130. But is there any reason why the other nations of the world should not join in an agree- ment of that kind, as they did before, without the aid of this country ? — Commerce is very much larger than when that arrangement was entered into, and some people are very much frightened about the production of silver. I find the production of both metals in the United States is practically about -^ part of the pro- duction of their commodities and no more. The in- ternational trade of the world is a much bigger factor than when France began the regime in 1803, and there is no reason why England should refuse to take her perfect and proper share of the work of getting inter- national rated money. There is another very great reason why England should be included, and it is this, that we have the greatest silver-using country in the world under our Empire, and other nations are very much afraid if they build up the rate again that we might make some change in the currency of India that would be very disadvantageous, in fact, as Ger- many broke down the Latin Uni(m in 1873. I believe at the Monetary Conference in 1881 they would have agreed if England, being out of the arrangement, would have given a pledge that for 20 years she would not interfere with the standard of India. I believe the nations would have rated money without England. 8131. But are you aware that at that Conference England gave the pledge that the mints of India should be open to silver coinage ? — I am aware that she declined to pledge the future. It is not a matter of whether the mints of India are open to-day or to-morrow, it is a question of 20 years. They, the nations, must have no great flood of silver thrown on the market through another demonetization. 8132. I think I am right in saying that no ques- tion was raised about the change of standard in India at that time, nor was any apprehension expressed that such a change would be made ? — The impression remains on my mind that the Powers were prepared to accept the reponsibiUty of rating silver, providing that this country would give an absolute guarantee not to touch the coinage of India for 20 years. However, that is a matter of small importance now. 8133. You would agree that without England, before 1873, the bimetallic arrangement was possible ? — It not only was possible but absolutely carried out, and carried out during a period when twice the produc- tion of silver in relation- to gold took place than is taking place now. Silver has fallen through restrict- ing its use and not through the production of the mines. 8134. (Mr^ Montagu.) Would there not also be a disadvantage to this country if other nations were bimetallic and we remained out, with regard to our trade with silver-using countries, because we should have to get the silver from those countries with ex- pense or sell it again with loss, and so we should be handicapped in our trade with silver-using coun- tries ? — Quite so. 8135. That was the case, was it not, before 1873? — If we wanted silver for India we had to go abroad for it and pay the profit, and the reverse would cause a loss if we received silver, and had to sell it abroad ? — Well, I am not quite acquainted with that question, but I would simply say that the greatest danger that could possibly happen to this country in regard to its trade would be if the United States were to say, " We will go on silver and we will " clear England out of the whole of her Eastern " trade, and, if she did, you could not help your- " selves." You would have to rush to a silver standard. Mr. J. C. Fielden. 114 Nov. 1887. The witness withdrew. Adjourned till Triday, o 51080. 138 HOYAL COMMISSION ON GOLD AND SILVER : THIRTY-SIXTH DAY. Friday, 1.8th November 1887. PRESENT : The Right Hon. LOED HERSCHELL, the Chairman, presiding. Me. D. M. Barbour, C.S.I. Mr. Hekry Chaplin, M.P. Sib T. H, Farrer, Bart. Sir John Lubbock, Bart., M.P. Mr. S. Montagu, M.P., and Mb. Geo. H. Murray, Secretary. Mr. i T. Comber. 8136. (iHfr. Chaplin.) 1 think last time you were I8.N0T. 1887. here, you said you regarded the question in two lights ; first, as to whether the fixed ratio was possible, and secondly, if it was, whether it was desirable in the interests of India and England, that it should be re-established ? — Yes, I did say so. I may mention that I understood that I came here to-day to answer certain questions about wheat ; I did not understand that I was to go over the whole subject. There may be some questions that I have not materials with me for answering. I will answer them if I happen to be able to. 8137. Well, I gather that you gave a general opinion that it would be impossible to fix the ratio permanently ? — That is my opinion. 8138. But that opinion was somewhat qualified, I think, by various answers that you gave; In Question 6335, you laid down that it would be " impossible to permanently maintain a double " standard, even when established over a certain area, " by international agreement." But you do not deny that the fixed ratio has had some efiect in keeping the standard steady ? — Not at all ; certainly it has. Allowing for the gold, which will shortly return from Scotland, has there not been a very small amount of gold, if any, attracted on balance from abroad ? — -I should thiuk it had been quite small. 9317. Do you not consider that the loss inflicted upon the trading classes by a rise of 2 per cent, in tlie bank rate, for over three months, would exceed 1,000,000/. Stirling ? — Well, it all depends. I do not believe in the estimate of 300,000,000/. of bills. I do not think anybody knows anything about it. 9318. Does not a higher rate for money tend to depress values and diminish the profits on our home and foreign trade, and in the latter case would not advantage be given to our foreign competitors who work with cheaper money ? — Provided they do ; if you assume that they do. 9319. Those competitors who work with cheaper money ? — Certainly, if they do, of course. 9320. Is it not a high price to pay for tlie purpose of attracting a million or two of gold, which has in the present instance been inefiectual, owing to European competition for gold ? — Well, there you see you raise the point which I referred to iri my first day's examination. I think, and I have always Co 202 KOYAL COMMISSION ON GOLD AND SILVEE : Mr. W. Foioler. 2 Dec. 1887. thought, that having regard to our enormous opera- tions, we keep too small a reserve. 9321. Are you not of opinion that the fall of the rupee from Is. llrf. to Is. 5d. has on the whole been of advantage to India ? — I think the balance of evidence goes to show that the low silver is beneficial to the mass of the people of India. 9322. Do you think that a further fall, say to one shilling, would also be advantageous to India ? — I cannot say. 9323. You stated that the fall in roubles facilitated the export from Russia of wheat and oats. Do you believe that this depreciation of the currency is an advantage to Eussia ? — I never said so. 9324. You do not consider it an advantage ? — -Well, you have to take so many things into consideration, before you say it is an advantage, because there is the credit of the nation and other things to be considered before you arrive at a conclusion, as to what is a general advantage ; but you may have an advantage to certain classes of exporters, and an injury to the people. 9325. Do you think that inconvertible paper currency is ever of advantage to the country ? — I have said once before that I look upon it with horror. 9326. Is not the Indian currency depreciated ; and can a depreciated currency be a disadvantage to Russia, and an advantage to India ? — It depends so much upon circumstances. The depreciation of silver, I think, from all I can learn, is a benefit to the masses of the people of India, but an injury to the Government and to the ofiicial classes. It is possible that the state of things in Russia may benefit the mass of the people. I do not know, but looking to the credit of the nation, I should not advocate any such change, any depreciation of the currency. 9327. And do you think that an inconvertible paper currency can be an advantage to the masses of the country ? — I do not say that it can, but you see you have got to take into account all the circumstances of the case. It may be an advantage, for instance, to-day, and may cause a very great loss a few years hence, by some international difficulty arising ont of that inconvertible currency. 9328. Then you would say that an inconvertible paper currency, as a permanency, would be a dis- advantage to the country ? — It certainly must cause, I should think, on the whole, great injury to a country. 9329. Then is not the Indian currency inconver- tible ? — It is a metal currency. 9330. Is not the Indian currency inconvertible. Could India sell any considerable portion of her cur- rency ? — I do not think thatv s a practical question at all, because no country ever tries to sell the whole of its currency. 9331. Could India use her silver in payment to any other country outside India ? — No, I do not suppose she would, unless it was a silver-using country. 9332. But apart from that, therefore, internationally the currency of India and China would be inconver- tibln ? — Well, the only way of removing that difficulty would be to give her a gold currency. 9333. But at present her currency, therefore, is inconvertible, the same as the paper currency would be ? — I do not think that it is at all the same as a paper currency. 9334. If it cannot be converted or used ? — I cannot assume ofE-hand that it can never be used. 9335. With regard to Russia, how is it that the exports of wheat from Eussia have not largely increased during the many years during which the rouble has been low, and been so large as to rule the market ? — ^Well, that, I think, arises from the general cause I have referred to, that the condition of the markets depends upon the supply of the article, not upon the question of the rouble. 9336. And should increased export of wheat occur in Russia, would not the paper rouble rise in value ? — It has not done in recent years with an increased export, that I can see. For instance, it remains stationary in 1883, 1884, and 1885, with a great change in the export. 9337. It would tend to increase the value of the rouble ? — Weil, it should do. 9338. If, therefore, Russia were to, as you suggest, rule the wheat market, as a necessity the rouble would be enhanced in value? — It ought to be, but it depends entirely upon what amount they have got out. , 9339. Well, the information already given is that the amount is kept within reasonable bounds, and even diminished ? — ^It depends upon what you call reasonable bounds. I have got the amount of notes here, it is an enormous amount. 9340. About 80 or 90 millions sterling, the entire currency of Russia, and notes ? — Yes, but then only consider what a very poor nation they are. 9341. Would not therefore they require more currency.? — No, I do not think they would. The great mass of the people never see that currency. 9342. You stated that the chief objection to a ratio of 20 to 1 would be that it would render permanent the loss to the Indian Government by the increased burden of its gold debt. Would not the Indian Government be benefited in two ways, that the Budget estimates could be fixed in the future with greater certainty, and that internal loans could be raised on less onerous conditions, rupee loans ? Do you consider it would be prudent to invest capital largely in India, and in silver securities, such as rupee loans in the present condition of silver ? — Well, that of course involves the question what the probable future of silver is to be. Now there is such a diametrical opposition amongst people as regards that question that I should hesitate to give a very strong opinion. 9343. But you, as a prudent banker, would you like to invest money largely in India and in silver-using countries in silver securities, such as rupee loans, in the present condition of silver ? — Well, we bought some rupee loans not long ago. 9344. Would India be at all likely to send silver to England in exchange for gold, should the ratio be fixed at 20 to 1, when India does not do so now, when silver is discredited ? — I do not know. I cannot tell. I would not give a very strong opinion upon that. I was referring more particularly to loi to 1 when I mentioned about their sending over their silver. 9345. There would not be the same inducement at 20 to 1 ?— There would not be the same inducement. You never can tell what these Indians will ie at. 9346. India would not part with her currency. If silver were sent from India, before it reached Suez it would be ordered back again ? — I have heard such statements made, but on the other hand I have heard extraordinary statements as to the amount of hoards held in India. 9347. Then if we did not lose our gold our supre- macy would be maintained under a bi-metallic ratio ? — ^If we did not lose our gold tnere would not be those dangers to which I referred, but as to the supre- macy that is another question altogether. 9348. But if all the other Powers were situated In the same way as regards monetary convention, surely the supremacy of this country would be maintained ?— Well, yes, if the United States and Germany and France joined, I suppose the supremacy would depend upon other factors. 9349. And in case of a bi-metallic ratio being brought into force, bank notes would be as readily taken, would they not, in this country even if based partly on silver and partly on gold ?— Bank notes are out such a short time that it would not be of importance. 9350. And when you talk of engaging to pay in gold, you really mean engaging to pay in bank notes ? — I do not know about that. 9351. But supposing a man accepts a bill for 1,000^. he does not engage to pay the 1,000^. at th« MINUTES OP EVIDENCE. 203 due date in gold ; lie engages to pay in bank notes ? — It is gold nominally. 9352. It is engaged to be paid in legal tender, but it would be a satisfaction of bis debt if be did not pay in gold, but paid in bank notes ?— It would be so, no doubt. 9353; Therefore there is no such thing as an engagement in this country outside the Baaik of England to pay in gold ?-- .You have to pay nominally in gold. It is really what represents the gold. 9354. In fact nobody could insist on your paying him in^gold ? — Because you can tender him the notes. 9355. Can you conceive that it would be to the interest of any nation to go out of a convention of say 20 to 1 ?-^Well, I was asked that question the other day, and I said I could not tell all the possible circumstances. 9356. Can you give me one example, where it would pay a nation to go out of such a convention m that ? — I do not know, but I know that France went out of her convention practically. 9357. Was that quite the case. Did she break faith with any country ? — No, she did not break faith ; but the whole Latin Union broke faith with the whole world ; that has caused all the trouble. 9358. But did they engage with the whole world ; they engaged between themselves ? — No ; but they gave out that they were free coiners of silver, and then they stopped it. 9359. The reason of that was, that Germany commenced to take all the gold from France. Ger- many sent out silver to France to be coined, and to be exchanged into gold ; and it was from ill-will to Germany, or jealousy of Germany, that France refused to continue to coin silver ? — If you say so, I do not dispute it. 9360. (Mr. Barbour.) Do you think it would be possible to have a gold standard in India ? — I do not think it would. It would cause great difficulty if you told the ryot to pay in gold. 9361. But we might use the rupees as they use the five-franc pieces in France now. We might con- tinue the rupees as they are ?— I am afraid it would be very much misunderstood, It is a very large question. 9362. A man having the rupees would pay them just as before and would not perceive any change? — I should not see any such great objection, if it can be done, but I do not see myself how it can be done,, and yet maintain India as a market for silver as she is now — as full as she is now. 9363. Certainly, as a market for silver, her power would be decreased. Do you see any evil in that ? — That I should think would be very objectionable apd intensify the present trouble. 9364. Just as England says, " It is my business to •' look out for ray commercial supremacy ; I will have '' nothing to do with silver." India might say, " I act " for myself, I see no reason why I should inconve- " nience myself to make a market for silver for the rest " of the world"? — That is quite a reasonable argu- ment, but I think it would be a very dangerous thing myself, as far as I can understand it, and I think it would be a great pity that one of the largest markets for silver should be decreased. I am not one of those who cry down silver, and say it is of no consequence. 9365. You may know that gold was at one time a legal tender in India ? — Yes, I do ; before 1835. 9366. So that to use gold in India would be only going back to what once existed before ? — No ; but they did not use gold as we use it here, 9367. They chiefly used silver, but they also used gold to some extent ? — ^But comparatively little to what it would be now. 9368. But is it not rather hard upon India to main- tain the present difficulties in order to provide a market for silver for the rest of the world ? — Well, if you can show that India was very much injured by the process it might be so, but I doubt whether it is. 9369. But even if she has not been injured in the past she might be very much injured in the future ? — It is conceivable in circumstances that might arise, undoubtedly. Mr. W. Fowler. 2 Den. 1887, The witness withdrew. Adjourned till Monday. FORTY-FIRST DAY. Monday, 5th December 1887. PRESENT ; The Right Hon. LORD HERSCHELL, the Chairman, presiding. Mr. D. M. Bahbour, G.S.I. Mr. J. W. BiKCH. Mr. H, Chaplin, M.P. Sir T. H. Farrer, Bart. Sir John Lubbock, Bart., M.P. Mr. S. Montagu, M.P„ and Mb. Geo. H. Murray, Secretary. Mr. Daniel Watnet called and examined. 9370. (Chairman.') You have given considerable attention to the questions which have been raised in the controversy with regard to the existing condition of the currency ? — Yes. 9371. And specially to the changes in the ratio of value of silver to gold, and the results which are alleged to have flowed from those changes ? — Yes. $^372. Let me ask you first with regard to the suggested appreciation of gold, as having been the cause of the reduction of price which has taken place in many articles of consumption of late years. What observation have you to make with regard to that ? — My difficulty is to admit that it is a cause. The one is not the cause of the other. If you say that gold has appreciated with reference to commodities, you can only mean that commodities have gone down in price with reference to gold ; you could not say that gold having gone up in value was the cause of the others going down. It is stating the same fact in two diiferent forms. 9373. No doubt that may be so if you are speak' ing of a fall in the price of all commodities, but you ■would not say, I suppose, that the fall in the price of a single commodity, though it showed an appreciation Cc 2 Mr, D. Watney. 5 Dee, 1S87, 204 ROYAL' COMMISSION ON GOLD AND SILVER : Mr. D. Watney. 5 Dec. 1887. of gold in relation to that commodity, showed an appreciation of gold generally? — No, of course you have to take all of them, 9374. May not one regard the matter from dif- ferent points of view, that a change in the relation of commodities to gold may take place either from some- thing affecting commodities or from something affect- ing gold. In either case you have a change in the relation, which may be expressed as an appreciation of gold in relation to the commodities, or an appre- ciation of commodities in relation to the gold ; but you would admit, I suppose, that they are two differ- ent things ? — If you confine me to one commodity, I should consider that that would be travelling outside the currency question altogether. 9375. You mean that there may be something in the circumstances relating to that commodity which has altered its relation to gold ? — Exactly. 9376. Do you think that there has been what has been called a scarcity of gold ? — I think not at all ;. there is ample gold in the world for all the purposes to which it need be applied, provided there is a due economy in the use of it. I think it has been used in a most improper manner, and that the demand for those uses has caused its great appreciation. 9377. Do you think that an increase of the money in circulation increases prices ? — The increase of the money in circulation will create a demand for the precious metals, and if a demand for the precious metals is created, that renders them comparatively scarce, and therefore appreciates them and lowers the price of the commodities. 9378. You say an increase of the money in circula- tion ; why should that add to the demand for the precious metals ? — Assuming that we are speaking of increasing the circulation without increasing the fidu- ciary issue, there must be more of the precious metals used. If more is used there must be a demand for it, and that demand takes it out of the general bullion market, thereby causing a comparative scarcity. I assume that France, in comparison with England, has in circulation perhaps double the quantity of precious metals per head, and that if France were to have no more precious metals per head in circulation than Eng- land there would probably be liberated 200,000,000/. of precious metals, all of which would be thrown on the bullion markets of the world. 9379. What do you suppose would be the effect of that ? — That would, of course, render the precious metals of less value than they are now. 9380. Those, you mean, which are the standard currency of the French nation ? — In France both metals would be liberated, in what proportion I cannot tell; but on the general question I feel no sort of doubt, viewing it merely as a sum in arithmetic. If we abstract the precious metals from circulation we must throw them on the markets of the world, and that would render the precious metals comparatively cheap. On the other hand, let me take the converse of my previous proposition, and suppose that England adopt the same course which has been adopted in France, not as State policy, but as individual policy, we should then have twice as much in circulation per head as we have now. We should have to attract that money from the bullion markets of the world, and thus by creating a great demand for the precious metals we should appreciate them very considerably. 9381. In what way do you suppose an increase of the money in circulation would be produced? — It could only be produced by reducing the banking facilities now existing in the country. I should like, however, to remark that I am arguing on a suppositi- tious case, which it is almost impossible to imagine, because by adopting such a course we should be going backwards. On the other hand, the people of France by increasing their banking facilities would much reduce their money in circulation. 9382. If you were to increase the circulation here, you say that that would only be done by a I'eduction of the banking facilities ? — Exactly. 9383. That is to say, you mean the greater the amount of credit which is founded upon the stock of the precious metals the less the need of quantity of those precious metals ? — ^I ,do not quite understand the meaning of the word credit, unless the fiduciary issue is meant, but it appears to me that the fiduciary issue is another part of the subject, and has nothing to do with banking facilities. The essential part of credit with reference to banking facilities is the credit or confidence which the customer has in his banker. It is this which liberates the coin from his strong box and brings it into the bank. My point is this : we will suppose that there are a great many banks all over England, and that there are a great number of shops which are constantly taking money over the counter. In the one case where there are banks they would take that money straight to the bank, and the moment it is taken into the bank it enters into the general circula- tion of the world ; in other words, into what I call the bullion markets of the world ; whereas, if they held it in their tills or in their strong boxes it would be just the same as hoarded coin. On the other hand, in France there are very few banking facilities, and the consequence is they are obliged to hold this stock in their houses waiting for the collector to call for it. I will admit that cheques to a certain extent assist very considerably. I do not think that cheques with reference to all that enormous number of transactions that I am now speaking of produces so great an effect as the rapid collection of the money that is taken over the counter. You cannot imagine one without the other. You cannot imagine the banking facilities without the cheques ; therefore, I think they had better be always taken together. 9384. You are speaking chiefly of the effect of the coinage of the country being rapidly returned to the banks ? — Yes. 9385. Instead of being kept by a vast number of people in their houses or shops ? — Yes, that is what I mean by banking facilities. 9386. I observe that you have written suggesting that the view that an increase of the money in circulntion raises prices is false, but I do not think you have explained to us why you maintain that ? — The in- crease of the money in circulation will cause a demand for the precious metals, and when a demand is caused for the precious metals, they become scarce ; their value appreciates and the prices of commodities go down. 9387. What is your opinion with regard to the effect of the change in the relative value of silver to gold upon the fixed payments made by the Indian Grovernment to this country and the supposed bonus on the exportation of wheat ? — Probably it would be best to treat the bonus first. It does not exist ; it is a mere statement without any proof. My argument was given in a letter to the "^ Times" of August 10th, 1886. If permitted, I should like to read it : — Who gains by the Cueeency Crisis ? To the Editor of the " Times." " Sir, — In my letter under this heading, which you did me the honour to insert in the ' Times ' of yester- day, I left out of consideration the case of shippers to and from India, because I am of opinion it can be proved that the currency crisis does not affect tlicm. It happens, however, that, under the heading of ' The Currency Question,' you printed in the same impres- sion a letter from Mr. J. T. Mackenzie, in which he sums up an argument by saying that ' it is futile to ' contend that this state of exchanaes does not ' greatly benefit the shipper from India, as for the ' same cause it is adverse to our home exports to ' India.' The argument is that a few years ago, when 10 rupees were equivalent to \l., a Bombay merchant shipping wheat which cost him 1,000 rupees would sell it for lOOZ. and receive back his 1,000 rupees, but that now, when making a smaller ship- ment, he would receive back 1,454 rupees. This might be true, if wheat retained its old price, but I MINUTES OF EVIDENCE. 205 contend that the prices of most articles, including wheat and silvei", as expressed in terms of gold, have receded in about the same ratio. This being so, the loss in the price of his wheat would be made up to the supposed shipper by the gaia on the exchange. The same effect, mutatis mutandis, would be produced when goods are shipped to India. But that the ques- tion of exchange may be left out of the calculation altogether is shown by the following method of stating the case. Supposing a shipper of wheat from Bombay were to send a cargo to England with instructions to have the proceeds applied to the purchase of goods for export to India, the wheat would be sold at its present reduced price and the goods to be returned would also be purchased at an equally reduced price ; so that as much goods would be sent for the wheat as would have been sent before the prices were changed. That is not an extravagant supposition, for trade being in a normal state, the exports and imports must neces- sarily coincide in value. It is of advantage to India that the influences arising from the present currency crisis, which are disturbing other nations, have no effect on the mutual relationship of the various classes by whom her trade is carried on. Indeed the serenity of her present condition may, in this respect, be con- sidered almost a positive gain. Unfortunately, the Indian trade is not in a normal state, owing to the large amount of debt which is repayable, capital and interest, in gold. Of course, India exports articles, chiefly wheat, to pay its obligations. The ^ybeat is sold at the reduced price, but no profit on exchange takes place, as the proceeds are retained here. When the price of wheat is 30«. a quarter, one-third more must be sent than when the price is 40*. Thus, so far as exports and imports balance one another, the state of the exchange produces no effect, but so far as debts are paid by exports, the low price is a grievous misfortune to India. How Mr. Mackenzie can call this misfortune a benefit surpasses my comprehen- sion." It will be observed that Mr. Mackenzie says : — " It " is futile to contend that this state of exchanges " does not greatly benefit the shipper from India, as " for the same cause it is adverse to our home ex- " ports to India." In my letter I disprove both of these propositions, stating in full the argument about the bonus, but stating the converse merely under the expression mutatis mutandis. But there is another mode of looking at this question which may appear to some minds clearer than the foregoing : commodi- ties, when they come from India, can be exchanged for the same quantity of silver as formerly, and this silver can purchase the same quantity of commodities to return to India as formerly. Commodities from India, however, can only be exchanged for a much smaller quantity of gold, and commodities sent in payment of debt have to be exchanged for gold. This necessi- tates a much larger quantity of commodities to be sent in payment of debt, and causes a corresponding loss to India. 9388. It has been suggested that the fact that the gold price of goods exported from this country to India would be necessarily lower than it would have been before is a mischief as regards this country, because it takes away the profit which is made upon the manufacture of the goods and compels or may compel a diminution of wages in this country ? — The appreciation of gold is a very great disadvantage to the capitalist in this country until everything is rio-hted ; until all his obligations can be expressed in th^ new terms, wages among them. 9389. So that it would tend to a diminution of wages ? — Eventually. 9390. What have you to say with regard to its effect upon India and Indian officials ? — I think the letter I have just read sufficiently answers the question as regards ladia. 9391. That is the effect upon India. The Indian officials' would suffer, I suppose, so far as their pen- sions are paid in silver, by the diminished value of silver as compared with gold? — There is no doubt that they suffer considerably from a practical point of view. I hardly know how to give you my ideas upon that subject, for I think when things are righted it will make no difference at all. As I have said before, when everything is righted I anticipate a crisis, I cannot help saying so, I anticipate a crisis in wages, and when that takes place it 'will most likely be in consequence of some other crisis happening. It is a long time coming, but after it has come eveiything will be righted. 9892. What is suggested against that view of everything being righted is that whilst it is admitted that if silver now remains stationary in price or value everything would be righted, it is said you can never have things righted, because the price of silver is continually chauging, and therefore this righting of things is continually going on, and there is no finality ? — The gold price of silver has remained tolerably stationary for some considerable time, but wages have not gone down at all to correspond with the apprecia- tion of gold, and a great many other things in like manner have not gone down. Rent has not gone down. 9393. The rent of agricultural property surely has gone down very much ? — But we were not talking of agricultural property just now, I think ; the subject that I had in my mind was the Anglo-Indian officials. 9394. What you piean is that aU rents have not gone down ? — No. There was a very clever letter, as I thought, in the Morning Post from Colonel Hughes- Hallett upon this subject. He said many people con- sidered that the officials were very much worse off, with reference to their receiving pensions payable in rupees, when they had to spend the money in this country, and with reference to the money which they sent over from India for their families living in this country, but thought, with reference to all that part of their expenditure which occurred in India, that they were under no disadvantage. But Colonel Hughes-Hallett said that a great number of the articles that they required for their use in India really came from this country, that these had not gone down in price, and therefore that exactly as the ex- change altered so their incomes went less far. 9395. Did he indicate what the articles were which now fetched the same gold price, and there- fore a higher rupee price ? — He says : " Look in any " direction, crockery, glass, cutlery, plate, ornaments, " books, clothing, boots, toilet materials, medicines, " groceries, all liquor from whiskey upwards, saddlery, " these and other things are aU from England." 9396. That, of course, would be correct so far as regards all articles the gold price of which had not fallen in England ? — Exactly. 9397. I observe that you object to the expression " depreciation of silver " ? — Undoubtedly, because I believe silver can buy everywhere as much as ever it did, except gold. 9398. Surely not, if that statement is correct ; silver will not buy as much as it did before of all the articles which are enumerated there ?— "No, it will not ; but this is because of the extra profits made by the shopkeeper and his servants. 9399. Now is not the expression " depreciation of silver " a proper expression, inasmuch as all gold prices have not fallen ? — All gold prices have not fallen, though they have almost all fallen in wliolesale. Those which have not fallen give extra profit to some- one. There is great tenacity in keeping up prices. . 9400. Take rents, which you say have not fallen If silver will not purchase as much of household accommodation as it did before, does it not show' that silver is depreciated ? — Yes, with reference to these exceptional things it is, of course. 9401. {Mr. Barbour.) Have you any facts to show that the rent of houses has not fallen, because it was mentioned to me a few days ago that the rents in some places had fallen very largely ? — Oh, yes, some Mr. D. Watney. 5 Dec. 1867. 206 ROYAL COMMISSION ON GOLD AND SILVER ; Mr. D. Watney. 5 Dec. 1887. rents have fallen, also some wages. Those that have gone down will not have to go down when that crisis I was speaking of comes, but those that have not gone down will have to go down. 9402. {Mr. Chaplin) You say that wages have fallen ? — I do not think they have fallen universally, by any means. I think there is a very large fall in some. 9403. In what particular class, artizans ? — ^Artizans have nearly the same wages now as before the appre- ciation of gold. This is one of the causes, I believe, perhaps the principal cause of the depression of trade. To the loss of trade caused thereby I attribute the number of men now out of employment. 9404. And agricultural labourers ? — Agricultural labourers must be vastly better off than they were 20 years ago, 9405. Is that borne out by facts and evidence on the subject ? — I can give no evidence as to the fact. I am merely stating what I hear is the universal belief. 9406. Are you well acquainted with the con- dition of agricultural labourers ? — No, I do not think I am an authority on the subject. On the subject of depression of trade there is a peculiar phenomenon which has never been published by me or, so far as I believe, by anyone else. Being a creditor nation, we have been receiving interest from our debtors in goods. Let us suppose all to have been paid in wheat. The appreciation of gold caused more to be sent. The tendency of sending the in- creased quantity was to lower the price still further, and this lowering of price increased the debt when expressed in terms of wheat, thus causing even more to be sent. During the years when gold was going up in value, i.e., until the price of wheat reached about its lowest point, this mysterious cause was being added to all other causes, and was producing a great depres- sion of trade, in other words, was rendering trade difficult to be carried on without loss. The usual tendency is that when the price falls, it checks pro- duction. The peculiarity here is that it stimulated production. 9407. {Chairman.) Now, with regard to the suggested, remedies, specially the remedy of bimetal- lism ; do you think that a bimetallic arrangement such as that suggested would be beneficial ? — ^No, certainly not. 9408. Would you give us your reasons for saying so ? — "Well, I suppose that in giving an answer to that question one might be allowed to consider whether the thing is possible, because if it is not possible it is hardly worth while to entertain it. Probably the first thing to know is what are the necessary conditions of the problem. I think that first of all there must be a treaty with all the coin-using nations of the world ; I mean including China and India. I cannot excludri them. I know that bimetallists wish to do so, but I could not exclude them. 9409. {Mr. Barbour.) You speak of China as one of the coining nations of the world, but I think the Chinese Government does not issue coins at all ? — Well, but they use precious metals. 9410. They use precious metals, but I think it is private individuals who use bars or pieces of silver. I think there is no mint in China ? — The fact whether it is a State regulation of coinage now or not does not matter ; it is private now ; it may be a State regulation in five years' time. 9411. {Chairman.) Therefore, you include it because, if not now coining, it might coin, having a silver standard ? — Yes ; at any rate it uses precious metals to a very large extent; in what form it uses them I do not think is of any consequence for our present inquiry. 9412. You say that the first condition would be to get the consent of all these nations ? — Of all these nations. 9413. Do you think it would not work if you excluded China and India ? — Supposing that they are now using principally silver there, and supposing that after we had started it they were to change their cur- rency to gold, it would so completely upset the whole of the calculations that it would be impossible to con- ceive what the effect of it would be. 9414. The first condition is that all nations must concur ; what is the next condition .? — Well, of course, they would have to concur in the idea, not only of bimetallism, but also as to some ratio. I cannot imagine the ratio myself. They all say 15 J to 1. 9415. But you do not think all nations would be likely to concur in such a ratio ? — I do not see how they could at present. It seems a most extraordinary thing when the ratio is upwards of 20 to 1 that it should be changed all in a moment to 15^ to 1. It seems a sort of arbitraiy change that I cannot imagine. 9416. What is the third condition ? — I consider there is a most important condition that would have to be introduced into the treaty, which would be the relative quantities of the precious metals which are to be held in every country, and a proper arrangement made so that these relative quantities should be altered from time to time as the demand for the one or the other became greater. 941 7. Why do you consider that a necessaiy con- dition ? — You must take care in this case that the ratio is the exact ratio, as nearly as possible the ratio that is in the market ; if not, it would break down, the same as it did when Germany flooded the bullion market with silver and absorbed gold. 9418. What is suggested is that the fact that the mints of the agreeing nations coined silver or gold indiscriminately at a fixed ratio would be sufficient to maintain that ratio between the two metals ? — It has failed so far, and I do not see why it should not fail again. The bimetallists assume that bimetallism caused the ratio to be moderately well maintained during the 70 years so much talked about ; but they neglect to consider the extraordinary coincidences that took place during those 70 years. When the counter- balancing coincidence did not happen to arise the whole thing broke down. Who could have expectedj when gold was found in large quantities in Cali- fornia and Australia, that France would have absorbed such an enormous quantity of it ; and who could have supposed that, liberating as France did large quantities of silver, India would take that silver away ? 9419. You regard the comparative fixity of the relative value of gold and silver during those 70 years, or nearly 70 years, as due to accidental circum- stances, and not as the effect of the then mint regulations ? — Certainly not cause and effect with reference to the mint regulations, though, of course, they assisted very much as between one time and another. I have compared that to the fly wheel of an engine. It equalises the speed between one time and another ; but it has no force, no power. Bimetallism has no power; it is merely something which, by oscillating in the reverse sense to the immediate ten- dency, will influence changes so that they may take place quietly. It has no effect except when there are nearly equal causes operating in opposite ' directions ; and then it would appear to the unphilosophical looker- on that neither cause was in operation. 9420. {Mr. Chaplin.) But it did keep the ratio quiet ? — It did keep the ratio quiet within time, ■ that is between one week and another, and I think it checked speculation which would have been a very sad thing. 9421. I understand you to say that it liad the effect of keeping the ratio steady for 70 years ? — No, I do not say it ; I say it is stated. 9422. {Chairman.) You say the keeping of the ratio steady was an accident or a coincidence not dependent on the existing bimetallic regulations? — Certainly. 9423. {Mr. Chaplin.) You think the existing mint regulations during those 70 years had nothing to do with that ? — No, I do not say they had nothing to do MINUTES OP EVIDENCE. 207 with it. I think they had something to do with it ; I think they kept speculation out and gave general con- fidence. Besides they steadied people's minds so as to prevent panic and. violent fluctuations. 9424. Had they a good deal to do with it ? — Very little, for their effect was only felt between short periods of time. 9425. {Mr. Barbour.) You compared bimetallism to the fly wheel of an engine. You would not deny that the fly wheel of an engine is a very useful thing?— Oh, no; I think bimetallism would be a most useful thing, provided it were practicable. 9426. {Chairman.) You have given us three neces- sary conditions ;. have you any other to add ? — No, I do not think there is any other necessary condition, but if you were to have bimetallism, I have stated very clearly what an alteration it would make to con- tracts. I do not know whether morality would not require that every contract should be considered with a view to compensation on one side or the other. 9427. In what way do you suggest 1;hat the alteration would alter the relative situation of con- tracting parties ?~I cannot tell you unless I know how many and what countries are to be included in the treaty. It is evidently the wish of the bimetalligts to include no countries which would create a demand for gold, their object on the other hand being to sub- stitute silver as much as possible for gold. By this process gold would fall in value and silver would rise. Perhaps the two metals would approach in value to one another till they reached a less ratio than 20 of silver to one of gold. If any such ratio should be adopted — in my opinion an idle supposition so long as China and India are left out of the treaty — debts now payable with gold would be payable with the cheaper metal. Between paying debts with a cheaper metal and with clipped coin I see no essential diffe- rence. This I consider is the object of the bimetallists, and would lead to a rise of prices which would be a corresponding benefit to debtors. I have previously said that in my opinion India and China could not be left out of the treaty, and I wish it to be understood that my arguments founded on any other basis are academic rather than practical. 9428. {Mr. Barbour.) Is it not an object of the bimetallists to secure a fixed par of exchange between gold and silver countries, apart from the question of raising prices ? — They say that. 9429. Is not that put forward as one of the pos- sible things ? — I think it may be put forward, but we do not think very much of those little arguments. 9430. {Chairman^ But I understand you to say that you think that if bimetallism could be arranged it would be a good thing. I suppose the reason why you think it would be a good thing would be, not that it would raise prices, but that it would create fixity of exchano'e between the gold and the silver countries ? Exartly. Well, it would be comparatively fixed. Of course, you know there is no such thing as a fixed ratio possible in the world. In my published writings I have said : — " Let us imagine the great silver pro- " ducing country to exist in longitude 90° west, and " the great gold producing country to exist in longi- " tude90°east. Each precious metal would be cheaper " in its own producing country than in the other. " All intervening countries would be affected in like " manner, though probably in a less degree." In order to fix the ratio it would be necessaiy to abolish interest and cost of transit by the annihilation of time and space. . .. 9431. You would say comparative steadmess ot the ratio? — Comparative. There was only compara- tive steadiness during the 70 years when the ratio went up to 15 '83 to 1, and went down a good deal below jgi to 1, and there were times, I believe, when in France you could not get silver change, 9432. And there were times, we have heard, when "■'old was at a slight premium ?— Yes. I do not know whether I might, upon the pomts that have just been raised, suggest a consideration ; supposing that India and China were to join the bimetallic treaty, what would be the effect of it ? — I think it would produce an enormous effect upon the demand for gold because they must have their proportion of gold there, the same as we should have our proportion of silver here. It would create a demand for silver here and for gold there. I do not know what it would do in the United States. They have so much silver and so much gold that possibly it would make very little diffe- rence to them. France also has a very large quantity of silver and of gold, and so has Germany. We do not know how much silver Germany has, because they do not pubHsh the accounts, so I have been led to understand. It might very possibly happen if India and China were to be included that the demand for gold would be very much increased, and that we should have in consequence of that, instead of a rise in prices, a very considerable further reduction of prices. It is easy to determine the tendency of a cer- tain cause to produce a certain effect, but I doubt if any man could estimate the extent of the effect of the causes now under consideration. My opinion is that the man does not live who could do it. 9433. Do you think that there are other means than bimetallism by which an economy of the use of gold might be effected, and so the suggested scarcity caused by the adoption by Germany and the United States of the gold standard be obviated i* — I have suggested three, The first is the issue of 1^. notes. I have not developed that idea in print, but I have made a little memorandum here of what was in my mi ad when I suggested it. I assume that the gold in the hands of the public, besides banks, is 75,000,000/. \l. notes might be issued and might come into general use to the extent of 45,000,000Z. If they did not come into general use the whole thing would fall to the ground. All this gold would come into the issue department in exchange for'the notes. Then I assume that the fiduciary issue of the bank njight be increased by 15,000,OOOZ., thus leaving in the issue department 30,000,000/. of gold out of the 45,000,000/. ab- stracted from circulation. There would be no use, of course, for these 15,000,000/. of gold. The new fiduciary issue would represent it ; therefore it would have to leave the country, and would be thrown on the bullion markets of the world, thus slightly per- haps inappreciably lowering the price of gold. 9434. What advantage would you gain by that ? — It would have an effect, but it would be a sUght effect, and I thought it propej* when I was vsrriting to state all that I could think of. I wanted to econo- mise gold, and I thought this was a mode of econo- mising it, and therefore I put it in. 9435. {Mr. Barbour.) May I ask why you wish to economise gold ; with the view of raising prices ? — It would have the effect of raising prices there is no doubt, though to so slight an extent as to be almost inappreciable. 9436. Is that the object ? — That, is one of the objects. 9437. Then you think the appreciation of gold affects us injuriously so far as it lowers prices, and your object is to obviate the effects of the appreciation of gold, and therefore to raise prices ? — It would have that effect. It would be our contribution — the only one I know of that we could make by legislation. 9438. {Chairman) What I understand you to suggest is this, that if the currency difficulty is to be remedied and to be met, rather than meet it by bi- metallism you would meet it by the suggestions you are making ? — Yes. _ I can quite see that people may taunt me that my wish is to get prices raised. But I think it would be perfectly legitimate, for economy can never be a wrong policy. Eaising prices by economy is very different from legislating that debtors may pay in cheaper coin. Besides this it would have other effects which would benefit the country. I'irstly according to my supposition, the issue department would then hold its present 20,000,000/. as well as the 30,000,000/. withdrawn from circulation, together Mr, D, Watney. 5 Dec. 1887. 208 KOTAL COMMISSION ON GOLD AND SILVER: ^-^'■- 50,000 OOOi of gold, I think this 50,000,000/. would £). Watvey. ^^ ^ ^^^^ ^^^^^^ evidence of Strength, and would 5 Dec 1887 produce a considerable effect on the public mind. :_ ■ Such a quantity of gold could hardly be expected to fail, and would most probably take away all prospect of panic. Secondly, supposing the circulation of \l. notes reached 45,000,000/., of which 15,000,000/. were fiduciary issue, the annual gain of interest would be 540,000/. In my published writings I have assumed the nett expense of the note issue at 50,000/. a year, allowance being made for the saving of the loss by abrasion. But on these points I have no special knowledge, and only mention them in order to indicate the necessary conditions of the problem. If the issue of 1/. notes should cause much greater confidence to be felt by the general public thereby reducing to a minimum the chances of a panic, and if it should lead to a saving of 400,000/. a year, I could well bear the taunts of those who should say that it would also slightly raise prices. Perhaps I may be allowed to add that I do not use these figures for any other purpose than to fill up the argument, which I contend is good whatever figures are used. The conclusion is that, if 1/. notes are issued, it might be desirable to increase the fiduciary issue from time to time by one-third of the amount of the 1/. notes issued. 9439. (Sir John Lubbock.) Would you propose that the Bank of England should keep the numbers of the notes and keep the notes themselves as they do now with the 5/. notes, or do you propose that they should reissue them, or have you not gone into that ? — I liave not gone into that. • 9140. You do not know what the cost would be i —No. 9441. Have you looked into the great forgeries of 1/. notes when we had them in the beginning of the century, and which led to their abandonment ?^No. 9442. You have not considered those points ? — I hai-e given them consideration, and I know they are important points, but I cannot give you any evidence upon them. 9443. {Mr. Montagu.) You assume that there is 75,000,000/. of gold in circulation in Great Britain ? — Yes. 9444. But are you aware that bank notes are les;al tender in Ireland and Scotland, ana that the 1/. notes exist there ? — Oh, yes, I know. 9445. Therefore you take oflf, would you not, from your estimated circulation of gold the amount circu- lating in Ireland and Scotland ? — ^Well, I do not wish to go into so much detail as that. 9446. I think that no one has proposed to issue so large an amount of 1/. notes. They may be issued for the convenieuce of those who desire them, but your proposal would be rather to force them into circulation ? — Oh, no. 9447. You would hardly expect people for the sake of convenience to take so large an amount in 1 /. notes ? They might in time. When travelling in Scotland I found a large number of 1/. notes. People seem to like them there, and if they liked them here they would take them. 9448. If the eflect of issuing 1/. notes raised prices, virould not that also affect contracts ? — The issuing of 1/. notes, taken by itself^ would have no effect on prices. The increase of the fiduciary issue would have the same effect as altering contracts, but the contracts would not be altered. 9449. {Chairman.) Your next suggested economy is an increase of banking facilities ? — Yes. 9450. You anticipate that there will be increased banking facilities in foreign countries which have not adopted them so fully as we have ? — Perhaps I have no right to anticipate an increase of banking facilities in foreign countries, but I am sure, if such increase were to take place, it would be a great benefit to them. If my estimate of the possibility of liberating by means of banking facilities 200,000,000/. from circulation in France is correct, the profit to the nation would be certainly 8,000,000/. a year. There might also be, I believe, a still further increase of banking facilities in this country. The effect on prices of such transactions would be a prodigious rise, and in comparison the issue of 1/. notes, accompanied by an increased fidu- ciary issue, would be a mere bagatelle. And it should be observed that the increase of banking facilities would be carried out by the action of private indivi- duals, and require no legislative or State action what- soever. 9451. I think you had a third suggested eco- nomy ? — Of course that does not come in the slightest degree within the power of this country; it is for other countries who have now a gold currency or a quasi-bimetallic currency to adopt a silver currency. 9452. Then you would not suggest that for us, I suppose? — Not at ail ; we should not do it because being a creditor nation it would bean enormous injury ■ to us. The other countries in the world have brought this difliculty upon themselves. The United States more particularly I am thinking of. 9453. I think that covers all you have to say about economy of gold ? — I think so. I may, however, add I feel perfectly certain that the United States are going to adopt a silver currency, or else the Bland Act would be a foolish thing, [n fact if they had intended to adopt a silver currency, they could not have matle a better preparation than by passing the Bland Act, which requires that at least ii,000,()00 silver dollars should be coined every month. This has been going on for the last nine years, and is going on now. The old vaults are full, and new vaults have lately been erected in which to store the dollars. 9454. You mean that paves the way towards the adoption of a silver currency ? — Yes, people say they have done it innocently, but if they had had the longest heads in the world they could not have adopted a better method. 9455. May they not have adopted it because the silver interest was strong, and those who had to sell silver were powerful .' — I know that. On the other hand, it may have been in order to hide their design that they proclaimed their wish to benefit themselves. 9456. {Mr. Barbour.) I think one of your chief objections to bimetallism is that you could not get all the nations of the world to agree, and you could not be sure that they would keep the agreement. That is one objection ? — Yes. 9467. After the principal nations of the world had agreed, India and China might become bimetallic, or might start a gold currency and create such a demand for gold as to destroy the effect of the bi- metallic agreement ? — When I said that I said also that I did not conceive it possible that a bimetallic treaty could be entered into unless those two countries did join. 9458. And you could not depend upon such a country as China, I suppose ? — No, I could not. I do not know anything about the civilisation of China. 9459. What you propose is various measures that would effect an economy of gold ? — Yes. 9460. But supposing that after these measures had been introduced, and the economy of gold had been effected, China started a gold standard, would not that swallow up all the results of the economy of gold ? — Yes, it would, and we should have to take other measures for economising gold. 9461. We should be no better off than we were ? — Possibly no*. 9462. So that the objections to bimetallism apply also in some degree to your scheme for the econo- mising of gold, unless you can get an understanding with all the chief Powers. And if you cannot get an understanding for bimetallism, I suppose you could not get an understanding for a scheme such as you pro- pose ? — I should not ask for it. But I think it hardly fair to call mine a " scheme " for economising gold, for my proposition of issuing 1/. notes and of increas- ing the fiduciary issue by one-third of the 1/. notes issued is the only one which would require legislative sanction. I have explained that it would affect the MINUTES OS" EVIDENCE. 209 value of gold very slightly, its chief advantages being collateral. My second proposition, as regards bank- ing facilities, would be entirely dependent on indivi- dual effort, and yet this would be by far the most efficacious of the three. And the third, the change of the currency in the United States, from gold to silver, though within the scope of legislative action there, could not form the subject of a treaty. 9463. But if after you have effected this economy of gold Austria resumes specie payments on a gold basis, you would be no better off than you were befor'e ? — The same remark applies to Austria as to China and India. 9464. Or suppose that India adopted a gold stand dard, a measure which has been proposed, then that also would be sufficient to swallow up all the economy of gold ?- — Yes, of course, if India is stupid enough to do it ; the loss to India would be stupendous. 9465. May I ask how India would lose by adopting the gold standard? — By the demand for gold that would be created. If she had a gold standard the debt would be thereby increased enormously. 9466. But suppose she adopted the gold standard at the market ratio of to-day, 20 to 1, it would leave matters very much as they are, would it not ? — A gold standard is a gold standard ; there is no ratio then. I do not agree that the ratio between silver and gold to-day is 20 to 1. 9467. But in changing from the present silver coins to the future gold coins, she might adopt the ratio of 20 to 1, so as not to increase the burden, you know ? — You could not have a gold standard for India without having a large stock of gold in India. 9468. But there is a very large quantity of gold in India ? — I know. How are you to get it ? 9469. Of course there is a difficulty; I do not deny that ; but India does import at the present day 3,000,000/, sterling worth of gold every year, and about 5,000,000/. worth of silver, which is mostly coined. If she adopted a gold standard, I presume, instead of importing 5,000,000/. worth of silver every year, she would import 5,000,000/. worth of gold, and coin that every year ? — Possibly. 9470. Do you see any objection to that ? — I think it would be a great demand on the stock of gold in the world. 9471. But if these difficulties in silver continued, India might be forced to that course in self-defence ? — Forced to injure herself! forced to stab herself! I cannot imagine that. There is no reason in it. It would be the most awful catastrophe for India to have a gold standard. 9472. (Sir T. Farrer.) You mentioned a crisis once or twice which you thought was likely to happen. I did not quite understand what you meant that it was, or what you supposed it would arise from ?— I assume that there are currency troubles in the world, and I assume that they will right themselves. As soon as all prices come to a natural level again there will be no longer any trouble, and I do not think it is Ukely that they will get to a natural level again without a crisis. 9473. Then do you think that the fall in prices which has occurred is due to the divergence of gold and gjlver ? — No ; not to the divergence between gold and and silver. The fall in prices is a necessary coin- cident of the appreciation of gold. I do not see any- thino- else. Silver is merely one of the commodities that have altered. 9474. But do you think that the appreciation of gold or the fall in prices arises from the scarcity of gQl^ V Not from the absolute scarcity of gold, but the scarcity of gold relatively to the use to which it is now being put, as I think, most foolishly. 9475 Then you do think that this fall m prices is due to the alteration in the relation between the demand for and the supply of gold ; is due to an in- creased demand or a diminished supply, or both ?— It i=i due principally to an increased demand, though, of courBe, it so happens that there was a reduced supply o 51080, at the same time ; but that was a very small cause in comparison with the increase in the demand, because when you come to work out the figures you find that the increase of demand was prodigiously large, and the decrease of supply was comparatively small. 9476. {Sir John Lubbock.) Have you formed any estimate at all what the fall in prices has been, say, since 1874? — Well, I generally say 33^ per cent., but I find it is extremely difficult to arrive at anything like a precise figure. 9477. I suppose you would agree, would you not, that the demonetisation of silver by Germany and the closing of the mints by France and the Latin Union have considerably decreased the demand for, and therefore the value of, silver ? — Yes, but other causes have neutralised that. Silver has not gone down in relation to commodities. 9478. But you consider that part of the fall in silver in relation to gold has been due to the demone- tisation of silver by the mints of the Latin Union ? — Yes ; but it would be much more agreeable to me if I might put it that the cause of the great appreciation of gold is that there has been great demand for gold in the United States, Germany, and elsewhere. 9479. That was not the question I asked you. I was speaking with reference to silver. You wUl agree that silver has been demonetised by Germany, and the mints of the Latin Union have been closed, and the question I asked you was, whether you con- sider that that had had much effect on the value of silver ? — So far as it put silver on to the market of course it had the effect of lowering the value of silver. It had a tendency in that direction, but as there is no actual depreciation of silver there must have been other causes to counteract it. 9480. Then do you consider that the value of silver now is what the value of silver- used to be, and that the difference is owing to the appreciation of gold ? — Yes. 3481. Several witnesses who have been before us have attributed part of the fall in the other com- modities to the great increase in the supply, owing to diminished cost of production, cost of transport, and so on ; do you doubt that ? — Well, I suppose there must have been a decrease in that respect ; of course there must have been a decrease of expense. I know many people who have thought that there has' been over-production. 9482. But they have taken, for instance, the price of wheat, the pnce of sugar, the price of various other commodities, and they have pointed out the great increase in the stocks, the great increase in the supply, the greater facilities of transport, and have expressed the opinion that the fall in prices of those articles has been mainly, or perhaps even some of thein entirely, due to those causes ? — Well, the de- creased cost of production is one thing, but the in- creased production or over-production I cannot imagine to exist, for I believe that in every trade now goods are going more directly to the consumer than ever they did before, and if there are fewer goods held in ware- houses and so on, which I believe is the fact, there must be fewer stocks, and, in fact, even the change from sailing vessels to steam must have enormously decreased the stock of commodities in the world, and therefore I cannot see that there is any such thing as over-production. 9483. Do you mean to say that you consider that there is a smaller stock of most of the staple articles in warehouses than there was 20 years ago ? — Yes ; I believe so. Probably iron may be an exception. 9484. Now taking the ease of sugar, there has been a very considerable fall in the price of sugar. Is it only affected owing to the appreciation of gold, and do you consider that the real value of sugar is the same as it was 15 years ago ? — There is no doubt that sugar has had various causes to operate upon it. 9486. Again, take the case of wheat ; do you con- sider that the real value of wheat is the same as it Dd D. Mr. Watney. 5 Deo. 1887 210 ROrAL COMMISSION ON GOLD AND SILVER; I). ■^f*"' was? — No, I think that wheat has fallen in price Watney. jj^^^^g ^|,g^^ 331 pg^ cent., and I think the same with 5 Dee 1887 sugar. ' ■ 9486. Then 33 pei* cent, of the fall you attribute to an increase in the value of gold, and anything over and above that to a fall in the real value of the article. Is that your contention ? — It is very much like that, but I should be very sorry to pin my faith on to the 33. You see I hold that gold has appre- ciated with reference to silver about 28 per cent. 9487. I think you have already expressed the opinion that the ratio of silver to gold being 20 to 1, there would be great injustice in compelling those who had made contracts in silver at that ratio to fulfil contracts at the ratio of 15^ to J. I think you have already expressed your opinion on that ? — Yes ; and further I think it unjust for the Legislature to alter contracts, however or whenever made, unless compensation is made to the sufferers according to the price current on the day of the change. 9488. Supposing bimetallism were adopted with the ratio of 20 to 1, would you consider that that would have any effect upon prices ? — Well, I think it would. 9489. Are you prepared to express a decided opinion upon it ? — It would be a very slight altera- tion, because it would not be far from the market price. 9490. You think it would have an effect, but a very slight one ? — Yes. 9491. (Mr. Montagu.) Do you say that increased circulation tends to lower prices ? — Certainly. 9492. And if you increase the circulation, say, by the issue of paper or anything of that kind, would you not lower the value of money and lead to the export of gold ? — If the paper were founded on gold it would be the same as gold. 9493. But would it not lower the value of money and lead to the export of gold ? — You cannot increase the circulation without decreasing banking facilities. 9494. I will put it in this way, suppose 3,000,000/. of gold should arrive in this country and go into cir- culation naturally, would you not lower the value of money and lead to the exportation of gold ?— There is no demand for it here ; we do not want the 3,000,000/. of gold, and therefore as soon as it came it would go, because there is a demand for it elsewhere. It is not wanted here. 9495. But I understand you to say that increased circulation would lead to a demand for gold. Would not it lessen the demand for gold ? — I do not know how anybody is to provide for an increased circulation, except by creating a demand for gold ; that is, sup- posing the fiduciary issue is not changed. 9496. But surely if gold arrived in this country and was taken to the Bank of England, and notes issued against it, that would increase the circulation, would it not ? — Yes, if anybody took them. 9497. They must take the notes against the gold they deliver ? — Yes, but they do not want the gold, I suppose, and I cannot imagine the circumstances that are being considered. 9498. Do you see any connexion between the fall in the rupee and the fall in wheat ? — Undoubtedly, because gold is appreciated, and, therefore, it affects all commodities, silver among them. 9499. You stated that an exporter of wheat from India received as much goods as formerly. Would you take the instance of copper, which, I believe, is largely exported to India, and has risen now 50 per cent. ? Of course you would expect that the exporter of wheat from India would not receive the same amount of copper as formerly, owing to this great advance ? — I was very desirous, if I possibly could, not to take up individual cases of that description. I thought that it was generally assumed that gold had appreciated with reference to almost all articles, and I take that as the basis of my argument. 9500. We have heard it stated that the fall in the rupee is a benefit to India. Do you agree with that ? — I daresay you notice how very much dis- inclined I am to say that there has been a fall in the rupee. 9501. The rupee is now 1*. 5d.; it was 1*. lid.? — I say there has been a rise in gold, but there has been no fall in the rupee. I have a gi'eat objection to the phrase a fall in the rupee. I prefer to call it a rise in gold ; I understand that, but I do not agree there has been a fall in the rupee. 9502. Supposing that Germany saw no advantage in continuing to hold her useless silver and sold it, would not silver and also rupees decline in value ? — Undoubtedly, by throwing more silver on to the market of the world ; there is no doubt it would have an effect that way. 9503. (Chairman.) But in that case would not you call it a decline of the rupee rather than a further appreciation of gold, inasmuch as it is produced by an increased supply ? — It is very possible it might be then. It has not arisen yet. In fact, all the silver that has been thrown on the market has been more than absorbed, for silver is slightly appreciated. I am very strong upon that point. I am sorry to be so pertinacious, but I cannot agree that silver has gone down in value. 9504. (Mr. Montagu.) Why should a bimetallic convention, say, at 20 to 1, break down, if all the im- portant nations joined in it ? — I should have to sup- pose that everybody is wise to suppose that it would remain. I cannot suppose that everybody is wise. Just think of the folly of the United States when they were a debtor nation in adopting a gold coinage. They knew nothing about currency matters ; they did not know that it was going to increase their debt enormously. 9505. Is the United States a debtor nation ? — I call it so. 9506. What leads you to suppose that ?— Well, I believe there are enormous quantities of stocks held in this country for railways and all sorts of industrial enterprises for which dividends are received in this country. Besides, if you look at their imports and exports you will find that invariably they are a greater exporting than an importing nation. 9507. You are aware that almost all her public debt is held in America ? — Oh, but that is very small in comparison with the other debts of the United States ; so I believe. 9508. Do you think France could alone maintain bimetallism at the time, 1873 ; do you think she was able to maintain bimetallism alone ? — Oh, dear no. 9509. And, therefore, you use tlie refusal to help Germany to exchange her silver for gold as an argu- ment against bimetallism ? — Yes ; but I prefer to change the word refusal into inability. 9510. Because Trance singly could maintain it, and refused to help Germany to exchauge to gold, would you consider that an argument against universal bimetallism ? — Again I deny that France could singly maintain bimetallism. In fact, it broke down upon that point. It is difficult to imagine a stronger argu- ment. 9511. Bimetallists do not for a moment assert, I believe, that one nation or two nations could maintain the bimetallic convention ? — No, they have various views. I have had a long correspondence with Mr. Grenfell, who thinks one nation is quite enough for it. 9512. Would you think that a bimetallic ratio of 20 to 1 would interfere with contracts ? — ^It would, I think, to a small extent, very likely. 9513. Considering that it did not raise silver at all, would it interfere with contracts ? — It would raise silver in comparison with its present price; that is to say, if you paid in silver instead of in gold — to that extent it would be an injury. 9514. You advise foreign countries to adopt silver currency while we keep out of it. Do you think that MINUTES OF EVIDENCE. 211 advice is likely to be followed ?— There again T have to make an estimate of the folly of mankind. 1 Lave said it would be to the interest of the United States to adopt that policy, and that therefore it would be foolish for them not to do so. 9515. Do you think any other country has a gi-eater interest than this Empire in silver ? — This country has little interest in silver. It would be to the interest of thi« country that every other country should adopt a gold currency. 9.516. If the United States of America followed your advice, and became monometallic on silver, do you not see great danger in her supplanting us in the trade with India and the East ? — Oh, dear no. 9517. Tou see no facility, then, between one silver- using country arid another trading ? — Oh, none what- ever ; that is only a bogey. 9518. And you think that if a man imported from China, tea, and had to fix his price in silver, that he would be under a disadvantage to an American who had silver ready at hand ? — Oh, no ; it makes no difference, whatever the currency is. I hope you understood me to say just now that a universal gold, currency for every country in the world would be the greatest possible advantage to this country, because we are the greatest creditor nation in the world, and it would increase the world's debts to us enormously. This is an undoubted fact, though no one could pro- perly, I may say honourably, recommend it as a policy. Mr. D. Watney. 5 Dec. 1887. The witness withdrew. Adjourned till Friday. FORTY-SECOND DAY. Friday, 9th December 1887. PRESENT : The Right Hon. LORD HERSCHELL, the Chaibman, presiding. Mr. D. M. Barbour, C.S.I. Me. J. W. Birch. Mr. H. Chaplin, M.P. Sir T. H, Parrer, Bart. Sir John Lubbock, Bart., M.P. Mr. S. Montagu, M.P., and Mr. Geo, H. Murray, Secretary, Lord Addington called and examined. Lord Addington. 9519. {Chairman.) You are one of the directors of the Bank of England ?— I am. 9520. And have given considerable attention to these currency questions?' — To currency questions generally, but to the bi-metallic question I cannot say that I had given much attention, until your Lordship's invitation was read to the Bank Court, which I felt I ought to respond to, if I possibly could, and there- upon I prepared this paper, which I put in in place of verbal evidence. The Theory of Bi-metallism. Many trades and industries have recently suffered, and the severe and general depression of price for agricultural and manufactured products has entailed serious loss on those engaged in the production of such articles. Amongst the articles which have materially Fallea in price silver is conspicuous. The price of bar silver in 1873'having been 60 pence per oz., and now in June 188/ being 44 pence per oz. The fall of silver as compared with gold is a tar more important incident than the faU of price in any other pommodity, for silver is a precious metal; it is in many countries the medium of exchange and the measure of value and a fall of prices estimated in silver as a measure of value, has, consequent upon the fall in silver as a 9 Dee. 1887. commodity, varied still further from the level of prices previously expressed in gold. This conflict of standards has been especially vexatious in the dealings between Kngland with its gold and India with its silver standard of value, and while all concur in the advantage that would accompany a common standard for the two countries, no agreement has yet been attained as to the mode of procuring it. The most prominent of the competing schemes is the one designated Bi-metallism, which may be thus defined : — Bi-metaUistn is the combination, — for the purposes of currency, and as the standard of value and measure of price, — of gold and silver in a fixed ratio to one another (say of 1 part of gold to \b\ parts of silver). The civilized nations of the world would join in the adoption of Bi-metallism by an engagement .ijehjeh would involve an obligation to coin, free of charge, or at a uniform charge, all the gold and silver brought to each national mint, they would bind themselves to constitute, as legal payments, all payments in gold and silver coin at their permanently assigned value. Upon the execution of this cosmopoUtaa treaty, Bi- metaJHsm would be estabhshed. Its consequence would be, — 1. That every standard silver coin would bear a fixed proportionate value to every standard gold coin. 2. That payments to any amount might be made in either metal at the option of the payer. Dd 2 212 ROYAL COMMISSION ON GOLD AND SILVER : Lord 3_ That silver would, as a commodity, acquire and AddingtoH. retain the value given to it by international law. 4. That holders of silver coins would possess coins of 9 Dec. 1887. invariable and international value, and that owners of • silver mines would command a certain cash price for any quantity which they could produce. 5. That fresh discoveries of either gold or silver would add to the compound mass, but would not afiFect the price of either silver or gold separately. 6. That the complexity attending' the computation of price between countries now using different standards, and the uncertainty attending the realization of transactions would, so far as they arose from the variability of the relative values of gold and silver, wholly disappear. 7. That, as touching the intercourse of India and England commercially and financially, the operation of Bi-metallism would materially diminish the clerical labour involved, and terminate the fluctuating value of the rupee. These consequences would seem to follow upon the establishment of Bi-metallism, but can Bi-metalUsm be established p An affirmative implies, — I. That all, or at least the principal, civilized nations of the world would concur in framing and observe the provisions of the bi-metallic treaty, and that each contracting state should have, as the basis of its own concurrence, a solid reliance on the good faith and capacity of every other state for the permanent observance of the treaty in all its parts. The theory of Bi-metallism is attractive, and I discover no logical inaccuracy in its construction. Its practical value must depend upon the feasibility of the premises on which it is based, and obviously this is not to be easily secured. Before, however, determining that Bi-metallism should become an object of general desire and laborious diplomatic efforts, it will not be superfluous carefully to investigate the motives alleged for its adoption. Rbasons for adopting Bi-metallism. Bi-metallism is prescribed as a remedy for commercial depression alleged to be mainly the effect of an apprecia- tion of gold. ■ The depression is unquestioned; the appreciation of gold as its cause has not been demonstrated. I will attempt to investigate the allegation. The appreciation of gold implies its scarcity, indepen- dently, at least, of those accidents which aSect its value in use and in exchange. Excluding, however, all qualifying circumstances, it necessarily ensues, upon a scarcity of gold, that' it com- mands, as capital and as currency, a higher rate of interest in use, a larger quantity of commodities in exchange. When both these indications are visible, an appreciation of gold arising from its scarcity may be assumed, but as an evidence of scarcity in the present discussion an enhanced rate of interest has been conspicuously absent. Mr. Gibbs, indeed, designates this stipulated evidence as an error, involving an ambiguity in the use of the word money. " The phrase ' Money is cheap,' has (he writes) no reference " whatever to any scarcity or abundance of coin. It " relates rather to time than to money, to the rate " interest or discount payable for the anticipation " money not yet due." Of course, time is an element in the computation interest, it measures the amount of the consideration, but the rate of the consideration for use is dependent upon the abundance or scarcity of the money seeking investment. The effect of an influx of gold may be temporary, the bullion in the bank may subside, and, concurrently, the rate of interest may decrease, but if the bullion in the Issue Department and the reserve in the Banking Depart- ment are maintained above the average level, the rate of interest will range below the average and securities will rise in value. Throughout the whole period 187^-87, to which the controversy relates, the bullion in the Issue Department and the reserve in the Banking Department have been maintained at an average level which has entailed a rate of discount indicating rather an excess, than a scarcity of gold. The bullion in the Bank of France rose in the same period from 30 to 140 millions, of which the gold alone was 65 millions, so that in the two chief financial capitals there is recorded a distinct refutation of the theory that gold has been appreciated through comparative scarcity. Mr. Gibbs thinks that the production of gold within the last 10 years has scarcely supplied the consumption and of of of wear and tear, and he States that within the same period Germany and Italy have acquired some 100 millions for currency purposes, while other states have also taken considerable sums. Upon these premises, Mr. Gibbs con- cludes (" Fortnightly," October 1886, p. 484) :— " So, then, " supply has diminished, demand has increased, gold is " dear, commodities are cheap." The propositions of this sequence seem to me irreconcileable with facts. I do not find the affirmation, " Gold is dear," to be true upon the average records of the period under review, for I hold that dearness in use is inseparable from scarcity of gold, and I demur to the exclusive application of the terms " cheap money," or "dear money," to the rate paying for a loan with few days to run, or for money at call ; a limitation which would render it irrevelant to the argument. The rate of discount for three months' bills, and the price of Government stocks and other first class securities, are real tests of the scarcity or abundance of money seeking in- vestment, and these evidences are distinctly at variance with the assumed dearness of gold from 1873 to 1887. A single proof, however, may carry conviction, and there is still offered in evidence the list of depressed prices accompanying the alleged appreciation of gold. The evidence deduced from prices, to be effectual, must, however, be universal, and the depression of prices must be capable of being distinctly traced to the influence of the scarcity of gold (or rather of gold and silver, each of which acts as a measure of value). The universality of the depression of prices may be open to argument, and the scarcity of gold may be debateable, but the connection of these two facts as cause and efEect, if real, should be demonstrated. It is here that bi-metallists fail; they assume the coincidence of depressed prices in view of a diminished production of gold, and of the adoption of a gold standard by Germany and Italy, to be equivalent to the depression of prices consequent upon a scarcity of gold, but they make no attempt to trace the economic operation. There is really no necessity for ascribing to some occult and inexplicable influence the connection between the recent decline of prices and the diminished production of gold, when, as regards a very large portion of the articles depressed, depreciation can be explained upon the recog- nized principle of supply and demand ; of supply not necessarily excessive in relation to the past, but excessive relatively to a present diminished demand. A period of prosperity leads to enlarged production ana the expansion of any branch of industry stimulates others. A multiplication of ships leads to a rivalry for cargoes, low freights lead to cheap imports, while, again, the velocity of steam, and the instantaneous telegraphic order supersede the necessity for keeping stocks. Every scientific advance tends to the depression of price. The effect of the Silver discoveries op THE Sixteenth Century. The rise of prices consequent upon the silver discoveries of the sixteenth century is cited as illustrating the con- nection between the mass of precious metals in its varying magnitude and the prices of the commodities which it served to circulate. It may be useful to refer upon this •subject to Tooke and Newmarch, " High and Low Prices," and from the 6th Volume, Appendix 2, I gather these facts : — The precious metals in the old world in £ 1492, were estimated by Jacob at - 33,342,000 Gold and silver produced from 1492 to 1600 - . . 143,668,000 Gold and silver produced from 1600 to 1700 - - - . 337,000,000 Gold and silver produced from 1700 to 1809 .... 880,000,000 Leaving, after wear and use, coin in 1809^ in Europe, Africa,"and America ... deduction made for a sum existing as 1,394,000,000 380,000,000 The effect of variations in quantity upon the power of gold and silver as measures of value must depend upon the proportion borne by the amounts newly added to the currency to the pre-e-xistent amounts; and it would be natural to find that the extensive discoveries in the 16th century would make a sensible impression upon prices subsisting concurrently with a metallic currency in the old world of no more than 33 millions sterling. The efl^ect of the new discoveries seems to have been slow and gradual, and Adam Smith remarks, " that the discovery of " the mines of America does not seem to have had any MINUTES OF EVIDENCE. 21S ■'^ very sensible effect upon the prices of things in England " till after 15/0, although even the mines of Potosi had " been discovered more than 20 years before. The price "^ of wheat had, since 1350, fallen gradually from four to '' two ounces of silver, equal to 10s. of our present money, " the price at_ which it was estimated till about 1570. ^^ " From 16/0 to 1640 the variation between the value of " silver and that of corn held a quite opposite course. " Silver sank in ixs real value, or would exchange for a II smaller quantity of labour than before, and corn rose in " nominal price, and came to be sold, not for two ounces " or ten shiUings, but for six or eight ounces of silver, or about 30s. or 40s. of our present money. The discovery of the abundant mines of America seems " to have been the sole cause of this diminution in the value " of silver in proportion to that of corn (between 1670 and 1640). Europe was, during this period, advancing in industry and improvement, and the demand for silver " must consequently have increased. But the increase in the " supply of silver, had, it seems, so far exceeded the demand ■' for it, that the value of that metal sunk considerably."* Here cause and effect are distinctly perceived, and the connection between them shown. The first owners of the newly discovered silver, barter it for the commodities which they covet. This abnormal demand for any article raises its price, whicli the purchasers readily provide out of their metallic abundance. Their customers in turn seek the articles which would gratify them, and, in the face of an enlarged demand, readily meet the higher price out of their profitably acquired silver. Another (and another) circle of operations diffuses the influence of the new demand, until the power of purchase in the silver is determined by the cost of its production.f In general terms, Adam Smith considered that the American discoveries raised the price of the quarter of wheat threefold, i.e., from two to six ounces of silver. The stock of gold and silver having, within the same period, increased sevenfold, viz., from 33 millions sterling to 220 millions. Effect of Gold Discoveries op 1848 and 1850. I proceed to the consideration of the discoveries of gold in California in 1848, and in Australia in 1850, seeking my information in Tooke and Newmarch's 6th volume, p. 368. £ The aggregate amount of gold and silver coin in Europe, Africa, and America in 1809 was estimated by Jacob at - 380,000,000 He computed the increase of that stock up to 1829 at ... 103,000,000 The exports to India and the loss by wear and tear in the same period at 483,000,000 170,000,000 Leaving for coin in Europe, Africa, and \ g^g qqq qqq America (in 1829) - - f ' ' There is good reason to believe that the total stock (of gold existing) in various forms in Europe and America in 1848 was — (Tooke and Newmarch, 6th vol., p. 230) — Of gold - - - 560 millions And of silver - 800 „ Together 1,360 „ that the new supplies of gold from 1848 to 1856 from California and AustraUa amounted to 174 millions, and that an equal amount of 174 millions sterling was in the same period added to the gold coin in England, France, and the United States, raising its aggregate by one-third from 560 to 734 million.s.^ It was to an existing stock of 560 millions in gold and silver coin that the new discoveries were to be added, and it is important to trace the effect on prices of an addition within nine years of nearly one-third. In 1849 the gold of San Francisco was eagerly sought and wrought by a vigorous company of adventurers rapidly increasing from a mere handful to many thousands. They came inadequately provided with tools or implements, yet in the earlier days of their labour they averaged 21. or 31. worth of gold dust as the result of a day's hard work. With experience their gains increased, and men have been known to gain for days successively from 100 or 200 dollars a day UP to five or even eight hundred dollars. Wealth easily acquu-ed was as easily spent ; provisions rose enormously in • Tooke and Newmarch, pp. .378, 382, 6th vol. t Tooke and Newmarch. pp. 386, 413- f Tooke and Newmarch, 6th vol., pp. 151, 169. price, eggs were sold at 4d., Sd., and lOrf. each. Sugar, tea, ■and coffee at 16s. alb. Picks and shovels at from one to three pounds each ; a suit of clothes for 200 dollars, a pair of boots for 100 dollars. Iron tacks were bought at their weight in gold. All had gold and all wanted commoditits which as yet were but scantily supplied, and of which the price was consequently extravagantly raised. The abnormal demand quickly attracted fresh supplies, and within a couple of years a strong reaction had set in. This again in time subsided to an elevated though more equable level regulated in proportion to the gains of labour at the mines. The working of the Australian mines was in full activity from August 1851 to July 1853, and during that period the rush of Immigrants to the Victoria diggings, and their successful labour, rapidly raised wages fourfold, and enormously enhanced the prices of spirits, beer, provisions, clothing, tools, carts and horses, in fact, of all commodities which the miners required.* The effect of the excessive demands by the miners was soon evidenced in the exports from the mother country, and the trade returns show that ten articles, of which the value exported to the United States and Victoria was 11^ millions in 1849, had risen to 292 millions in 1853 — the increase of 18 millions being attributable to the demand created by the gold discoveries. Rapid had been the inflation of prices and the rise in wages in Australia ; rapid also was the reaotion, and severe the crisis consequent on the overwhelming supply of every conceivable article. The crisis extended over the whole of the year 1854, but it subsided between February and August 1855, and the torrent of imports having ceased, trade assumed a more settled and hopeful aspect, which prevailed continuously throughout 1856. It has been remarked by Mr. Newmarch, " That the " rise of prices in 1851-3 followed precisely the increase of " expenditure arising out of ths augmented incomes of the " iunabitants of the Colony, that the incomes first " augmented were those of the unskilled labourers, then " the incomes of skilled labourers, then the incomes of " retail dealers — and so on in upward progression." The facility and certainty of obtaining fresh supplies precluded the recurrence of extravagant prices for imported articles, but for articles of local production, such as meat, dairy, farm, and garden produce, required by vast numbers of thriving labourers, inordinate prices were easily secured by fortunate purveyors, until competition moderated their profits, and the gardener who sold a cabbage for 5s. in 1854, was reduced to accepting 2d. for the same article in 1856. A review of the history of Victoria during the years 1851 — 1856 justifies the conclusion that the discovery of gold led to the immediate elevation of prices in the Colony, but that this effect had, as regarded most articles, passed away with the year 1853, and that prices during the entu^e period under survey were visibly determined by the relative foi'ces of supply and demand.f In relation to the present controversy, the question is not what effect the gold discoveries of California and Australia had upon prices of commodities in those countries, but what effect they had upon prices in England. Classifying the articles noticed, I find that the chief articles of colonial and tropical produce, tea, sugar, coffee, tobacco, silk, cotton, and indigo are scarcely higher in price at the close of 1856 than they were in 1850. That raw materials generally experienced a progressive rise from 1851 up to the close of 1856 ; that the Russian War of 1864 — 6 exercised a disturbing influence upon prices ; but that no change of any magnitude is recorded which does not admit of explanation upon purely mercantile reasons relating to supply and demand. Mr. Tooke (A.D. 1867) concludes "that while no im- " mediate influence of the gold discoveries can be traced " in the present range of prices, the eventual subsidence of " them, when disturbing causes have ceased, is likely to be " at a higher level than could otherwise be maintained."^ The effect of the gold discoveries of California and Australia upon prices in England was brief in its duration and difficult to assess. I have now to ascertain what were their direct effect upon the rate of interest, and the price of interest-bearing securities. The bullion in the Bank of England for the five years 1845-9 averaged 13,898,000?., and, on the 5th April 1851, the bullion in the issue department of the bank stood at 13,294,000?.; the rate of discount was 3 per cent., and the price of Consols 96|. The influx of gold had, by the 6th October 1852, raised the bullion to 20,990,000/. j the rate of discount had fallen to 2 per cent., and the price of • Tooke and Newmarch, pp 804, 806, 810. t Tooke and Newmarch, 6tn. vol., pp. 810, 813. Lord Addingtoh. 9 Dec. 1887. X Tooke and Newmarch, &th vol., p. 663. 214 ROTAL COMMISSION ON GOLD AND SILVER : Lord Addington. •) Dec. 1887. Consols had risen to lOOZ. The accumulation of gold ceased early in 1863, with the rumours of an impending war between Russia and Turkey, and the measures con- sequent on the certainty of hostilities aided the reaction, which, by the 5th October 1853, reduced the bullion in the Bank to 15,032,000if.,the price of Consols to 91, and raised the rate of discount to 5 per cent. For years the bullion in the Bank continued to decline, and it appears therefore that although the enormous gold production of 1850-1856 averaged 28 millions annually, of which three-fourths came to this country, yet, under the influence of commercial activity and of war expenditure, this flood of gold bad been diffused so rapidly and so widely that, subsequently to the brief inflation of 1851-1853, it left no sensible effect upon prices which can be assigned to the vast addition made to tne metallic wealth of the universe. "We have been challenged to consider the depression in connection with its alleged cause — an appreciation or scarcity of gold — and I have therefore referred for guidance to the great events in the history of the precious metals which occurred, first, in the 16th century and again in the midst of the 19th century, for in the absence of mathematical demonstration reasoning by analogy becomes an important form of argument. 1. Bi-metallists assert that the present depression of prices is mainly the consequence of a scarcity and appre- ciation of gold. 2. That gold is now appreciated owing to its supply being inadequate for its purposes. 3. That to create a new standard of value, combining gold and silver in a permanently fixed ratio to one another, would enlarge the compound mass of the measure of value, and relieve prices from the disturbing influences to which they are now subject. Upon these propositions I remark :■ — ■ 1. That the effect of a diminished production of the precious metals may be not to create a scarcity but to mitigate a surfeit ; and that the diminished production of recent years has not been such, relatively to the existing stock of gold, as to superinduce the first and most unquestioned test of scarcity, viz., " dearness in use " preceding " dearness in exchange." I have traced the process through which the owner of newly found and easily acquired gold yields it in larger measure in exchange for the articles he desires Let us endeavour to trace the action prompted by a scarcity of gold arising from diminished production. The evidence of that diminution will be found in the gradual absorption of the unwrought metal through its coinage in replacement of the incessant wear and tear of the current coin, in the consequent subsidence of the metallic deposits in the national banks, in the contraction of their reserves, and in the increase of their charge for discount — and, as the sequel, a rise in the rate of interest, which discourages the holding of stocks of merchandize, and creates a disposition to realise which inevitably depresses prices. At this moment the rate of interest, instead of indicating by its elevation a scarcity of gold, is lower than ever was known in the history of the world. Advances are readily obtained, and three months' bills easily discounted at 1 per cent, per annum. In the face of this great fact, and of the increased value of solid securities, the assumption tha? there is a scarcity of gold is clearly untenable. If, however, some intrepid bi-metallist affirms a connexion between tne prevalent low prices and the assumed appreciation of gold arising from scarcity, let him explain the "modus operandi" ; let him set forth the process of reasoning, the motive which impels a seller to accept, except upon the issue of the struggle between supply and demand, a lower price for his goods in the face of an abundance of capital and of a low rate of interest. The assumption of a scarcity of gold is visibly refuted by the returns of the gold and silver held on the 1st May 1887, given in detail in the " Economist ■" of 4th June, the results being that the United States' Treasury and the Banks of France, England, and Germany held as their aggregate amounts of — Gold Silver 1881. 87,168,582 82,018,115 1887. 147,026,334 113,141,974 Increase. 59,857,762 31,123,859 169,186,697 260,168,308 90,981,611 2. Accepting the prevalent depression of prices to be in some degree an evil, I question the results of the proposed remedy-^bi-metallism . Gold and silver act now separately as measures of price ; if united, as parts of ajoint currency, they would still fulfil the same office, and I fail to see how or why (for instance) meat and wheat, butter and wool, should rise in price because bi-metallism had been proclaimed. The con- venience of a common coin, as of a common language, may be admitted, but the effect bi-metallism would have on prices is very problematical. The certainties are these : --An enormous boon would be conferred on the owners of silver mines, assuming that which is the basis of the movement to be well founded, that silver is becoming more abundant ; and so far as the union tended to depress or limit the comparative value of gold, countries which, like England, have on other countries large claims payable in gold would be proportionately damaged. I do not ignore the practical inconvenience which results from maintaining a gold standard of value in England and a silver standard in India ; but the consideration of the mode in which that inconvenience operates, and of the means through which it might be removed or mitigated, I have deemed to be outside the present inquiry, which is intended to ascertain the connexion between an alleged appreciation of gold and the depression of prices, and the expediency of adopting a universal bi-metaUism as the remedy for the depression. I have confined my remarks to these points, and I submit, as inferential from the evidence I have adduced, the following conclusions : — 1. That a theory of bi-metallism may be constructed on assumed bases and terms which, if established and enforced, ought logically to succeed in creating an international currency and standard of value. 2. I'hat the prevalent depression of prices cannot be the effect of an appreciation or scarcity of gold, since a scarcity of gold which would depress prices through its dearness in use is non-existent. 3. That a system of international bi-metallism is not required as a remedy for the depression imputed to a scarcity of gold, inasmuch as the existence of sucn scarcity has not been manifested. In the face of these statements of the stocks of gold and silver, and of the unprecedentedly low rate of interest, it seems futile to affirm that the low prices of the day are the consequence of an appreciation or of a scarcity of gold. 9521. This papei' conveys your views upon the subject ? — It does. P522. {Mr. Barbour.) Would you be in favour of the gradual demonetization of silver everywhere, and the adoption of the gold standard instead of it ? — No, I do not want to interfere with any existing system. 9523. Assuming that the practical difllculties in the way of establishing what is called bi-metallism are insuperable, and that both gold and silver must continue to be used as standard money, can you point to any satisfactory principle on which the division of the countries of the world into gold-using countries and silver-using countries can be based ? — I do not appear either as an advocate for or an opponent of bi-metallism. It appears to me that the theory has very much which is fascinating about it, but I give no opinion as to whether it is practicable or not, beyond a general opinion as to the very great difficulty which would attend its adoption. I am not prepared to depreciate any of the advantages which would result from having a cosmopolitan currency ; like a common language, 1 think it might have very many con- veniences. I think the arguments on both sides have been exaggerated, both the difficulties which would attend the operation of such a theory, if it were practicable, and the injuries which result from the present system ; but I am not prepared to point out any mode of escape from the existing difficulties which every one acknowledges. 9524. There has been an objection raised to the use of silver, which has been strongly put by The Hon. David A. Wells in an article in the Contemporary Review for this month, and I should like to read you a passage which explains that objection :--« In respect of porta- " bility, convenience for use, adaption to domestic and " foreign business alike, the balance of advantages for " all transactions above 51. is also largely on the side " of gold ; as will be evident when it "is'remembered " that it required, even before its depreciation, 16 " times more time to count silver in any considerable MINUTMS OP EVIDENCE. 215 I' quantity than an equal value of gold; 16 times more to handle it ; 16 times more packages, casks, " or capacity to hold it ; and 16 times more expense to transport it. In other words, in this saving age, " when the possibility of extensive business transac- tions is turning on profits reckoned not in cents, but in fractions of cents per yard, per pound, or per bushel, to use silver for large transactions in the " place of gold, is a misapplication of at least fifteen- " sixteenths of a given unit of effort, time, expense, " and capacity, when one-sixteenth would accomplish " the same result." Do you think there is much force in that objection ?— No, I do not ; I think there is some confusion there between currency as a medium of exchange and currency as a standard of value. I conceive that that is exactly the point where large exaggeration prevails. You might have a gold standard and yet have silver very largely in use as a currency, and as a country is more or less civilized, and more or less in a condition to adopt banking facilities, so you find the modes of payment more or less clumsy ; but I do not think that the inconvenience of a silver currency is at all to be measured by the multiplication of its inferiority to gold ; in fact, one might illustrate that opinion by a reference to a country of which I know something — Russia. When I first knew Russia the operations of currency very seldom used to be made in silver, they used to be made in bundles of notes. If large payments in India are in question, I think banking facilities would bs found as. the means of paying large sums by notes or cheques, without having the burden of carrying about a large mass of coin. 9525. The evidence given before this Commission has not been to the effect that the Bombay cotton mills are handicapped, as regards Lancashire mills, by the use of silver instead of gold, but the contrary. There is a difference of opinion as to the amount of gain, but I do not think there is any difference of opinion as to the fact that there is some gain, and that would corroborate your opinion that the use of silver, as currency, is not open to any serious objection on the ground of its weight. Does not this show that though silver may be less portable than gold, still under certain conditions, and for certain purposes, it may be a bettej- standard than gold ? — I do not think it is, but there is no doubt that countries using silver have at this moment, with the depreciation of silver, a certain disadvantage in the payments that they receive for their productions. If India sells her cotton or her wheat for silver she receives in that silver mode of payment an article worth one-fourth less than it was worth a few years back. 9526. Yes, but presumably she gets more of it ? — Well, that ought to be, no doubt, but I have under- stood fiom the evidence that has been given before this Commission that the variations in price in India have been remarkably small as compared with the variations in silver. 9527. She gets comparatively more than if the standard had been gold ; would you admit that ? The Indian producer may only get the same amount of silver as he formerly did for what he sells, but if India had had a gold stjindard he would now get less gold than he formerly did?— Well, if she had got gold, the price might have been different, because the truth is that, notwithstanding the general tenacity of prices, the price of her commodities varies with the absolute value of the article which is given in exchange, and therefore, if India sells wheat at a given price, and that price is paid in silver when the price of silver is reduced by one-fourth, it certainly receives less than it would have sold the wheat for if it had been paid in gold. 9528. You said just now, in connexion with this question of the standard and the currency, that there were really two questions ; first of all, the stabiUty of the standard, and, secondly, the convenience of the ordinary circulating, medium ?— Yes. 9529. And I suppose you would say that, looking simply to the standard, a country should choose the material which would give the greatest stability of purchasing power; and, looking to the circulating; medium, a country should choose that form of cir- culating medium which would be most convenient in actual practice ? — Yes., 9530. Should you admit that it would be a great mistake to choose the standard of value merely with reference to its convenience as a circulating medium? — I think so, because it is more important to have a satisfactory measure of value than to have a currency which is convenient, inasmuch as you can vary your form of currency ; you may use either silver or gold, or you may use paper representative of either one or the other, but the standard itself is of the highest possible importance. 9531. I should like to read you a passage from Lord Liverpool's "Treatise on the Coins of the Realm," with which, I have no doubt, you are familiar : " It cannot, I think, be doubted that the metal of " which this principal measure of property is made " should correspond with the wealth and commerce " of the country for which it is intended. Coins " should be made of metals, more or less valuable, " in proportion to. the wealth and commerce of the " country in which they are to be the measure of " property. In very poor countries coins have been " and still are principally made of copper, and some- " times even of less valuable materials. In countries " advanced to a certain degree of opulence silver is " the metal of which coins are made. In very rich " countries, and especially in those where great and " extensive commerce is carried on, gold is the most '• proper metal of which this principal measure of " property and this instrument of commerce should " be made; in such countries gold will, in practice, " become the principal measure of property and the " instrument of commerce with the general consent " of the people, not only without the support of law, " but in spite of almost any law that may be enacted " to the contrary, for the principal exchanges and " purchases cannot there be made with any con- " venience in coins of a less valuable metal." Does it not appear to you that, in writing that passage, Lord Liverpool looked rather to the convenience of the circulating medium than to the stability of the standard of value ? — Certainly the language appears to be directed to that point. Probably he had both in his mind, but it is exceedingly diflBcult for anyone to say what may have been in Lord Liverpool's mind, and I am not prepared to hazard an opinion upon the subject. 9532. But the argument which he uses in that pas- sage in favour of the adoption of the gold standard is based entirely on its convenience for making payments, that is, as a circulating medium ? — In this country you may say in both respects, both as a standard and as a medium of exchange it is far the best standard to adopt. It does not follow that the same thing would be the case in China or in India. In India the con- dition of the people and the prices which prevail there may make silver a more convenient medium of exchange than gold would be. 9533.. {Mr. Birch.) You referred just now to Russia in your early days, but is it not very much the same system now that all payments are made in bundles of notes ? — No, now the banking system has very much extended itself, and they pay by cheques ; they take cheques. 9534. I understood you to say that you did not see any objection to silver currency, but you would object to any attempt on the part of England to establish a double standard with a free mintage of gold and silver at a fixed ratio ? — As regards England I see no motive whatever for making any change from our present system. 9535. Would you not consider that in the event of the ratio of 15| to 1 being established it would materially interfere with the production of gold and Lord Addington. 9 Dec. 1887 216 KOYAL COMMISSION ON GOLD AND SILVER : Lord Addington. 9 Dec. 1887. give facilities for the increase of the production of silver ? — I do not think that it would interfere with the production of gold, because probably the profit upon the production of either gold or silver is sufficient to keep the miners at work, whatever their relative proportions may be ; but I regard an absence of any distinct proposition on the part of bi-metallists as to the proportion between gold and silver to be fatal to the serious entertainment of their scheme at all. I have never yet found any agreement. Some want 15^ to 1, and some want 20^ to 1. At the present moment it would be impossible to go practically into the consideration of a bi-metallic system which would take any other than the actual proportion between the value of gold and silver. 9536. Then I understood you to say, iu reply to Mr. Barbour, that in your opinion there is no necessity for India having the same standard of value as England? — I see no necessity for it. There, no doubt, would be a very considerable convenience in it. It is a very great advantage to be able to know almost intuitively what the price of one coin and of one commodity is in the currency of another place and in another country ; but, on the other hand, it is the business of merchants to make those calculations, and they are made without much difficulty, and I do not for a moment believe that the absence of that great facility of calculation interposes any practical difficulty in the exchange of commodities. If India produces commodities that we want we shall have them. If we produce manufactures that India wants she will have them ; and it is only a certain difficulty in the arrangement of price which is the result of the present anomalous condition between England and its dependency, India, in the standard of value. 9537. Tou have had nothing yourself, I think, to do with business with the East ? — Not with India ; but the trade with Russia is carried on exactly in face of the same difficulty which prevails in India — a variable exchange. The inconvertible paper money of Russia is of course variable, and it has varied even more than the price of silver, so that the difficulties there are precisely analogous to those which have prevailed in India, but they do not restrict operations. Merchants have only to make their arrangements with regard to the fixing of the exchange and also to determine the value of what they want to sell or what they buy. 9538. The fact is, it is an inconvenience, but it is an inconvenience which can be overcome by the ordinary mercantile arrangements in all parts of the world ? — Yes. 9539. If you import wheat from Russia you take into calculation the rate of exchange and the price there, and thus arrive at the price at which you can sell ?— Yes. 9540. {Chairman.) Do you find that gold prices of the productions in Russia have become less of late when the rouble has been more depreciated ? — Prices altogether have been subject to such very large variations of late that it would be very difficult to determine how much of that was attributable to the change of policy ; but in Russia, I must say, the standard has never been absolutely gold. It has been silver. The legal currency of Russia is a silver rouble, which ought to be worth 37^d., but which is only worth now 2l^d. 9541. Yes; but have you observed at all, one way or the other, whether there are variations in the rouble price corresponding with the variations in the exchange? — There is no doubt that at the export markets the variations take place closely upon those lines. In the interior of the country, just as in the interior of India, peo])le have not the same informa- tion, and prices remain unaffected for a long time. They are much more slow in feeling the effect of either the depreciation in the value of paper or the depre- ciation in the value of the silver. 9542. (Sir T. Farrer.) Do you find that a fall in the value of the Russian paper is followed by a lowered price, an increased purchase of Russian goods, and increased imports of Russian goods into this country .?— I suppose we may say, with regard to the trade in Russia and to the trade with India, that it is English adventure and English capital that carries it on, and therefore the London merchant can give his order at a certain price with reference to the value of the commodity here, and the execution of that order depends upon the concurrence of a certain price with a certain rate of exchange. If the exchange has gone down, he could give a higher price there for the commodity that he wants to buy. The native seller, of course, would raise his price when he found that his foreign customer is prepared, owing to the fall of exchange, to give a higher price in rubles. 9543. Then the fall in exchange shows itself more in a rise of the Russian price than in a fall of the English price ? — Tes. 9544. {Chairman.) Why should the merchant here be willing to give a higher price ? Of course he can afford to give it, but he would try to get it at as low a price as he could, and unless the situation was thoroughly appreciated by the people throughout the country, would not he bo able to get it at a lower price, and so be in a position to sell at a lower price here, and better compete with his rivals ? — Certainly. I do not suggest that the London merchant would give a higher price. He may give a higher price in rubles to the Russians, but owing to the fall in the exchange, it may still cost him less than previously. He gives his order to buy at the lowest price at which he could get an article, but that price has its limit. 9545. {Mr. Montagu.) By competition of Russian merchants in Russia? — Clearly; the limit of the price to be paid is the price at which he can expect to sell at a profit. 9546. {Sir T. Farrer.) As I understand you, the Russian price follows the English price rather than the English price the price of the paper rouble ? — Certainly. 9547. {Mr. Montagu.) Hivs there not been a dimi- nution in the circulation of Russian notes of late years by destroying them ?— There has been, I am told, from time to time a diminution, but I am afraid there has also been an extension, if I may judge from the state of exchange, because the state of the exchange has never recovered itself. 9548. Information has been given that about 25,000,000 of roubles have been destwyed each year latterly, and that no fresh issues have been made ? — I was not aware of the fact. 9549. I have received information, and I wanted to know whether you could confirm it ? — I cannot confirm it. 9550. Is not the inconvertible paper a great dis- advantage to Russia ?— It has the disadvantage of keeping values in a very fluctuating and uncertain state. I do not know that it has any other dis- advantage, and the confidence it commands is un- bounded. It passes as readily as the bullion itself would. 9551. {Mr. Barbour.) You said, in reply to Mr. Birch, that there was a certain amount of inconvenience arose when two countries with different standards traded with each other, but that, was not, you thought, very serious ? — I say it was not so serious as to prevent the operations which supply the two countries with the articles that they severally require fronr each otlnjr. 9552. But it is an inconvenience, though not, in your opinion, a very serious one ? — It is an incon- venience. 9553. Are there not also financial difficulties besides the commercial di tficulty. For instance, if one country borrowed money from another when the exchange was at a certain rate and the exchange altered very much before the time for repayment came round ? Clearly there would be a financial difficulty, but that is one MINTJTES OF EVIDENCE. 217 •which those who are interested only become familiar with by their own experience. 9554. But if you had contracted a debt at a time when you had no reason to suppose that there would be any such fluctuation in the relative value of the two standards, you might find yourself in a difficulty afterwards ? — That is perfectly true, but where debts have been contracted in the legal currency of a country, and that currency has afterwards, according to the law of that country, been depreciated, the debtor would be naturally damnified, and very seriously. 9555. (^Mr. Chaplin.) I suppose the value of the Russian rouble depends to some extent upon Russian credit ? — ^Upon the credit of the Government, in fact. 9556. And that would affect it in its relation to commodities as well as in its relation to gold ? — Yes, certainly, it would. 9557. I observe in the paper that you have been kind enough to submit to the Commission you say : " I do not ignore the practical inconvenience which " results from maintaining a gold standard of value " in England and a silver standard in India ; but " the consideration of the mode in which that incon- " venience operates, and of the means through which " it might be removed or mitigated, I have deemed to " be outside the present inquiry." Well, among other things, we are instructed to inquire into the eifects of the present system upon the internal trade and industry of the United Kingdom, and it has been alleged by various witnesses that it does in- juriously affect certain industries in this country. Have you considered that at all ? — I am not aware of those injurious results. 9558. I will take the wheat industry, for in- stance ; are you prepared to dispute that the Indian exporter does derive an advantage from the fall in the exchange between gold and the rupee ? — If the Indian producer only receives the same rupee price as he did before, he would actually be damnified rather than advantaged by it, because he would receive a con- sideration which has no longer the value which it formerly maintained. If he has varied his price in proportion it would come in the end to the same thing ; and I imagine that although there may be a certain amount of friction to overcome, yet, sooner or later, the depreciation in value of the currency which has formed the medium of exchange will affect the price that is given, and that the price of wheat, therefore, in India, if it is paid for in depreciated silver, will ultimately be enlarged, and that, as a consequence of that same depreciation, the Indian buyer of English commodities will have to give more for them in rupees. In fact, when the price is paid in the depreciated currency the amount of the price must vary to counteract the depreciation. 9559. May I put this case to you ; at the period before silver was demonetised, 40s. a quarter was not an uncommon price for wheat to be at, and, therefore, the Indian producer received 21. in gold for his quarter of wheat. Now he gets 1/. 10s. in gold ? — Yes. 9560. That is the price also which the English grower receives. The English grower is suffering a loss to the extent of 10s. a quarter, but is it not the fact that at present, with his \l. 10s. in gold, the pro- ducer of wheat in India is able to purchase as many rupees as he could formerly buy for 21., and is it not also the fact that at present, at all events in India, the rupee retains all its original purchasing power?— There is no doubt that with 30s. in gold he can get 40s, in rupees ; but the price here is not determined by the price at which he can buy the rupees. 9561. Not quite so, but I am looking to the position of the Indian producer ? — ^Well, the Indian producer receives, we may say, so many rupees, and the rupees are worth 25 per cent, less than they were. 9562. But the most universal evidence, I think, has Lwd been that in India itself the rupee retains its original Addington. purchasing power ? — That is one way of putting it, but that is a mode which I cannot accept at all. Gold ^ ^^'^- ^*® ''■ and silver being so easily carried from one place to another cannot vary in their cosmopolitan value more than by the cost of carrying them from one point to another. If, therefore, you find that the rupee in India will buy a certain proportion of any commodity as it did before, it is because the price of that com- modity itself has not varied, and this is only one instance, of which there are many, of the great tenacity of prices in countries which are only half civilised, or not thoroughly permeated with means of conveyance and intercommunication. 9563. {Chairman.) Would it not follow that by reason of that great tenacity of prices in such countries the producer in that country would have his full dram, if I may use that expression, whilst the producer in the more civilised country would not ? — It depends on whether he is a buyer or a seller. If he is a seller, and the silver which is given to him is worth less, he ought really to raise his prices upon it, and that is what he will do ultimately ; if the silver remain the same, then the price of wheat in India will ultimately rise to the value at which it will satisfy him to grow it. 9564. Or would have prevented from fall ? — That is another way of putting it. It is the price which is variable and not the value of the gold and silver. Silver is variable, we know, from gold, but it would not necessarily be variable with regard to the price fo commodities in India. 9565. Supposing that in India all prices remain the same, so that, although wheat sells for the same number of rupees, the seller can buy any other commodities that he wants at their old silver price. Supposing that in this country the seller has to take 80s. in gold instead of 40s., if all the commodities which he has to buy have fallen to the same extent, then he would be in the same position as the producer in India, where silver prices have all remained the same. Would you agree to that ?— I quite see your position, but I hold that that is a course of events which is a most im- probable one. I cannot contemplate the fact of the currency of India being depreciated 25 per cent, in value and prices throughout the country remaining the same. They must, sooner or later, work down to what would be their commercial value. That com- mercial value would be the price at which they could sell or at which they could buy. 9566. {Mr. Barbour.) May I ask on what grounds you hold that the standard of India has depreciated 25 per cent. ? — Because it is in silver, and because silver is worth 25 per cent, less in gold than what it was some five or six years ago. 9567. You might, put that in another form by saying gold has appreciated as regards silver ? — Quite so. 9568. {Mr. Chaplin.) Well, then, is not this- the case, that it does not so much matter whether the rupee has reduced its purchasing power, or whether the prices of commodities have fallen. The Indian producer is, at all events, in this position, that he is not suffering the loss which is felt by the English producer, who is getting 1/. 10s. a quarter for his wheat instead of 21., which he got formerly ? — The command of those rupees, if they enabled him to buy other products at the same price as before, no doubt would appear to put him in an advantageous position ; but, as I said before, I cannot imagine that state of things being a permanent one. The natural course of Indian trade under the influence of a fall in silver would, I imagine, be thus wise. 'A Liverpool corn merchant orders his agent at Bombay to purchase so many thousand quarters of wheat at such a price, cost and freight included, or a larger quantity if secured at a lower price. The agent, owing to the fall in silver o S1080. 218 ROYAL COMMISSION ON GOLD AND SILVER : Lord obtains more rupees for his draft on Liverpool, and if Addington. ^|^g price of wheat in rupees has not risen, he secures „ ~.. the larger quantity at a price which enables the '_ ■ Liverpool merchant to sell it at Liverpool at (say) 30s. a quarter. The larger import of cheap foreign wheat depresses the price of English wheat and the English farmer suffers. India has sold her wheat, but she wants cotton cloth, but the Bombay importer wants more rupees in their depreciated A'alue than formerly, and if India refuses the advance in price, the goods are withheld or sold at a loss for the Manchester manufacturer. There would be a struggle in the negociation, but sooner or later, if silver do not recover its price, India would give a higher rupee orice for its cotton cloth ; and finding its rupees less (itfective to buy with, she would require more of them in payment for her wheat. That the movements of commerce are not persistently obstructed by variations in the medium of exchange is clearly proved by the .statistics of the period under review. 9569. I think you said that you are neither an advocate nor an opponent of bi-metallism ? — No. 9570. But you do not want to change anything ? — . Not in this country. 9571. But at the same time you are not prepared to formulate to us any positive objections to the bi-metallic system ? — It appears to me that the chief ground alleged for its adoption for it does not exist. 9572. You say also in your paper, " That the pre- " valent depression of prices cannot be the effect of " an appreciation or scarcity of gold, since a scarcity " of gold, which would depress prices through its " dearness in use, is non-existent. That a system of " international bi-metallism is not required as a " remedy for the depression imputed to a scarcity of " gold, inasmuch as the existence of such scarcity " has not been manifested." Supposing it were shown to you, and you were convinced that bi- metallism might in some degree be a remedy for that evil, am I to assume, then, that you would not object to it ? — Certainly. If I found that any nostrum was able to cure a certain disease I should be very foolish if I opposed its adoption. 9573. You e:-cpressed the opinion just now that the ratio which you thought might be accepted without objection would be the ratio that was cnrrent at the moment ? — ^Yes. 9574. But the ratio at the present moment con- stantly varies, does it not? — Of course it varies every day with the price of silver. 9575. Well, would that not be rather an arbitrary proceeding, then, to fix it at the ratio it happens to be at a particular moment? — Precisely; but that- is the only way in which you could do it. I think you could not go back to an old proportion. It would have this effect of giving the enormous bonus at once to all the holders of silver. The moment you raise the value of silver from the proportion of 1 to 20 to 1 to 15^, you give a bonus to that extent to the holder of silver. 9o76. {Sir T. Farrer.) Have you ever thought of the efEect of a return to the ratio of 15^ to 1 on the silver that is now held by other nations (for instance, the United States) and which passes at a gold value ? — I take it that the stock of silver which exists any- where would, if it were not already, or even if it were already, in a state to be estimated, would have its value raised in the general convention of bi- metallism. 9577. It would if it were current in the world at the gold rate in which silver in the London market is current ; but take the case of the silver which is held by the United Slates, and which is current, or for which certificates are current, as a gold value, would that be altered in value ? — I think so. That silver is not capable of being circulated at its legal value now, and it remains therefore in deposit. 9578. Have you thought at all what would be the effect of the ratio of 15^ to 1 upon the debts due by other countries to this country ? — So far as the introduction of silver at the rate of 15-^ to 1 into a common unit of value went, it would have the efEect of diminishing the value of the debts of other countries to this country, where it is already a sterling debt, We have gold claims over nearly the whole world, and those gold claims, if they were diluted by being brought into a bi-metallic system, would become less effective by the difference between the power of the gold and the power of the blended gold and silver standard. 9579. {Chairman.) But why should that be so on the assumption, which is, of course, the assumption of the system of bi-metallism, that in all the leading commercial nations, after the arrangement, the stipu- lated ratio of silver will buy as much as every commodity as its equivalent in gold, then would it matter to us whether we were paid in the silver or in the gold. It would not be transmitted in the metal in any case ; would not it give us the right in any country to just as much commodity as we could have got if it had been still represented by gold only ? — I do not think 1 admit the premises in that question. It assumes that a currency may be indefinitely extended, even so far as regards that which is the standard of value, without afiEecting its general efficacy. 9580. You think it would affect prices ? — I think it would affect prices. 9581. But that would be, of course, a different con- sideration. If it did not affect the prices in the country it would not matter, would it, whether we got paid in gold or silver. If there was no alteration in the general scale of prices, and if a given amount of silver would buy as much as the old amount of gold, it would not matter whether we got silver or gold. We should really get commodities, and really get the same quantity ? — At present the gold claims of this country are valued in gold and gold only, and they have a certain efiicacy and purchasing power. If that standard were diluted by the introduction of silver in a given proportion it would no longer be the same standard. I hold that, being mingled with silver of a lower proportionate value than that which it has previously maintained, with the effect of diluting the general value of this standard itself, the new standard would be disabled from purchasing the same quantity of commodities as before. 9582. {Sir John Lubbock.) In fact, for any rise in the value of silver which it created there must be a corresponding fall in the value of the gold ? — Quite so. 9583. {Mr. Barbour.) And, I suppose, you would hold that the breaking of the old ratio of IS^ to 1 did raise the value of gold. If the restoration of it would lower the value of gold, I presume the break- ing of it must have raised the value of gold ? — That depends on whether you would say that gold was appreciated or silver depreciated. 9584. There was practical fixity of value between silver and gold for a very long time, and when that ceased and the ratio became 20 to 1, did not gold get a higher value than it would have had if tlie old ratio had been maintained ? — I do not think there has been much difference in the value of gold, but it is in silver, owing to the circumstances which affected it in its larger amounts, brought from the mines, and the dealing with silver by the German Government, all had the effect of lowering its value. 9585. {Sir T. Farrer^ I gather that you rather regard gold as the stable point, and silver, like com- modities, as varying with relation to it ? — I do. 9686. And you believe that there has been no tall in prices due to an alleged scarcity of gold ? — I can find no evidence of such. 9587. And, on the contrary, you find evidence in the state of the gold reserves of the banks, and the rate of discount, that there has been no such scarcity ? — Quite so. MINUTES OF EVIDENCE. 219 9588. (Sir John Lubbock.) I gather that in your opinion, the present ratio of value of gold to silver being 21 to 1, you consider that there would be an injustice in compelling debtors who have made con- tracts in silver at 21 to 1 to fulfil their contracts at the rate of 15^ to 1 ?— Decidedly. 9589. Several witnesses have expressed the opinion that, with reference to our commerce, it was very un- desirable to make any change in the standard of value unless there was some very strong reason for doing so. Do you concur in that ? — I quite agree to that. 9590. It has been said several times here that the fall of 25 per cent, in the price of silver constituted practically a bounty of 25 per cent, upon the pro- duction of wheat in India. I gather that you see no reason for any such statement ? — I fail to understand how the word bounty has got any place in that position at all. 9591. And, apart from the question of the alleged bounty to India, you cannot see that there is an ad- vantage of 25 per cent, to the wheat grower ? — No, I do not. 9592. In your paper I think you rather implied that you thought it might be possible to maintain a fixed ratio of value between gold and silver, assuming that the principal nations of the world were to agree upon one ; but having regard to the very great amount of gold which is used in the arts, — it is assumed to be about 12,000,000/. out of an annual production of about 20,000,000/., — do you not think that some doubt is thrown upon the possibility of maintaining a fixed ratio between gold and silver ? — If bi-metallism were once established, then the proportion never could vary; it would be definitely fixed. Whatever the quantities of the gold or silver might be after that the proportions would be fixed. 9593. But do you not think that the result might be in the first place to diminish the production of gold, and in the second place to drive gold out of circu- lation and into use in the arts ? — No, I do not think so. I do not think that the introduction of bi- metallism would affect the working, either of the gold or silver mines materially. They would both be worked as long as they could be worked profitably. 9594. And a very large use of gold in the arts, in fact, does not affect your belief that bi-metallism might be maintained, provided it were agreed to by all the great nations ? — No, it does uot. 9595. That is assuming that all the great nations come into the arrangement, is it not ? — Oh, yes ; it must be general. 9596. (Mr. Birch.) Including India? — Of course India's consent must be assumed. 9597. And China; would you consider that China ought to come in ? — China is most important. 9598. (Mr. Montague.) You say that we have now a large command of gold in debt due from foreign countries. We had also a large command of gold when silver was practically fixed in value. Did we then derive any advantage from the demonetization of silver by G-ermany and other countries? — No, I do not think our position was affected, except in reference to India. 9599. Would the restoration of a fixed ratio put us to any disadvantage? — No; because the present state of things is one which does not affect the dealings of other countries. 9600. I understand you just now to say that we should be under a disadvantage as we have such a command of gold from abroad ? — Well, I said we should be under a disadvantage with regard to our gold claims, because it would be no longer a gold claim ; it would be a bi-metallic claim, and that bi- metallic claim would be less, intrinsically, valuable than the gold claim. , , ^ 9601. Would the difficulties you apprehend from adopting bi-metallism disappear if the market ratio of 20 to 1 were adopted ?— Well, I look upon bi-metalUsm, as I have said in my evidence, as a very pretty theory, but one upon the future of which I can make no Lord practical comment. Addington. 9602. Are you aware that Indian banks are afraid ■- to employ their English deposits, or even their capital ^°' ' in India, on account of the uncertainty of silver in the future ? — There is no doubt it may be a restraint to them in their operations; that is the inconvenience. 9603. Do you not see a great advantage, therefore, in developing our trade with silver using countries, seeing that we have difficulty in extending our trade with continental countries through their hostile tariffs ? — I do not think that, practically, our com- mercial operations are diminished in volume. They are more difficult to be carried out ; there is a certain difficulty in computation ; but, practically, all the business which is to be done is done, and will be done, still under either system. 9604. Is there not a tendency for our trade to be diverted to eastern markets rather than to those near at hand, through the competition of Germany and France ? — I am not aware of it, 9605. Do we do as much trade with the continent now as we used to ? — I have not got the statistics al hand. 9606. In Kussia, discount is maintained at and above 4 per cent. Is not that some evidence that the circulation of rouble notes in Eussia is kept within the bounds of the requirements for circulation ? — It ought to be an evidence, and I think it is, yes. 9607. And in India they cannot fix the circulation on account of the imports of silver being beyond their control ? — Why should they control it ? 9608. I do not ask why they should control it, but the countries outside of India have the faculty of increasing the Indian circulation by shipments of silver ? — That is to say, they have the faculty of paying to India a very valuable consideration for the produce which they buy there. I see nothing to be regretted in that on the part of India. If India is rich in silver India can use those riches in any way she chooses. 9609. Could India re-sell any silver ? — Certainly, they could buy gold or anything they want. 9610. Could they sell it outside of India? — Certainly they could. 9611. Could you tell me wliere ? — London. 9612. If you offered silver in London would there be any buyer ? — It depends on the extent of it. 9613. What do you think would be the price? — You cannot tell till you try. 9614. But is it not the fact that India is almost the sole buyer ? — The chief buyer. 9615. It is assumed, is it not, that if India were to re-sell silver, that nothing like the present price could be obtained ? — I have no knowledge upon that subject. 9616. But, assuming that, do you consider it is a disadvantage to India to make her the sole re- cipient of nine-tenths of the silver produced in the world? — I do not think that the country would complain of enriching herself by selling so much of her produce for silver or anything else. 9617. Do you think that the English public would object to the circulation of bank notes partly based upon silver ? — The English public would not refuse bank notes based upon anything which the Legislature sanctioned. If they sanctioned the issue of bank notes upon pewter the country would take them, but that is simply because they would be upon the credit of the country at large. 9618. It has been stated here that people in this country make engagements to pay in gold. Is that a fact, or are not their engagements to pay in legal tender — in bank notes ? — It depends on which engage- ment you speak of. 9619. If a man accepts a bill, say, for 1,000/., is he bound to pay 1,000/. in gold when it comes due .^— He is bound to pay 1,000/. in that material with Ee 2 220 EOYAL COMMISSION QN GOLD AND SILVBK : Lord Addington. 9 Dec. ]887. which the holder of the bill can get 1,000^. in sovereigns in the Bank of England. 9620. But there were occasions on which bank notes could not be cashed in the Bank of England ? — I do not know when that was. It has not been within my observation. 9621. (Mr. Barbour.) What do you think of a proposal which I may tell you has been made more than once, and seriously considered, of introducing a The witness withdrew. gold standard into India ? — I could not venture to give an opinion upon it at all. 9622. But you say there would be great difficulty connected with bi-metallisin. If it came some day to a choice of difficulties, either of establishing bi- metallism or of the adoption of a gold standard in India, and consequently of a large increase in the demand for gold, it might be a question which of the two evils was the less ? — It might be. Adjourned. APPENDIX. it.OL. J. ■ 221 LIST OF APPENDICES. Page I. — Letter from Mr. Alfred de Rothschild to the Chairman of the Commission - - - 222 II. — Memorandum by Mr.- J. Barr Robertson on the Rise and Pall of Prices in consequence of In- crease or Decrease in the Volume of the Currency - .... 223 III. — ^Paper laid before the Commission by Mr. H. D. Macleod on the Relation between Prices and the Standard of Value .--.... 226 IV.— Papers put in by Mr. J. C. Pielden : — («.) Statistics of the Position of Ten of the leading Trade Societies as regards Employment of Members - - ... 250 (b.) Statistics relating to the Cotton Trade and the Population of Lancashire 250 (c.) PigTires showing Cost of Production in the Indian Cotton Mills - - - '261 {d.) Exports of Cotton Yarn from Great Britain and India - - - - 251 V. — Paper put in by Mr. T, Comber showing Reduction in Cost of Transport of Indian and American Wheat since 1873 .-...-.... 252 VI. — Paper put in by Mr. W. Fowler showing Russian Exports of Wheat in the last 20 Years with the Rate of Exchange ........ 252 VII. — Questions addressed to certain Persons in foreign Countries with the Answers received from — Professor Pierson ........ 254 Professor Nasse ..... ..... 257 Professor Lexis .-...-.-. 264 Mons. de Laveleye . . . . r . _ . 270 Hon. David A, Wells ........ 272 222 KOYAL COMMISSION ON GOLD AND SILVEE ; APPENDICES. APPENDIX I. Mr. Ar.FBED db Eothschild to the Chairman of the Commission. New Court, E.C., My Lord, 4 July 1S87. The Governor of the Bank has communicated to the Court the invitation of the Gold and Silver Commis- sioners to the Directors to offer evidence on the questions now before the Commission, and 1 as one of the directors beg to avail myself of that privilege. I trust, however, that your Lordship will excuse me if I do not do so at any great length ; to do so would entail entering into a great many statistics, and would likewise mean dealing with details and figures which I would infinitely rather leave in more competent hands. But the broad question of whether the introduc- tion of bi-metallism into this country would be desirable, is one which may be approached even by a humble indi- vidual like myself. I am strongly opposed to any radical change as regards the metallic circulation of Great Britain. In the first place, I hold that the progress of civilisation is towards diminish- ing the requirement of large amounts of bullion instead of increasing the same, and what better proof can you have in favour of my argument than the existence and perfect working of our Clearing House. That institution shows an average weekly return of one hundred millions sterling, which hundred millions sterling mean that bond fide trans- actions to that extent have taken place without the inter- mediary influence of bullion or even bank notes. In the face of such a perfect banking system, or rather such very simple means for the exchange of sums of such colossal magnitude, does — 1866-75. 1876-86. 10 years. 10 years. Total Imports - 190,900,000 152,300,000 Total Exports - 140,800,000 153,500,000 Net Imports - 50,100,000 — Net Exports - — 1,200,000 The absence of the gold which ought to have come into the country was felt in two ways, (1) there was none imported to supply the consumption in the arts, and (2) there was none imported to provide for the wear, tear, and loss of coins, and for new coinage. The con- sumption in the arts was provided for by taking the amount of annual consumption out of the stock of gold coin or bullion. If the consumption in the arts was prin- cipally provided for out of new bullion from the bullion driers, there must have been a corresponding export of gold coin or old bullion, seeing that we exported more than sve imported. And this supply for the arts must ultimately have come almost altogether out of the coinage, because part would be obtained by melting down sovereigns, and the rest must in the end have been taken mainly from the coinage, because in the last 11 years the stock of gold coin and bullion has decreased at least 27,000,000L, that is from 135,000,000^. to 108,000,000?., while the stock of bullion has probably not changed much. This caused a steady drain of gold chiefly from the gold money outside of the banks, seeing that the banks when drawn upon for gold coin to export against the imported bullion in the arts, would have to renew their supplies of gold from the general circula- tion to meet their liabilities, as the fact of gold being withdrawn from circulation would not, in itself, diminish in any way the capital, reserve, or deposits in the banks. That is to say, the withdrawal from circulation of gold for the arts would not afi'ect the deposits in the banks, but the results of such withdrawal leading to lower prices might cause the withdrawal of deposits to meet losses produced by lower prices of commodities. On the other hand, however, there would be an increase of deposits from the savings of the community, and from the special savings which the increased purchasing power of money over commodities would enable the investing classes to effect. The supply of gold for the arts having been taken from the current stock of that metal during the last 11 years, we have now to consider the exact process by which prices fell in consequence of the decrease in the gold circulation. It is evident that, so far as the capitals of banks and their undivided proflts are con- cerned, these must have remained intact as a whole, and notwithstanding, a gradual diminution in the stock of gold, the reserve of gold kept by the banks in connection with their capital and undivided profits would remain the same, unless they reduced the per- centage of gold held against their liabilities. But the banks receive deposits, and these may be distinguished into two classes, the deposits from inves- tors, annuitants, &c., and those from the mercantile, industrial, agricultural, and landed classes, whose deposits are the working balances of accounts in which the banks discount bills and grant advances. Now, in the case of depositors whose resources beyond their deposits are in good securities, there is no reason whatever why their deposits should have diminished, indeed with the increased command of money over commodities their deposits should have increased. It is evident, therefore, that as good securities have in- creased in money value during the last 11 years owing to a gradual fall in the permanent rate of interest, and without any regard to quantity of money, and as the deposits of the holders of such securities ought to have increased, the gold reserve in banks against this class of deposits ought to have increased rather than diminished. With the other class of deposits, those belonging to the trading, industrial, and agricultural portion of the people, the process of contraction of the currency must have very largely diminished their resources, and, therefore, through failures and losses in business, this class of deposits would be diminished, though it must be remembered that these deposits are the mere current balances necessary for carrying on business, and are not deposits placed at the complete disposal of the banks. _ This then goes to show that there may be a con- siderable contraction of the gold currency, and yet little or no change in the gold reserves of the banks. We must therefore look to the gold circulation outside the banks for the contraction produced by a diminished amount of gold. While securities, such as consols, and notes held by the banks undergo no change whatever in consequence of a contraction of the currency, low prices for com- modities are an invariable accompaniment of a con- tracting currency. Let us look at the process by which contraction is effected. The consumers of gold in the arts, carry on their business in times when we have no net imports of gold, by withdrawing sovereigns from circulation, or 224 ROYAL COMMISSIOi^' ON GOLD AND SILVER : causing them to be withdrawn and melted down ; or by withdrawing bullion which is potentially coin, seeing that it is in the Bank of England ready to be coined immediately that coin is wanted. If on the other hand, bullion is purchased that is not in the Bank of England, then that is so much that would, but for this purchase hare gone into the Bank, as there is no profit in holding gold, seeing that it has one permanent price, namely, the Mint price. Or if it did not go into the Bank, it would be exported, seeing that we are not gaining any new gold by import. In this manner (with no net imports of gold) the quantity of gold in circulation is reduced by perhaps 2,400,000Z. a year. It is not taken from the Bank of England in large quantities so as to affect the rate of discount, it is not taken from any single fund, but from the circulation generally in the leading cities and towns of the country. If there are 37,000,000 of people in this country using a certain amount of money for certain transactions in which legal tender money, or money passing as such, is actually used, and if the total amount of such money available for all actual cash purposes is 137,000,000?., then' this 137,000,000?. of money, or the portion outside of the banks, spread over all these cash transactions, will be distributed on a scale of relative prices that will show the comparative values of all commodities. On the other hand, if by some sudden operation the. 137,000,000?. of money were reduced to 100,000,000?., then it is perfectly certain that with the latter amount of money the same cash transactions could not take place except at reduced prices. It would be a physical impossibility to pay the same prices on the same transactions. There is no more mystery in the method by which money distributes itself over an entire community in proportion to the needs of each person and his ability to supply his money needs, than there is in the method by which all articles are distributed over the country in proportion to the needs cf the inhabitants and their ability to pay for the articles. In the fields of com- merce, industry, and agriculture there is a change in most wholesale prices of articles every day, and often sgveral times in a day, and at least there is a distinct feeling on the part of the dealers in most articles every day that the market is rather stronger or rather weaker when no change of price takes place. It is also sur- prising to observe the frequent changes, in many cases daily and even hourly, in the prices of the enormous mass of securities of all kinds. This demonstrates the daily and hourly adaptation of the prices of thousands of niillions sterling of wealth to changes in supply and demand as aflfecting each commodity and each security. If then we see the prices of articles and all securities hourly and daily changing over the whole country, we ought not to feel sui-prised at the money in the country which every inhabitant and every business firm must have more or less, distributing itseK and re-distributing itself with incessant activity in accordance with the total available quantity of money, the demand for it, and the ability of eagh person to pay for the amount which he demands, that is, by services or some other equi- valent. But with 100,000,000?. of money, prices of commodi- ties can no more remain at the same average figures at which they stood when the amount of money was 137,000,000?., than 100,000,000 bushels of wheat could give each individual of 37,000,000 people the same amount of wheat as 137,000,000 would give. While the currency is being contracted in conse- quence of sovereigns being withdrawn, it is manifest that the first eH'ect of this is that there is not money enough to carry out the retail transactions at current prices. There will therefore ensue a falling ofi" in the demand for commodities, and . this falling off will im- mediately be felt in the wholesale markets. This diminished demand without any diminution in the supply will inevitably cause a fall in wholesale prices. The fall first shows itself in wholesale prices, but the cause is that there is not enough money to pay the same retail prices for the usual quantity of articles, and thus the current supply of articles can only be disposed of at such a reduction in prices as will enable the normal amount of articles to be paid for by the smaller amount of money available. We are now reasoning on the basis that as our prices have fallen, prices have similarly fallen in other gold money countries, otherwise we should have had foreign countries sending gold here to purchase at our lower prices. As we have not gained any gold by import in the last 11 years, it is clear ' that there hks been a correBponding fall in prices in all gold standard countries, and therefore this fall in prices is due to a cause which has been in operation in all the gold-money countries. The amount of gold in circulation here has dimi- nished, and the amount of the gold standard has dimi- nished in all other gold countries, because the stock of gold in the countries which were on the gold standard in 1870 has had to be reduced so as to give a stock of gold to Germany, the United States, Norway and Sweden, Holland, Italy, &c., which in 1870 were not on the gold standard, and had at that time but little gold. If, however, instead of gold being withdrawn annually to the extent of 2,400,000^., an amount of 20,000,000?. had, let us suppose, been exported from the counla-y in two years to provide for gold coinages in countries adopting gold. This would have involved a diminution of 20,000,000?. by export, of 4,800,000?. in the arts; and further, there would have been no gold to provide for wear and tear of coin, or for the wants of an in creased population, so that prices would have fallen very greatly. The 20,000,000?. of export would have been demanded from the Bank of England. Any foreign country wish- ing to get gold could sell 20,000,000?. of its securities and have the proceeds put to its credit at the Bank. If 2O,X)jOO,0OO?. were to be demanded within two years, the gold reserve at the Bank being an average amount, the Bank would undoubtedly be. compelled tp raise its rate of discount, and if the foreign government persisted in withdrawing the gold, a severe monetary crisis would supervene in England, which would certainly require the suspension of the Bank Charter Act. When the Bank had only its usual gold reserve, say about 22,000,000?., a withdrawal of 20,000,000?. for the purpose of being locked up abroad would be impracti- cable. The Bank would require to call upon the Government to suspend the Bank Charter Act, and it would then refuse to pay in gold and would tender notes instead. There would, however, be a tremendous strain on the gold circulation. The high rate of discount would diminish applications for discounts, and the banks would refuse new business and would strengthen their position by calling in loans or by reducing them. There would be a movement of gold from the provinces to London, and the Bank of England would use every possible eflTort to bring gold into its cofiers. The operations of merchants, manufacturers, agriculturists, &c., would be restricted, there would be a partial paralysis in all business, money would not circulate so freely as before, there would be a falling off in the demand for com- modities, and prices would consequently fall. There would be a diminution in the funds for the payment of wages, there would be short time in factories, the shop- keepers would have less activity in their business, and in the absence of demand, wholesale and also retail, prices would fall until they had adjusted themselves to the contracted currency. And as the fall in prices was due to a permanent contraction of the currency, this fall would be permanent ; whereas if the fall were due to some mere temporary monetary crisis or unusual conditions, prices would rise again as soon as the abnormal causes had ceased to operate. I have now shown how prices fall over a period of years when we have not received any gold by net imports from abroad, by two different operations, (1) by a withdrawal of sovereigns from the gold circulatioB generally, and (2) by withdrawal of gold coin or bullioR from the Bank of England to be exported abroad, whici must however be replaced in the Bank by withdrawals from the circulation. Prices may also fall in consequence of a deficient supply of gold, so that we may import large amount.8 of gold and yet have falling prices because we do not import enough. The next question to be considered is, how average prices rise in consequence of excessive supplies of gold. AH gold from abroad, whether deficient, normal, or ex- cessive in amount, must practically pass into the Bank of England, because the Bank is the one great customer that is bound immediately to pay cash for any gold that may be offered, and the price is fixed and always the same, and therefore there can be no profit for importers in holding it. The gold that comes into the Bank from abroad and is afterwards exported, does not enter into the present discussion, as it has no real influence on prices, its effect being confined to a temporary increase in the gold reserves of the Bank, and to a temporary lowering of the rate of discount. ' ■ The gold which has an effect on prices is that which APPENDIX. 225 remains in the country and passes into active circulation. A.n importer of gold having deposited a shipment at the Bank of England gets credit for tho value in his account with the Bank, or he may take a cheque on the Bank and pay it into his account at some other hank. If importations of gold take place on a considerable scale, and pass into the Bank, the latter v/ill have to lower its rate of discount, not, however, in the hope of causing gold to be exported, because we are assuming that there is an increased supply of gold, and that it is flowing into all the gold-money countries ; but in order that the lower rate of discount may cause a larger demand for discounts. Thus the Bank will get rid of, say, 60 per cent, of the new gold or of notes redeemable in gold. But the money obtained by these discounts must be used for purposes for which money is actually required, because the supply of gold has positively in- creased. The business of the country is not now being carried on with the same number of counters, so to speak, as before ; there has been an addition of counters. If 10,000,0001. of cotton, wheat, and tea had been im- ported there would have been no addition to the money or the counters in which these would have been valued, and by which they would have been distributed and paid for. But if 10,000,000Z. of gold come into the country there is a positive addition of so much to the money of the country, and these 10,000,0002. will very soon, by the processes of trade, exchange, and prices, be so distributed over the country that the business of the country will be carried on by the former currency and these 10,000,0002. more. The 10,000,000?. must be distributed in certain proportions between the banks and the gold circulation outside of the banks ; but as while contraction of the currency is going on, the gold circulation outside of the banks will be reduced more' in proportion to its quantity than the aruount in the banks will be reduced in proportion to the quantity they hold ; so, while inflation of the currency is taking place, the amount of gold which will pass into circulation outside of the banks will be proportionately greater than what will be added to the reserves of the banks. The effect of having an increase of gold would be that there would be new money competing for employ- ment ; merchants, manufacturers, and others would compete for this new money at a low rate of discount, and its use would cause greater competition in the wholesale markets, and, therefore, higher prices, until average prices had risen to the level of the increased amount of money, that is, to a level of prices at which practically it would take the increased amount of money to pay for the same articles and services which were formerly paid for by a smaller aggregate of money. Over the entire fleld of commodities and securities the lower rate of discount would at least temporarily compensate for and be the equivalent of higher average prices, and in the higgling of the markets the lower rate of discoimt would soon be adjusted to a higher range of prices, and this lower rate of discount would continue until the surplus gold beyond the banks' requirements was di-iven into the general circulation of the country and automatically distributed. But in the case of securities (not including, however, companies earning their incomes in trade or in produc- tion) the advance in average prices through a low rate of discount would only be temporary, that is, prices would, as a rule, not follow the quantity of money, but would follow the changes in the rate of discount. On the other hand, however, the low rate of discount caused by an excess of gold that must be forced into circulation would cause increased competition over the whole fleld of commodities, and, therefore, would cause prices to be raised, and as the money was in existence to raise prices, average prices would rise to and remain at the level of the quantity of money in the country, and would thereafter be only very little afi'ected by changes in the rate of discount, so that in general terms it may be said that average wholesale prices of commodities must follow the quantity i)f money absolutely, while they will be but very little afi'ected, and then only temporarily, by changes in the rate of discount. On the other hand, retail prices will not be affected by changes in the rate of discount, though they will be materially afi'ected by changes in the volume of the currency. When, therefore, the excess of gold has been, as it were, absorbed in a higher range of retail prices, tha money of the country will be adjusted to its uses at that higher range, and average retail prices will not advance further. It may also be pointed out that increased amounts of money will also cause new enterprises to be under- taken, giving more active employment to labour and setting many unemployed people to work, and all this must give increased demand for materials and for commodities, and thus raise prices, though not to the same extent as if the new money was applied altogether to its present uses only at a higher range of prices. In conclusion, I may remark that the words " infla- tion " and "contraction," as applied to the volume of currency, are historical, as they have expressed the experience of civilized notions from the earliest times ; and I know of no reason why in modern times increase or decrease in the currency should not have its full efBect in prices of commodities, although it cannot be shown separately by itself, as other elements enter into prices. In looking at a grain of wheat, we are per- fectly certain that air, soil, rain, and sunshine have gone to its production ; but it is impossible for ua to compare a grain of wheat of one year's harvest with a grain of wheat of another, and say in what proportions these elements have contributed to its production, or whether one owed more or less to air, soil, rain.- or sunshine than another. So with increase or decrsiae in the currency, we cannot positively say how much change in prices is due to it, as we have not exact statistics ; but we can approximately, and we could with tolerable accuracy, if we had reliable statistics; but increase or decrease is a physical fact like soil, rain, or sunshine, and is as completely represented in prices as any of these is in a grain of wheat. 23rd July 1887. o 51080. F f 226 ROYAL COMMISSION ON GOLD AND SILVER: APPENDIX III. Paper laid before the Commission by Mr. H. D. Maclkod. To INVESTIGATE THE RELATION BETWEEN THE STANDARD OP ValUE AND PRICES. Preliminary Remarks. This is as complex and perplexing a question as it is possible to propose. In the first place it may be remarked that there is not, and there cannot be by the nature of things, a standard of value. The expression Standard of Value arose from a confusion of Smith and Ricardo on the nature of value, which all economists see to be untenable. What is meant by the question is, what is the relation of money to prices. Though there cannot be a standard of value, there may be a measure of value. The distinction between the two expressions arises from difPerent conceptions of the origin and nature of value. It is a doctrine maintained by several English writers that all value is produced by labour, and in one part of their works. Smith and Ricardo allege that the value of a thing is the quantity of labour expended in obtaining it, and that if a thing could always be produced by the same quantity of labour, it would be invariable in value. But such ideas are now abandoned by every economist. The expression Measure of Value proceeds from the conception that the value of a thing originates in the demand of the consumer, and the measure of value is the quantity of the material fixed upon to measure the desire of the consumer to obtain any object. The measure of value is money and credit. The superlative complexity of the question consists in this, that by far the larger portion of the measure of value consists of credit, and in order to obtain even an approxi- mate answer to the question it is necessary to ascertain the ratio which money bears to credit. All economists a,cknowledge that credit has exactly the same effect on prices as money. Bank notes, biUs of exchange, and banking credits, payable in gold, have exactly the same effects as an equal amount of gold. Bank notes, bills of exchange, and banking credits, payable in silver, have exactly the same effects as an equal quantity of silver. And the value of these metals, with respect to each other, is aifected by the credits of all forms payable in each of them, exactly as by equal quantities of the metals themselves. Moreover, in estimating prices generally, the quantity of inconvertible paper money must be taken into consideration at its current value in specie. Credit emanates from two sources : (1) merchants and traders of all kinds ; (2) Banks. It is somewhat remarkable that the great scientific principles and mechanism of credit are not to be found in any work in the English language. The modern system of banking and credit was invented by the Eomans, and the complete scientific principles of credit were developed by the Roman lawyers, and are con- tained in the Pandects of Justinian, and are set forth in every Continental treatise on Jurisprudence, but they have not hitherto found their way into any treatise on economics. In a subsequent section there are exhibited the juridical principles of credit as developed by the Roman lawyers, which have now been enacted by Statute as law in England. "With respect to banking it is somewhat remarkable that there is not in any language an exposition of the actual mechanism of banking, which is of indispensable importance in determining this question. All the com- mon notions of the nature of banking are entirely erroneous. In a subsequent section there is given an outline of the real mechanism of banking. Having then determined that the measure of value consists of money and credit, it is necessaiy to consider the various kinds of purchaseable commodities, and these are (1), material things; (2), labour or services ; and (3), abstract rights. The question proposed is not only as abstruse and com- plex as any in physical science, but its difficulty is enor- mously increased, because there is no agreement among the best known econonaists as to the meaning of any one of the fundamental terms which are necessary to its discussion. It is, of course, only one example of the general theory of value ; but, unfortunately, economists are at utter dis- cord with themselves, and with each other, on every point in the theory of value. To give an answer, therefore, to the question which can even approximate to correctness, it is necessary (1) to explain the fundamental terms involved in its discussion ; (2), to give an outline of the theory of value ; (3), to explain the nature and system of credit; (4), to explain the nature of banking, of which the common notions are entirely erroneous. SECTION I. Definitions. On the Meaning op the Word Wealth. Ancient writers for 1,300 years unanimously held that exchangeability is the sole essence and principle of wealth. That everything whatever which can be exchanged, or bought and sold, or whose value can be measured in money, is wealth, whatever its nature or its form may be. Thus Aristotle says, Nioomach. Eth. B.v. c. 1 : xriiMTa Se \e7o/iEV irtiyra iaiev 7] dfi'a votilfffiaTi /ierpeiTBi. By the term wealth we mean all things whose value is measured in money. This is a good general definition, fitted to form the basis of a great science, and the whole science of economics is to be developed out of this single sentence. We have next to ascertain how many different kinds of things there are which can be bought and sold, or exchanged, or whose value can be measured in money. First there are material things of all sorts : lands, houses, money, cattle, trees, &c. which every one now admits to be wealth. Ancient Dialogue to show that Labour is Wealth. There is an ancient dialogue named the Eryxias, on the nature of wealth, which, as far as I am aware, is the earliest work extant on an economical subject. Eryxias observed to Socrates that he had seen the richest man in all Sicily. Socrates asked him what he meant by wealth. Eryxias said that by wealth he meant the person who had most money. Socrates then asked him what kind of money he meant, and said that different States had different kinds of money which could be exchanged in them and therefore were wealth, because they had purchasing power in them, but were not exchangeable in other places, and therefore were not wealth. Socrates showed that money is only wealth in those places in which it can be exchanged, or has purchasing power, anywhere else it is not wealth. He then asked : — " Why are some things wealth and " some things are not wealth ? " " Why are some things " wealth in some places and not in others, and at some " times and not at others ? " He then showed that whether things are wealth or not depends entirely upon human wants and desires ; that everything is wealth wher? it is wanted and demanded ; that it is not wealth where il is not wanted and demanded. That, in short, things are only x/wfA'"™ or wealth where they are xpil<^'l*a; that is where they are wanted and demanded. He then showed that anything else which enables us to purchase what we want and demand is wealtli, for exactly the same reason that gold and silver are. He instanced professors and persons who gained their living by giving instruction in the various sciences. He said that persons got what they wanted in exchange for this instruction, just as they did for gold and silver ; and, consequently, he said, the sciences are wealth at ^Iffrniicu Xp^fioTo aSffai — and that these who are masters of such sciences are so much the richer TrKovrndrepol eiiri. Now in instancing the sciences as wealth, that, of course, is a general term for labour, because labour in economics is any exertion of human abilities or thought, which is wanted, demanded, and paid for. Now labour or thought APPENDIX. 227 cannot be seen or handled, but it can be bought and sold ; its value can be measured in money, and therefore by- Aristotle's definition, it is wealth. Thus Socrates showed that personal qualities in the form of labour are wealth, and a person makes an income by the exertion of his skill and labour as an advocate, a physician, an engineer, or the manager of a great commercial company, just in the same way as another person makes an income by selling material commodities. Demosthenes shows that Personal Credit is Wealth. But personal qualities may be used as purchasing power in another way besides that of labour. If a merchant enjoys good " credit," as it is termed, he may go into the market and purchase goods, not with money, but by giving his promise to pay at a future time — ^that is, he creates a right of action against himself. The goods become his actual property, exactly as if he had paid for them with money; this right of action is the price he pays for them ; and this right of action is termed a credit, because it is not a right to any specific sum of money, but only a general right against the person of the merchant to demand a sum of money at a future time. Hence a merchant's credit has purchasing power exactly as money has. When a merchant purchases goods with his credit instead of with money, his credit is valued in money exactly as his labour may be; and therefore, by Aristotle's definition, personal credit is wealth. So also Demosthenes says : " Svotv wyaSolv ovtoiv irXoirov *' T6 Kai Tov irphs Kiravras irLcmieffBai, fiei^Sv iiXTi rh Trjs trlffrews There being two kinds of " goods and chattels " — money and general credit, the greater is credit, and we have it. He also says : " Ei Se tovto Ayvoeis liri irltms dfpopiJ.^ rSiv ** Trauay etrrl fxeyiffTTj Trphs xPVf^i^Tif^f^^Vi "^^v Uv ayvoTjffGtas." If you were ignorant of this, that credit is the greatest capital of all towards the acquisition of wealth, you would be utterly ignorant. Thus Demosthenes shows that personal credit is oryaBa or goods and chattels, and aopiJ.T], or capital. Thus though personal credit, like labour, cannot be seen nor touched, nor handled, it may be bought and sold, or exchanged — its value can be measured in money — and therefore it is wealth. It is now clearly shown that personal qualities, both in the form of labour of aU sorts, and also the form of the c!redit of our bankers, merchants, and traders, is wealth ; and it follows that the credit of the State itself is also national wealth. All Jurists show that Rights are Wealth. But there is another order of quantities which can be bought and sold, or exchanged, and whose value can be measured in money, and which are therefore wealth by the definition. And it is this order of quantities which requires the greatest attention, because it is with respect to them that modern economists are chiefly at fault, and it is with them that* the most important questions in modern economics are chiefly concerned, especially the question before the present Commission ; therefore the subject requires to be fuUy treated. Suppose that I pay a sum of money into mj account with my banker, what becomes of that money ? It becomes the absolute property of my banker. I transfer to him the absolute property in the money, but I do not make him a present of it, I get something in exchange for it ; and what is that something ? In exchange for the money, my banker gives me a credit in his books, that is, lie gives me a right of action to demand an equal sum of money from him at any time I please. This right of action is termed a credit, and it is the price the banker pays for the money ; and if I write that right of action down on paper in the form of a cheque, that cheque may circulate in commerce and efi'ect exchanges exactly like so much money, until it is paid off and extinguished. So if a merchant buys goods on credit by giving in payment for the goods a right of action against himself to demand so much money at a future time, that right of action is the payment for the goods, and the owner of it may write it down on paper in the form of a bill of exchange, and that bill of exchange may circulate in commerce, and efFect exchanges exactly hke so much money until it is paid off and extinguished. Thus a right of action written on paper in the form of a cheque or biU of exchange is itself an independent article of property or a vendible commodity, and may be bought and sold exactly like a piece of money, or a horse, or a watch, or any other material commodity; thus, a credit is itself a saleable commodity like any material chattel. It vidll also be convenient to state here that this right of action or credit is also termed a debt. The subject of credit and debt will be more fully explained further on. It is sufficient to state here that the words credit and debt are used perfectly indiscriminately, in English law and common usage, to mean the creditor's right of action to demand a sum of money from a person. But there are a great many other kinds of abstract" rights which can be bought and sold or exchanged, and whose value can be measured in money, and are therefore wealth. Suppose that the State wants money for some public purpose, such as a great war, or to execute some public work, it buys money from any person who is wilhng to sell it to it, and in exchange for the money it gives the subscribers certain rights to demand a Series of future payments from the nation. These rights in popular language are called the funds, and the public creditors may sell these rights to any one they please. These rights may be bought and sold like any material chattels. They are vendible commodities, and therefore wealth by the definition. Suppose that any one wishes to subscribe to the capital of a public company, banking, railwayj canal, dock, or any other, the money he pays becomes the property of the company in its corporate capacity, and in exchange for the money he receives certain rights to share in the future profits to be made by the company. These rights are termed shares, and the shareholder may sell his right to any one else. These shares may be bought and sold like any material chattels. They are vendible commodities, and therefore wealth by the definition. Suppose that a trader establishes a successful business of any sort, besides the house or premises in which the business is carried on, and the material goods in his shop, he has the right to receive the future profits to be made by the business. This abstract right is termed the goodwill of the business, and it is part of the trader's assets, over and above the material goods in the shop, and he can sell it for money to any one else. Its value can be measured in money, and therefore it is wealth. When an author publishes a successful work, he has the exclusive right of publishing the work, and receiving the profits made by it for a certain time. That right is termed copyright, and is a property quite separate from the printed volumes. And the author may sell that copyright to any one he pleases, like a material chattel. Its value can be measured in money, and therefore it is wealth by the definition. When a professional man establishes a successful busi- ness he has the right to receive the future profits to be made by it. This right is called a practice, and he can sell it to any one else. Its value can be measured in money, and therefore it is wealth. There are also a considerable number of other abstract rights of a similar nature, which can all be bought and sold, and are therefore wealth, which it would be too long to enumerate, as it is not necessary to enumerate them all, but only to direct attention to a particular class of saleable quantities. Now all these rights cannot be handled nor seen, nor transferred by manual delivery in that form ; but they can all be bought and sold; their value can be measured in money, and therefore they are all wealth. But all these rights may be written down on some material, such as paper or parchment, and then they may be transferred by manual delivery, like any other material chattel ; in fact, then, they become material chattels. And because all these rights can be bought and sold, because their value can be measured in money, all Jurists expressly class them under the terms "wealth," " goods," " goods and chattels," " vendible commodities," " incor- poreal chattels," and " incorporeal wealth." Thus, in the great code of Roman law, named the Pandects, it is laid down as a fundamental definition. Dig. 60, 16, 222. "Pecunia; nomine non solum numerata pecunia, sed omnes res, tam soli quam mobiles^ tam corpora quam Jura continentur." Under the term wealth, not only ready money but all things, both immovable and movable, both corporeal things as well as rights are included. Dig. 50, 16, 6. Nominis et rei appellatio ad omnem contractum et obligationem pertinet. The term debt and property is applied to all contracts and obligations. Dig.. 50, 16, 21. Princeps bona concedendo videtur etiam obligationes ooncedere. The Sovereign in granting " goods " also grants obhga- tions. Dig. 50, 16, 23. Rei appellatione et causae et jura continentur. Pf 2 228 ROYAL COMMISSION ON GOLD AND SILVER: Under the term property both, rights of action and rights are included. Dig. 60, 16, 49. Mque bonis admunerabitur si quid est in actionibus nam hsec omnia in bonis esse videntur. Rights of action are justly oounted as " goods "... for all these things are included as "goods," So Ulpian says : Lib. 34 ad edict. Nomina eorum qui sub conditione vel in diem debent, et emere et vendere solemus. Ea enim res est quae emi et venire potest. "We are accustomed to buy and sell debts payable at a certain event and on a certain day. For that is wealth which can be bought and sold. So Colquhoun in his summary of Roman law, says that under the term Merx is included anything whatever which can be bought and sold, no matter whether it is movable or immovable, corporeal or incorporeal, existent or non- existent, such as a horse or a right of action, servitude, or anything to be acquired , or the acquisition whereof depends on chance. Thus in Roman law, abstract rights of all sorts are ncluded under the terms pecunia, (wealth), bona, (goods and chattels), res, (property), and merx, (merchandise). The Pandects were published in the year 630 A.D. at Constantinople, but while the official language was Latin, the people were Greek, and the Latin Pandects soon fell into desuetude. They were superseded by Greek translations and treatises, and at last in the ninth and tenth centuries under the Basilian dynasty, they were entirely superseded and set aside as obsolete ; a new digest or revised code was published in Greek, called the Basilica, which has remained to the present day as the common law of all the Greek population of the east, and in the Basilica these definitions are repeated. Basi). 2, 2, 204. t^ oviti.aTi tuv xp^f-^'''""' "" ii6vov Tci Xpyf^ciTa aWh irdj/Ta ri Kturjra Koi aictvTjT^ Kal ra ffu^iaTiKo, koI to. dffatfiaTLKa SiKaia driKovraL. Under the term xp^M"'^'' • • • rights are included, Basil, 2, 2, 21. t^ toG irpdyfiaros trpoffriyopia Kai c^Ttat Kal t^ SlKaia irepiexerai. Under the term " goods and chattels " both rights of action and rights are included. Also in Greek Law abstract rights are included under the terms ayaOd (goods), ova-la (estate), a(popfi7i (capital), oIkos (estate), and they are called ol/a-ia cupdi^s, invisible wealth. It is the same in English Law. In the old law of Normandy it is expressly said that rights of action are included under the term chattels. Thus Sheppard says under "chattels" "all kinds of " emblements, cut and growing, grass cut; all money, " plate, jewels, utensils, household stuff, debts, wood cut, " wares in a shop, &c., &c , are accounted chattels. " AH right of action to any personal action is a chattel." So in the reign of Elizabeth, it was resolved by Popbam, L.C.J., and the court " personal actions are as wellincluiled " within the word ' goods ' in an Apt of Parliament[as goods " in possession." So in another case Lord Hardwicke said : '• And debts " come within the meaning of the Act, and would pass in a " will thereby." Buniet, J., said " A bond debt is certainly a chattel. Parker, L.C.B., said " But' goods and chattels ' include " debts . . . things in action are considered goods " and chattels." In English law all property consisting in mere abstract rights, such as debts, the funds, rights of action including bank notes, bills of exchange, shares in commercial companies, copyrights, patents, the goodwill of a business, a practice, &c. are included under "goods and chattels" "vendible commodities" "incorporeal chattels" and " incorporeal wealth." The principle which is the basis of the theory of credit and of all incorporeal property, is that every future profit from whatever source it arises, whether from land or from personal industry, has a present value ; and that present value can be bought and sold, or can be measured in money, and therefore by the definition which the ancients unanimously held for 1300 years, that present right, or the present value of the future payment, is itself an independent article of wealth, (juite separate and distinct fi-om the future payment itself. Reflection will show that there is nothing which can be bought and sold which is not of one these three forms — either it is a material chattel, or it is a service of some kind, or it is an abstract right. Hence taking money as the type of all material things Labour as the type of services of all kinds Credit as the type of all incorporeal property ; wealth is seen to be of three forms, money, labour, and credit. It is thus seen that there are three, and only three, orders of exchangeable or economic quantities, and these three orders of quantities can be exchanged in six different ways/. — 1. A material thing can be exchanged for a material thing — such as gold money for corn or jewelry. 2. A material thing can be exchanged for lal)our as gold money for labour. 3. A material thing can be exchanged for a right — as gold money for a bill of exchange, copyright, !kc. 4. Labour can be exchanged for labour — as when two persons agree to render each other services, 5. Labour can be exchanged for a right — as when services are paid for in bank notes. 6. A right can be exchanged for a right — as when a banker discounts a bill of exchange by giving a credit in his books. These six distinct kinds of exchange constitute the science of exchanges or of commerce in its widest extent, and in all its forms and varieties. The law which regulates the exchangeable relations of these quantities is termed the law of value ; and the least acquaintance with the principles of natural philosophy shows that there can be only one grand general law of value which governs all exchanges in all their multiplicity and complexity. Thus for 1,300 years the ancients held that exchange- ability is the sole essence and principle of wealth ; that everything whatever which can be bought and sold is wealth . Now for a thing to be exchangeable there must be a demand for it ; hence ancient writers unanimously held that demand is the sole origin of value. There is not to be found in any ancient writer the trace of such a doctrine, that labour and materiality are necessary to wealth and value. I shall now show that modern writers have at length come exactly to the same conclusion ; and it is by adopting this principle only that the question before the present Commission can be solved. On the Definition of Whalth in Mobern Times. The principle that exchangeability is the sole essence and principle of wealth was unfortunately totally lost sight of in modern times, until at last modern economists have come to the same conclusion. For many centuries money was held to be the only wealth, which was the cause of numerous commercial wars for centuries. About the end of the seventeenth century it was seen to be absurd to restrict the word wealth to money alone, and it was extended to mean aJl the material products of the earth which conduce to the welfare and comfort of mankind. Origin of Political Economy in Modern Times. Political economy was founded as a science by a sect of illustrious French philosophers who, in 1759, published a code of doctrine. They originated the expression " production, distribution " and consumption of wealth," and it is necessary to explain clearly what they meant by this expression, because all the differences of opinion which at present prevail on the nature of economics have arisen from modern writers having completely misapprehended the meaning of that expression as explained by its originators. The term wealth, the Economists, as this sect were called defined to mean the material products of the earth which are brought into commerce and exchanged, and these only. They drew an essential distinction between the products which the owners consumed for their own enjoyment, and those which were exchanged. The former, they termed biens, the latter only they termed richesse. Hence, as the ancients did, the founders of economics in modern times held that exchangeability is the essence of wealth, as a technical term. But they restricted it to material products only. They refused to admit that labour and credit are wealth, because they said that to do that would be to maintain that wealth can be created out of nothing. They constantly repeated ex nihilo nihil fit. They therefore held that the earth is the sole source of wealth. Now it is contrary to the laws of natural philosophy to admit that exchangeabihty is the essence of wealth, and then to restrict it to material products only. Bacon repeatedly points out that when the principle or quality on which a science is founded is once agreed upon, it is necessary to search for and include all quantities in the science which contain that quality, however diverse their forms and natures may be in other respects. And as labour »,nd credit are both exchangeable, and can be bought and sold, it is contrary to the laws of natural philosophy to exclude them from the term wealth. The ancients included both labour and credit under the term wealth, as we have seen, in strict conformity with scientific principle. The terms " production," " distribution," and " con- sumption " have now to be explained. They defined production to be the obtaining the raw produce from the earth and bringing it into commerce, APPENDIX. 229 But this raw produce is seldom fit for immediate use ; it has to undergo several intermediate processes of manufacture and transport before it is brought to the person who ultimately purchases it. All the persons engaged in these intermediate processes they termed distributors. The person who finally purchased the finished product for use and enjoyment, and took it out of commerce, they termed the consommateur, because consommer in French means to complete or terminate, and the purchaser is the person who completes or terminates the transaction. The whole transaction — the bringing the produce into market, the various changes of form and place it underwent, and its final purchase for use or oonsommation — the Economists termed commerce or exchange. An exchange, however, may take place between two parties, and distribution was often used as equivalent to consommation. Hence the expressions " production, dis- tribution,and consumption," '"production and distribution," and " production and consumption " were all equivalent expressions, and never meant anything else, as explained by the Economists, than commerce or exchange. Production meant supply, and consumption meant demand ; and supply and demand constitute commerce or exchange. Thus it must be carefully observed that the expression " production, distribution, and consumption " is one and indivisible, and it must not be separated into its component terms. It is in the interpretation of this expression that the whole point in the contest between the modern schools of Economists consists. Considering that these two ex- pressions were absolutely identical in their original meaning, the question is, which is the better term for the science in its enlarged state at the present day ? Even supposing that the term " wealth " is to be restricted to material objects only, a difficulty arises with respect to the first expression. The land itself is a saleable commodity ; it may be bought and sold. But how are we to speak of the " production, distribution, and con- sumption " of land ? Whereas it is quite usual to speak of the " supply and demand " of land. Thus, even if wealth were restricted to material things, the second expression is wider, and far more clear and intelligible. In fact, the expression "production, distribution, and consumption of wealth " imposes a cast-iron limit on the science ; and it was intended to do so ; while the second expression is expansive, and includes all commerce in its widest extent. The Economists refused to allow credit to be wealth, but other contemporary writers did. The first writer in modern times, that I am aware of, who agreed with Demosthenes in classing credit as wealth, was Bishop Berkeley, who says in his querist, " Whether " power to command the industry of others (i.e., credit) be " not wealth." The French mercantile writers also contemporary with the Economists expressly class credit as wealth. Melon says : — "To the calculation of values in money " must be added the current credit of the merchant, and " his possible credit." So Dutot says :— " Since there has been a regular com- " merce among men, those who have need of money have " made bills or promises to pay money. The first use of " credit, therefore, is to represent money by paper. The '• usage is v<'ry old ; the first want of it gave rise to it. It " multiplies specie considerably ; it supplies it where it is " wanting, and which would never be sufficient without " the credit, because there is not sufficient gold and silver " to circulate all the products of nature and art. So there '' is in commerce a much larger amount in bills than there " is in specie in the possession of the merchants. " A well managed credit amounts to tenfold the funds of a merchant, and he gains as much by his credit as if he had ten times as much money. This maxim is generally received among all merchants. " Credit is, therefore, the greatest wealth to every one who carries on commerce." So Junius says : — " Private credit is wealth." Franklin says : — " Credit is money." The Economists were the first to found a science of economics, but they had no practical experience of com- merce, and they never made any attempt to exhibit its actual mechanism. And it has now been shown that even in that age, it was seen that .their doctrine of excluding everything from the term wealth except the material products of the earth was untenable. It was, however, perfectly well understood by all writers of that age, that as a positive science economics is the science of commerce or exchanges. Thus, Condillac published a work, " Le Commerce et " le Gouvernement," and he calls it " Le Commerce or the " Principles of Economic Science." Forbonnais, who was an eminent contemporary of the Economists, published the best treatise on commerce in his day, and he calls it " Economic Principles." Adam Smith. Smith entitles his work " An Inquiry into the Nature " and Causes of the Wealth of Nations." But most unfortunately he never gives throughout the whole course of it any clear idea of what he means by wealth. At the end of the introduction he speaks of " the real " wealth of the country, the annual produce of the land " and labour of the society." We have now to examine whether such a definition can be accepted as the basis of economics as a great science. In the first place, it is observed, that he has omitted the quality of exchangeability from the definition of wealth, which was the very quality which the economists insisted upon. It is perfectly obvious that the mere definition of wealth as the " annual produce of land and labour " cannot be accepted as a suitable definition of the term, because if it were so, every useless work done would be wealth. If one were to build a pyramid in Salisbury Plain, would that be wealth ? The simplest form of the " produce of land and labour" are children's mud pies. So that if we accept that definition simply, the way to augment the wealth of the country would be to set all the dirty children in it diligently to make mud pies. The medium price of an acre of land near the Bank of England is about a million sterling. That land is wealth ; but how is it the " produce of land and labour ?" Further on Smith classes the natural and acquired abilities of the inhabitants as fixed capital. How are the " natural and acquired abilities " of the people the " pro- duce of land and labour V Smith treats labour itself as a vendible commodity, and he has a long discussion on the price of labour or wages. How is labour itself the "annual produce of land and labour?" Thus Smith has already broken away from the dogmas of the Economists, who expressly excluded labour from the term wealth, and counts labour as wealth because it is a vendible commodity, exactly as the author of the Eryxias did. After, for several hundred pages, filling the minds of his readers with the notion that wealth is simply the " produce of land and labour" he admits that unless a thing is exchangeable, it is not wealth. Thus, after all, he admits that exchangeability is the real essence and principle of wealth. Further on, under the term "circulating capital," he enumerates bank notes and bills of exchange. Now, bank notes and bills of exchange are mere rights of action ; they are credit. Thus it is seen that Smith expressly classes credit under the terms wealth and capital, which was what the Economists expressly denied. Now, how are bank notes and bills of exchange — mere rights of action — the produce of land and labour ? Thus Smith has extended the domain of economics. In conformity with what has been shown of ancient writers, he recognises that wealth is of three forms, material things, labour, and rights. Thus while the economists restricted economics to the commerce of material things. Smith extended it to include the commerce of labour. He admitted that bank notes and bills of exchange are circulating capital, but he never gave any exposition of the great scientific principles and mechanism of the mightv system of credit and banking, which are the department o"f economics which concern the present inquiry. He also says that the object of his work is to investigate the principles which regulate the exchangeable value of commodities. Thus the subject matter of Smith's first two books is in reality a treatise on commerce, or the theory of value ; and his editor, McCuUoch, says in a note, this science might be called the science of values. This is not the place to explain fully the immense services Smith did to economics; but as regarding the present inquiry, and as a treatise suitable to be placed in the hands of students at the present day, it is necessary to point out that its fatal defect is that the first half of the work is entirely founded upon labour and materialitv a being the essence of wealth, while the latter half adopts exchangeabiUty pure and simple. Now, these two funda- mental concepts do not coincide, because there may be 230 EOTA.L COMMISSION ON GOLD AND SILVBE! many things which may be the produce of land and labour, which are not exchangeable ; and it is a notorious fact that there are multitudes of things which are exchange- able which are in no way whatever the produce of land and labour. . , o AH the most advanced and mdependent economists ot the present day entirely reject labour and materiality as being necessary to wealth and value, and adhere to the unanimous doctrine of ancient writers that exchange- ability is the sole essence and principle of wealth ; and that everything whatever which can be bought and sold is wealth. Another fatal defect of Smith's work as a scientific treatise, that it is totally wanting in unity of principle, which was indeed the cause of Ricardo's work. RiCARDO. Ricardo was the first economist in this country who perceived the necessity of reducing the laws of value to general principles. He calls his work " The Principles of " Political Economy and Taxation." The part relating to political economy is nothing but a treatise on prices or on value. Ricardo, then, understood that politick economy is an fond the theory of value, in accordance with all writers up to his day. But unfortunately his work is not a treatise on value in general, but only on a very small part of it. He deals only with material things, and only with a certain portion of them— those only which are the produce of human labour. He expressly restricts his investigation to the principles which govern the value of " commodities " which can be increased in quantity by the exertion of " human industry, and on the production of which com- " petition operates without restraint." Having then excluded all things from his consideration except those which are the produce of human labour, he lays down the dogma that labour is the foundation of all value, a dogma which the slightest consideration will show is utterly untenable, even as applied to material objects, because there are multitudes of material objects which have value which are not the produce of labour at all. However, it will be more convenient to discuss Ricardo's doctrines further on. The last writer who need be cited in this place is Whately. In his lectures at Oxford he says :— " A. Smith has desig- nated his work a treatise on the ' Wealth of Nations ; ' but this supplies a name only for the subject-matter, not for the science itself. The name I should have preferred as the most descriptive, and on the whole least objectionable, is that of CataUactics, or the science of exchanges. "Man might be defined as 'An animal that makes exchanges.' .... And it is in this point of view alone that man is contemplated by political economy. This view does not essentially differ from that of A. Smith, since in this science the term wealth is limited to exchange- able commodities, and it treats of them so far forth only as they are, or are designed to be, the subject of exchange. But for this reason it is perhaps the more convenient to describe political economy as the science of exchanges, rather than as the science of national wealth. For the things themselves of which the science treats are imme- diately removed from its province if we remove the possi- bility, or the intention of making them the subject of exchange, and this, though they may conduce in the highest degree to happiness, which is the ultimate object for the sake of which wealth is sought. A man, for instance, on a desert island, like Alex. Selkirk, or the personage his adventures are supposed to have suggested. Robinson Crusoe, is in a situation of which political economy takes no cognizance, though he might figuratively be rich, if abundantly provided with food, raiment, and various comforts, and though he might have many commo- dities at hand which would become exchangeable, and would constitute him, strictly speaking, rich, as soon as fresh settlers should arrive. " In like manner a musical talent, which is wealth to a professional performer who makes the exercise of it a subject of exchange, is not so to one of superior rank who could not without degradation so employ it. It is in this last case, therefore, though a source of enjoyment, out of the province of political economy." Thus up to this time it was perfectly well understood by all economists that, as a positive science, economics is the science of commerce or of exchanges, or the theory of value. The expression production, distribution and consumption of wealth was an extremely awkward one, but still its originators clearly explained that they meant nothing but commerce or exchanges by it. So long as there was a general agreement as to its fundamental nature there was good hope of progress, because the ideas of its founders could be expanded, modified, developed and rectified. Everyone of the other great sciences — astronomy, optics, heat, electricity, &c. — have undergone great revolutions of opinion, modification, rectification, and expansion, and have thus been progressive sciences. And so it might have been at the present day with economics, if economists had steadily kept in view the original conception of the science. The first economists considered only the commerce in the material products of the earth. Smith devoted great attention to the commerce in labour, but, with the exception of a few perfunctory remarks on bank notes and bills of exchange, he does not seem to have the slightest idea of the magnitude and importance of the commerce in rights which is the most colossal branch of commerce at the present day, and includes the whole principles and mechanism of credit, banking, and the foreign exchanges. So long as it was clearly understood that economics is the science of commerce in general, it was perfectly easy to introduce any new branch of commerce which had not been fully developed. If the early economists had reflected on the nature of rights, if they had observed that Smith himself classes bank notes and bills of exchange as circulating capital, they would have seen that it is absolutely indispensable to discard labour and materiality as necessary to value, and they would have seen that exchangeability is the sole essence and principle of wealth. It is evident that under the general term of commerce it is quite as easy and natural to treat of the commerce of , rights as to treat of the commerce of material products and labour. The Second School of Economists. Unfortunately an economist of great distinction introduced a fatal change in the fundamental conception of the science, which threw it into utter confusion, and has arrested its progress up to the present time, but from which all the most independent economists are now emancipating them- selves. J. B. Say, in 1803, published his first treatise on political economy, in which he defined it as the production, distri- bution, and consumption of wealth ; but unfortunately he quite departed from the original meaning of that expres- sion, which was one and indivisible, and originally meant nothing but commerce or exchange. Say broke up the expression into its separate terms, and completely changed the original meaning of consump- tion and production ; for, while the original meaning of production was offering for sale, and consumption meant purchasing. Say used production to mean adding value to anything, and consumption to mean destroying value ; and he has separate and independent chapters on produc- tion, distribution, and consumption. Say himself classes instruments of credit, such as bank notes, bills of exchange, the funds, the copyright of a book, a professional practice, and also natural abilities of all sorts, as wealth. How is it possible to speak of the production, distribu- tion, and consumption of bank notes, bills of exchange, the funds, or copyright, or practice, or natural abilities? But all these things can be bought and sold, and come under the expression demand and supply, and are perfectly intelligible when economics is treated as the science of commerce. Say's work has for nearly half a century moulded tlie continental view of political economy, and most of the usual manuals and treatises are little more than adaptations from it. It is evident that so long as the fundamental concept of economics is commerce or exchanges, it is a distinct positive intelligible science, the fundamental law of which is the law of value. But when it is broken up into three parts, it becomes utterly unintelligible as a science. It breaks the back of the whole science ; it utterly breaks the back of the theory of value. John Stuart Mill. J. S. Mill was the friend and pupil of Say, and in a general way Mill's system is moulded on that of Say, though he varies from him in certain particulars. Mill treats political economy as the production, distribu- tion, and exchange of wealth. Now, in the language of the economists, that is simply "exchange" and " exchange." In the beginning of his preliminary remarks, he says : — " Everything therefore forms a part of wealth which has a " power of purchasing." Now here we have a perfectly APPENDIX. 231 clear and definite oonception of wealth, exactly agreeing withthat of Aristotle and all ancient writers. This defini- tion includes all the three orders of exchangeable quantities, and if wealth be anything which has purchasing power, the production of wealth must mean the production of any- thing which has purchasing power. A little further on, however. Mill says : " The production of wealth, the extraction of the instruments of human " subsistence and enjoyment from the materials of the " globe." _ It is evident that these two ideas of wealth are quite distinct ; in the first, Mill makes exchangeability the sole essence of wealth, and in the second he makes it to consist of the produce of land and labour. Is it the fact that everything which can be bought and sold is extracted from the materials of the globe ? Still further confusion appears further on. He says that it is essential to the idea of wealth to be susceptible of accumulation, and that permanence it necessary to wealth. This is another change of idea. This new condition at once excludes labour from the term wealth. He then says that he considers only material things as wealth ; but in close juxtaposition to this he says that the skill, energy, and industry of the working classes (and why not that of all other classes as well ?) are wealth. How are the skill and energy of the working classes material and extracted from the materials of the globe P Mill says that anything which has purchasing power is wealth. He then says : " For credit, though it is not productive " power, is purchasing power." " The credit which we are now called upon to consider is a distinct purchasing power independent of money." " The amount of purchasing power which a person can exercise is composed of all the money in his possession, or due to him [i.e., bank notes, bills of exchange, &c.], and of all his credit." " Credit, in short, has exactly the same purchasing power with money." Now if Mill says that, " anything which has purchasing power is wealth ; " and if he says : " Credit is purchasing power"; then the necessary inference is that "credit is wealth." He also classes bank notes and bills of exchange as productive capital. It it thus shown by Mill's own statement that credit and human abilities and bank notes are wealth, and how are they the produce of land and labour, and extracted from the materials of the globe P In a popular manual it is admitted that wealth is anything which is exchangeable, and then soon afterwards it is said that all wealth is the produce of land, labour, and capital. It is thus shown that the notions of wealth of all economists from Smith to MiU are utterly vague, uncertain, and contradictory. The fact is that the expression production, distribution, and consumption of wealth, was expressly restricted to the material products of the earth, and, when labour and rights are included under the term wealth, it becomes unin- telligible. The whole system of credit and banking consists in the creation, sale, and extinction of rights of action, and how can that be described as the production, distribution, and consumption of wealth P The Third School of Economists. AU the most advanced and independent economists in Europe and America now see that it is impossible to make economics a science so long as the conception of it as the production, distribution, and consumption of wealth is retained. They now agree that exchangeability is the true essence and principle of wealth; and that everything whatever which can be bought and sold is wealth ; and that by adopting this principle all the difficulties and perplexities which beset the subject disappear. Land, houses, money, jewelry, debts, the funds, copy- rights, shares in commercial companies, and labour or services of all sorts, have value for exactly the same reason — ^because they can all be bought and sold. The interchange of these three distinct orders of quantities constitutes commerce in its widest extent, and in all its forms and varieties. And it is by adopting this conception alone that the great sytem of credit and banking can be brought within economics. , ., , , . ^, The fact is, that economics has burst the bonds ot the nomenclature of the first economists. A definition which suits the exchange of material products only becomes unintelligible when it is stretched to include labour and rig-hts The attempt of economists to discuss these subjects while retaining the old definition was hopeless, and only led to confusioa. The fundamental concepts of the economists will no more fit economics in its present enlarged state than the clothes of an infant will fit a full grown man. As economics now embraces all commerce we must entirely reject the narrow and restricted definition of the economists, and adopt that of commerce which includes all exchanges. Several modern economists have defined political economy to be the science of exchanges. But there is a general dissatisfaction now with that name. Various other names have been proposed. Whately proposed catallactics ; others have proposed plutology or chrematology ; but such novel terms as these would not readily be accepted. Economic science is so firmly rooted in the public mind that no goo« would be got by changing it. Moreover, it exactly expresses the nature of the science. Because oIkos^ in Greek is absolutely synonymous with irAoBroj and XPVI^- Throughout the whole range of Greek hterature, from Homer to Ammonius, oJkos means property or estate of every description. It includes not only land, houses, and all material property, but all such property as debts, bank notes, bills of exchange, and all other kinds of incorporeal property. It is the technical term in Attic law for a person's whole estate. The science may, therefore, be aptly termed economics ; and this name is now being very generally adopted for it. Economics, then, is the science of commerce or exchanges, and it may be defined thus — Economics is the science which treats of the laws which govern the relations of exchangeable quantities. By adopting this conception, it is at once seen how economics is a physical science, because it is a science of variable quantities. It is a new order of variable quantities, and the laws which govern this new order of variable quantities must be in strict harmony with the laws which govern the relation of all other orders of variable quantities. Like astronomy, it is a pure science of ratios. On the Meaning op Property. It is now seen that by the acknowledgment of all Economists, ancient and modern, there are three distinct orders of Economic, or exchangeable quantities : (1) Ma- terial things; (2) Personal qualities; (3) Abstract rights typified by tlie terms Money, Labour, and Credit. We have now to find a general term which includes all these orders of economic quantities. This general term is Property. The true meaning of this word will throw a blaze of light over the whole science of Economics, and will clear up all the difficulties which have been felt about the word Wealth. Most persons when they hear the word Property, think of some material things such as lands, houses, money, jewelry, &c., as being Property, This, however, is a cor- ruption of the true meaning of the word, and a very modern one too. Property in its true meaning is not any material things, it means Absolute Ownership, In early Roman jurisprudence a man's possessions wero termed Mancipium. In process of time the word was applied not only to the things themselves but to the Abso- lute Ownership in them. Afterwards a new word came into use. All the possessions of the family (domus) belonged to the family as a whole; but the Dominus or head of the house alone exercised all rights over them. Hence this right of. Abso- lute Ownership was termed Dominium. But in process of time separate members of the family were allowed to acquire private ownership of things ; and this right was termed Proprietas. Proprietas therefore in Roman law meant absolute and exclusive ownership, and was synonymous with Dominium. And for centuries this was the meaning of property in Enghsh. In aU legal text books up till the middle of the last century. Property was invariably used to mean Abso- lute Ownership, and was never applied to the material thing itself. This meaning of property was not only understood by jurists, but also by Economists, An early French econo- mist says, " Property is nothing but the right to enjoy " there is but one right of property; that is a " right in a person, but which changes its name accord- " ing to the nature of the object to which it is " applied." Thus landed property means rights to land. Funded property means rights to payments from the nation; personal property nieans rights to personalty; literary property means rights to the profits from works of litera- ture and art. So when the Socialists wish to destroy property, it is not the material things they wish to destroy, but the exclusive rights which private persons have in them. 232 ROYAL COMMISSION ON GOLD AND SILVKK Property means absolute, entire, and exclusive owner- ship. It is the totality of rights which can be exercised over anything. It comprehends the jus possidendi, or right of possession; the jus utendi or the right of using the thing in any way the owner pleases ; the jus fruendi or right of appropriating any fruit or profit from it; the jus abutendi or the right of alienating or destroying it ; and the jus vindicandi or the right of reclaiming it if found in the wrongful possession of any one else. Then there may be property, or rights, not only in specific material things, but also in things which are not material ; as also a property or right to things which have not come into existence or possession at the present time, but will only do so at some future time. Under the words Property and Res is included every- thing whatever which a person has a right to. Thus Smith and all Economists show that a man has property in his own labour. But just as a labourer has property in his own labour, a merchant and a banker have property in their own credit. Demosthenes, as we have seen, showed that personal credit is ^7061^, or goods and chattels. And modern Econo- mists and mercantile writers all include personal credit under the term Wealth. Thus a merchant or banker's credit is wealth or purchas- ing power to him just as much as his money ; and to ruin his credit in just as great an injury to him as to rob him of his money. Economic quantities or economic rights are of three distinct orders : — 1. Rights, or property, in some material substance which has already been acquired. 2. Rights or property in labour or services. 3. Rights or property in something which is only to be acquired at some future time. Now we observe that the first and third of these species of property are opposite or inverse to each other. Property regards the past and the future. But we may buy and sell a right to a specific thing which has already come into possession; and we may equally buy and sell the right to a thing which is only to come into possession at a future time. Property therefore is of opposite qualities. Now, in all mathematical and physical sciences it is mvariably the custom to denote similar quantities, but of opposite qualities, by opposite signs. Hence, if we denote one of these kinds of property as positive, we may as a distinguishing sign denote the other as negative. Property in a thing which has been acquired is corporeal property, and property in a thing which is to be acquired at some future time is incorporeal property. Hence, if we denote corporeal property by the positive sign, it is strictly in accordance with all physical philosophy to denote incorporeal property by the negative sign. But corporeal property and incorporeal property can all be equally bought and sold or exchanged, the value of each kind of property can be equally measured in money, hence in all systems of jurisprudence, each kind is termed pecunia, res, bona merx, xp^/^^^a, TpdynaTa, oliffia, don precision. This observation applies very forcibly to economics. Some persons are apt to despise it because its results cannot be brought out with the same numerical precision as those of mathematics. This, however, is an error. In economics the causes of phenomena can be ascertained with absolute certainty, and if we want to produce a given effect, the method of producing it can be pointed out with absolute certainty. This is all that is necessary to constitute an exact science, because the method of producing the result being pointed out with certainty, it has only to be put in force until the required result is produced. In considering the general equation of economics given above, we see the application of Bacon's aphorism : " That " which in theory is the cause, in practice is the rule." No other quantities but demand and supply appear on the face of the equation. It therefore follows that no other causes influence value or changes of value than intensity of demand and limitation of supply. It is seen that neither labour nor cost of production have any direct influence on value, and if they do so indirectly it can only be by and through the means of affecting the demand or the supply ; and that no charge of labour or cost of production can have any influence or value unless they produce a change in the relation of supply and demand. Thus the labour or cost of production theory of value is entirely disproved, and shown not to be applicable to the question before the Commission. There only remains, then, the'law of supply and demand, as expressed in full above, which is the universal law of value. And, as the question of bi-metaUism is only a par- ticular example of the universal law, it must necessarily govern the momentous question before the Commission. It is a problem of the profoundest complexity to discern how the universal law of value is applicable to the particular case of bi-metallisra. SECTION III. The Theory of Credit. The theory of the value of land will throw a complete lieht on the theory of credit. If we purchase an estate in land for 100,000/. say, where is the value for the money? Does it consist m thmgs which are already in existence? Everyone knows that it °When' we purchase an estate in land we purchase the riffht or property not only in the existing products of the land, but also the right to receive these products for ever j that is, to a series of products which will only come into existence at definite intervals of time for ever That is, we Durchase not only the existing products of the land, but also its capacity to produce future products to the end oi ^'^But though the annual products of the land will only come into existence at future intervals, the_ right or property to receive them when they do come into exis- tence is present, and may be bought and sold like any material chattel. That is, each of these future products has a present value, and the purchase money of the land is the sum of the present values of this series of products for ever. When a purchaser has bought land it may be said to owe him a series of annual products for ever. Hence the right to receive these future products is the credit of the land, because the purchaser only bought it on the faith, hope, or trust that he would receive them. A trader exercising any profitable business is an economic quantity analogous to the land. He has perhaps accumu- lated money as the fruits of his past industry, but over and above his accumulated money, he possesses the same capacity, ability, and industry to earn profits in the future, as he has ah-eady done in the past, and, of course, he has the right or property in the products of his future industry. H h2 244 KOYAL COMMISSION ON GOLD AND SILVER: And he may trade in two ways. He may trade with the money he has already acquired, or he may purchase goods by giving in exchange for them the right or property to demand payment for them at a future time, out of the profits which are to he earned in future. Personal chEiracier used m this way as a purchasing power is termed credit, and, as has been shown, all economists are now agreed that anything which has purchasing power is wealth, i-T necessarily follows that money and credit are equally wealth. Mercantile character, then, is purchasing power, and if a trader can purchase goods, labour, or money with his personal credit, his credit has a value which is measured in money. Hence /.jeruantile character is wealth or valuable property, and it may be used as capital as well as any material chattels. A merchant's credit may be damaged and injured by false reports, just as his material goods may be damaged and injured by material violence. To damage a merchant's credit is to injure and destroy his purchasing power, and is just as great an injury to him as-to rob him of his money. And he has an action against any one who injures his mercantile character or credit equally as he has against any one who injures his material chattels. So distinctly is personal character recognised as property in Roman law that it is classed under Jura in re, and an attack on it is an injuria, or the infringement of a legal right. Hence it must be carefully observed that mercantile character or credit is national wealth. On thb Creation of Obligations. But as value does not enter into economics unless a person manifests his value or demand for something by giving something in exchange for it, so mercantile character or credit does not enter into economics until the merchant actually exercises his credit by making a purchase with it. And when a merchant buys goods with his credit, or " on credit," as it is often termed, it is an absolute sale, just as much as if the purchase had been efPected with money. He acquires the absolute property in the goods as fully and effectually as if he had paid for them in money. But at the very instant that the property in the goods is ceded to the merchant a contract or obligation is created between the two parties, the buyer and seller of the goods, which consists of two parts : — 1. The right to demand payment in the person of the seller or creditor. 2. The duty to pay in the person of the buyer or debtor- These two quantities constitute the contract or obligation or the bond of law between the two parties. In this contract or obligation the creditor's right of action to demand the future payment in law, commerce, and economics is termed the credit or the active debt. The debtor's duty to pay is termed the passive debt. The right of action, credit, or debt is the price or payment of the goods. AVhen a merchant takes a trader's bill at three months in exchange for goods, it is payment for the goods just as much as if it were money. The transaction is a sale or an exchange. The bill is payment for the goods ; what the trader has to do is to pay his bill when it becomes due, which is another exchange. This right of action written down on paper is a saleable material commodity, like any material chattel, and it may be bought and sold, and circulate in commerce, and effect exchanges exactly like a sum of money. It is termed a credit because anyone who buys it knows that he only buys a right of action against a person to demand a sum of money, and not a title to any specific sum of money j and ' he only buys it in the belief and confidence that the debtor will be able to pay it at the proper time. It is also carefully to be observed that the debtor's duty to pay a sum at a future time is no subtraction from his present property. For the debt is simply the personal duty to pay, and there is no duty to pay until the day of payment comes. It is now apparent why economics can only be made a definite science by adopting the fundamental concept of exchanges. The whole phenomena of credit, which, are a hopeless puzzle and perplexity while it is treated as the " Production, Distribution, and Consumption of Wealth," become perfectly clear and simple when it is understood to be the science of commerce or exchanges. On the Extinction of Obligations. It has now been shown that credit is the name of a species of incorporeal property of the same nature, but inferior in* degree to money, and that it fulfils exactly the 'same functions as money as a medium of exchange or circulation. It is a property cumulative to money ; th?.t is over and above money. But credit has it limits, and we have now to investigate the proper hmits of credit, and to explain the various methods by which it is extinguished. The true limit of credit may be seen by the definition of the term ; because credit is a promise to pay money at a future time. The institution of banks and bankers who create currency by means of their credit, either in the form of notes or deposits, gives a great extension to the limits of credit ; but the principle of the limit remains the same. Credit always has to be redeemed, and if this can be done the credit has been sound; hence credit is never excessive, whatever may be its absolute amount, so long as it always returns into itself. Credit being the right to demand a future payment, and the debt being the duty to pay, of course the payment fulfils, discharges, and extinguishes the right as well as the duty; and thus the obligation is absolutely annihilated and extinguished. Credit being always expressed to be payable in money, it is often supposed that bills and notes are only extinguished by payment in actual money. This, however, is an error ; there are several other modes of satisfying a debt besides actual money; and in this country the amount of bills which are paid in money is absolutely infinitesimal com- pared to those which are paid in other ways. There are four different methods by which obligations may be extinguished ; these are : — 1 . By release or acceptilation. 2. By payment in money. 3. By renewal or transfer, or novation. 4. By set-off or compensation. On Release ok Acceptilation. The first method by which an obligation can be dis- charged is by release, termed in Roman Law, Acceptilation. As the contract or obligation is created by the mutual consent of two persons, it can be cancelled or annihilated by the same consent which created it. Euler says, that if a man has nothing, and even owes SO crowns, he has 50 crowns less than nothing; that is, he has nothing, and is under the duty to pay 50 crowns. Euler also says, that if any one made the debtor a. present of 50 crowns to pay his debt with, his property would then be only at the point 0, but he would be 50 crowns richei' than before. Euler is right so far as he goes, but he has only stated one half of the case, because the same result may be arrived at in another way. As any one may give the debtor 50 crowns to pay his debt, we may suppose that the creditor does so. The debtor may then pay the debt by giving the creditor back his 50 crowns, and the debt will be discharged. The debtor, though now possessing 0, is 50 crowns richer than he was before. The same result may be obtained in a shorter way. Suppose that the creditor instead of going through the double operation of first giving and then receiving back the 60 crowns, simply releases the debtor from his debt. Then the debtors' property would be 0, and he would be 60 crowns richer than he was before. This exaniple shows that the release of a debt is in all cases equivalent to a payment in money, a principle of the most momentous importance and the widest application in commerce. So the digest says "Qui obligatione liberatur videtur " cepisse quid." " He who is realeased from an obligation " has gained." So all jurists point out that the release from a debt is under all circumstances equivalent to a payment in money. The application of this in commerce maybe shown. Suppose that I owe a banker lOOZ., in how many ways may I pay him ? 1. I may pay him lOOl. in actual money. 2. If I have 1 001. in his notes, or have an account with him, I may tender him his own notes, or I may give him a cheque on my account. In these two cases I release him from his debt to me, and that is in all respects the same thing as paying him 1001. in money. 3. Or I may pay him 501. in money, and 501, in his own notes, and the combined effect of these two is to discharge and extinguish my debt of lOOZ. Thus I may pay a debt to a banker entirely in money, entirely in his own notes or by cheque, or partly in money and partly in his own notes or by cheque, and the effect of these several modes of payment is absolutely identical. On Payment in Money. All jurists have pointed out that a "loan " of money is in reality a sale or an exchange. The property in the money is ceded to the borrower, and in exchange for it the riifht APPENDIX. 245 on property is created in the person of the lender to demand Iiack an equal sum at a future time. Thus, if a person " borrrows " \00l. at 6 per cent., he in reality buys the 100/., and gives in exchange for it a right of action to demand 106/!. at the end of the year. This right of action is the credit. So when a person buys goods on credit, he buys them by creating a right of action against himself to demand a sum at a future time. In either case, as has been shown, this right of action is an independent article of property, which can be bought and sold, or exchanged like any material chattel, and is termed pecunia, res, bonum, merx, xp^i""; a,ya6hv,vpdyiia, and is "goods," "goods and chattels," "incorporeal chattel." When the time of payment comes, the creditor brings hia right of action to the debtor, and the debtor buys it, just as he would any material chattel. Thus, when a debtor pays a debt, he simply buys up the right of action against himself. Thus, an obligation is created by one exchange, and is cancelled and annihilated by another. On Renewal and Transfer: or Novation. An obligation may also be extinguished by substituting a new one for it. This is termed Novatio in Roman law. Novation may take place in two ways : — 1. When the debtor himself gives the creditor -a new obligation, which he accepts in lieu and discharge of the previous one, which is thereby extinguished. The new obligation is the price or the payment of the previous one. This is usually called Renewal. Thus, when a banker agrees to renew the promissory note of his customer, the new note is the payment of, and extinguishes the former one. If a creditor has a debt owing to him payable on demand, and he agrees to take a note from his debtor payable in three months, the note is payment of, and extinguishes the debt payable on demand; and no new debt arises until the time comes for the payment of the note. 2. A debtor may transfer to his creditor a debt due to him from someone else. If the creditor agrees to receive this new debt in payment of his debt, he thereby discharges his own debtor, and accepts the debtor's debtor as his new debtor. Thus, where a debtor pays his creditor in bank notes, if the creditor accepts these notes in payment of his debt, he discharges his own debtor, and accepts the banker as his new debtor. So also when a debtor gives his creditor a bill of exchange on another person. If the creditor and debtor are both customers of the same bank, the debtor may give his creditor a cheque on his banker. The creditor pays this cheque into his own account, and the banker transfers the credit from one account to the other. The debtor has thus paid his own debt by transferring to liim a debt due to him from his banker. When the new debtor consents to the transfer of the debt he is said to_be delegatus; and the transfer of the credit is termed delegatio. This novatio or delegatio is equivalent to a payment in money. The Digest says : — " Verbum exactse pecuniae non solum ad solutionem referendum est sed etiam ad delegationem. ^ So the Basilica : — " -rh firjiia rav hvairn^ivrav x(n)M<^™v ov jldvov (is HaraBoX^v avaipep^ffBai 8ei, aXKa Koi h ^KTa^iv." The word payment includes not only payment in money, but also the transfer of a credit. , „ „ tt So the Digest :— " Solvit et qui reum delegat. He Days who transfers another debtor." It is evident that the larger a bank is there will be more numerous cases of creditors and debtors being customers of the same bank, and of debts being settled by transfers of credit instead of by money. , • j As will be shown hereafter, bankers have devised an ingenious method by which credits may be transferred from bank to bank exactly in the same manner as the^ are transferred from one account to another m the same bank. Thus all the banks which join in this institution form for that purpose one huge bank. Thus the more extensive and the better organised the banking system becomes the smaller is the quantity of coin required to carry on commerce. On Set Off or Compensation. The last and a most important method of extinguishing obligations is by set off or compensation. If two persons are mutually indebted in debts payable at fhp same time, each may claim that the debt he has against the other shall be taken in payment of the debt he owes. The debts are weighed and set off against each other. This is termed compensation. The following are examples of set off or compensation : — 1. Suppose two bankers issue notes, and each has got possession of an equal amount of the other's notes ; then each banker may compel the other to receive his own notes in payment of the debt due to him. 2. Suppose that a banker holds a merchant's acceptance, and the merchant holds an equal amount of the banker's notes ; then each may compel the other to receive his own obligation in payment of the debt to him. 3. Suppose that a banker holds the acceptance of his own customer, then, when the payment becomes due, he simply writes off an equal amount of the credit due to the customer; and thus the mutual debts are extinguished. 4. Suppose two merchants have issued their acceptances payable on the same day, and the acceptance of each merchant comes into the hands of the other ; on the day of payment the two merchants exchange acceptances, and the mutual debts are extinguished. In former times this principle of compensation was adopted to an immense extent on the Continent. Before the bankers discounted bills; there used to be great fairs at the various mercantile centres, Lyons, Antwerp, Brussels, and many others, every three months. Merchants, instead of making their bills payable at their own houses, where they must have kept large amounts of specie in order to meet them, made them only payable at the great fairs. In the meantime their bills circulated throughout the country, and had the same effects as money, and got covered with indorsements. On a certain day of the fair the merchants met and exchanged their accej/tances. By this means an enormous commerce was carried on without the use of specie. In fact, commerce might be carried on to any extent without specie if only the respective acceptances of the merchants balanced among themselves. These various methods of extinguishing obligations without the use of money show how utterly impossible it is to ascertain the relation of the quantity of money to prices, and are sufficient to show that that method is incapable of giving the solution of the problem before the Commission. On the Quantity op Credit compared to the Quantity of Money. Credit, then, being seen to be a mass of exchangeable property, it is of considerable property interest, especially in the present inquiry, to discover the ratio which money and credit has been to each other in modern commerce. A good deal of light may be thrown upon this by a return which Mr. Slater made respecting the transactions of his house in 1856. He shov/ed the proportion in which each million of payments and receipts were made in money and various forms of credit : — Receipts. In bankers' drafts and mer- £ cantile bills payable after date Cheques payable on demand Country bankers' notes Bank of England notes Gold Silver and copper Post office orders 533,596 .367,715 ' 9,627 68,554 28,089 1,48S 933 A' 900,938 1,486 99,062 ^1,000,000 Payments. £ By bills of exchange 302,674 Cheques on London bankers 663,672 Bank of England notes Gold Silver and copper 22,743 9,427 1,484 £ 966,346 33,654 ..€1,000,000 This may fairly be taken to represent commerce in general, and it is seen that specie did not form two per cent, of their payments and receipts. The quantity of specie in the country may be roughlv estimated at about 120,000,0002. , and, consequently as there is about fifty times as much credit as money used in commerce, it would appear that there is about 6,000,000,000/. of credit in circulation. This, of course, is only a rough approximate estimate, but it shows the colossal magnitude of credit, and its 246 ROYAL COMMISSION ON GOLD AND SILVER; supreme importance in modern commerce. This credit produces exactly the same effects, and affects prices exactly as so much gold. Two Branches of the System of Credit. The preceding observations are sufficient to give a general outline of the gigantic system of credit which has grown up in modern times, and in such a commercial country as this has almost superseded the use of money in commerce. Modern commerce is almost exclusively carried on by the creation, circulation, and extinction of debts or credits, and not by money, and the superlative importance of this in this inquiry is apparent, because these circulating credits or debts have exactly the same effects as prices and production as an equal amount of metallic coin. And the actual influence of metalhc coin itself as prices and production can only be estimated by comparing the actual amount of coin with the quantity of credit which is usf;d in conjunction with it. The system of credit is divided into two great branches, commercial and banking. In the first, merchants buy commodities by means of credits or debts payable at a certain time after date. These commercial debts may circulate in commerce and effect exchanges exactly bke money until they are paid off and extinguished, and commercial debts are always intended to be extinguished when they become due. The second source of creating credit is banking. Bankers buy money and these commercial debts by creating debts of their own, payable on demand. A.nd there is this marked distinction between commercial debts and banking debts, that while the former are always intended to be extinguished at maturity, the latter are not so. Banking credits are created payable on demand, and must be paid if demanded. But they are not intended to be paid and extinguished. On the contrary, they are created with the hope and expectation that they will not be demanded, but continue in existence and do duty as money. There is no necessity that banking credits should ever be extinguished. They may be transferred from one account to another in the same bank, and from one bank to another to the end of time. It is quite possible that much of the banking credit which exists at the present time may have been originally created by the very first banks founded in this country, and there is no necessity that it should ever be extinguished as long as the banking system continues. Money is a very expensive machine to purchase and keep up, but banking credits cost nothing to create, and they may endure for ever. SECTION IV, On Banking. The second great source of the creation of credit is banking. The common notions of the nature of banking may be stated as follows : — 1. That the word bank comes from the Italian banco or bench; because as is alleged, the Italian money dealers kept a banco or bench on which their money was piled. 2. That the business of a banker consists in acting as an intermediate agent between persons who want to lend and those who want to borrow. 3. That the profits of a banker consist in the difference between the interest he pays for the money he borrows, and the interest he charges for the money he lends. Then Gilbart says :—" A banker is a dealer in ca,pital. " or more properly a dealer in money. He is an inter- " mediate party between the borrower and the lender. He " borrows of one party and lends to another, and the " difference between the terms at which he borrows and " those at which he lends, forms the source of his profit." So in the report of the House of Commons on the com- mercial panic of 1858, it is said :— "The use of money, and " that only, they regard as the province of a bank, whether " of a private person, or incorporation, or the banking " department of the Bank of England." These descriptions of banking, coming from apparently such high authority might be supposed to be accurate, nevertheless, they are entirely erroneous. On the Meaning of Bank. The Italian money changers as such, were never called banchieri in the middle ages, nor was the office of a mere money changer ever called a banco. Mere money dealers were called cambiatores, cambitores, campsores, speciarii, nummularii, trapezitse, danistse, colly- bistse, and mutuatores, but never banchieri; and their places of business were called casane, but not banchi. At the present day no person would call a mere money changer, or a person who merely lent out money, a bamker. Formerly there were many persons who acted as inter- mediaries between persons who wanted to lend and those' who wanted to borrow ; they were called money scriveners. At the present day many firms of solicitors act as inter- mediaries between, persons who want to lend and those who want to borrow. But no one ever called such a firm bankers. It is evident, therefore, that the nature of the business of a banker is essentially different from that of a money • scrivener or a solicitor. Tae word bank arose in this way. In the year 1171, the city of Venice was at war with the empires of the east and west. Its finances were in great disorder, and the great council levied a forced loan of one per cent, on the property of all the citizens. Commissioners were appointed to manage the loan, who were called the camera degli im- prestiti. Such a loan has several names in Italian, such as compera, mutuo, but the most common is monte, a joint stock fund. This first loan was called the monte veccnio, the old loan; subsequently two other loans were contracted and called monte nuovo and monte nuovissimo. In ex- change for the money the citizens received stock certificates, or credits, bearing interest which they might transfer to any one else. At this time the Germans were masters of a great part part of Italy, and the German word banck came to be used as synonymous with monte, and was ItaUanised into banco, and the loans or public debts were called indifferently monti or banchi. Thus, an English writer, Benbrigge, writing in 1646, speaks of the "three bankes " at Venice, meaning the three public loans or monti. Ben Jonson in his Volpone, the scene of which is laid in Venice, says : — " I make no profit in the public bank," meaning, I do not dabble in the Venetian funds. So the Spanish economist, Olozaga, speaking of these loans says " el monte Vecchio (banco viejo) ... el monte- " nuvo (banco nuevo)." That the word banco, in Italian, means a public debt, might be proved by numberless quotations. Thus, in Florian's dictionary published in 1659, it says : " Monte, a standing bank or mount of money, as they have " in divers cities of Italy." So a recent writer, Cibrario says : — " Cu?ea aUa teoria del " credito, che dissi invenzione di comuni Italiani, h noto " cheil prime banco o debito pubblico fu eretto in Venecia, " nel 1171 . . . . un monte o debbito pubblico fu " stabilito in Firenze nel 1336." Numberless quotations might be made from the Italian economists who always use monte and banco as synony- mous. The bank of Venice was, in reality, the origin of the funding system, or the system of public debts, it did not for many centuries do what is termed banking business. This was the meaning of bank when it was first intro- duced into English. Thus Bacon, says : — " Let it be no bank or common stock, but every man be master of his own money. So Gerard Malynes, in 1662, speaks of mons pietatis or banke of charity, and says, that in Italy there " are montes " pietatis, that is, mounts or bankes of charity." Benbrigge in his Usura Accommodata, published in 1646, says : — " For their rescue may be collected, mons pietatis •' sive charitatis or banke of piety or charity, as they of " Trent fitly call i«." Again: — "For borrowers in trade for their supply as " their occasion shall require, may be erected mons nego- " tiatonis or banke of trade." Tolet speaks of two kinds of banks, namely, " Mons " fidei or banke of truste, which Clement XII. instituted " at Rome ; he that put his money into this bank was " never to take it out again, and received 7 per cent., and " of mons recuperationis or banke of recovery, in which " the interest was 12 per cent." These were simply per- petual and termioable annuities. Several proposals for forming banks in England were made in the time of Cromwell. Cradocke, a London mer- chant, says : — " A banke is a certain number of sufficient " men of credit joyned together in a stock, as it were, for " keeping several men's cash in one treasury, and letting APPENDIX. 247 out imaginary money (i.e. credit! at interest for three or more in the hundred per annum to tradesmen or others I that agree with them for the same, and making payment thereof hy assignation, passing each man's aocompt from one to another, yet paying little money." And he says that "the aforesaid bankers may furnish another petty " bank (or mount) of charity." In a little tract entitled " A discourse concerning banks," published in 1697, it says ;— " Banks of the second kind, " called in Italy monti, which are for the benefit of the " income only are the banks of Rome, Bolonia, and Milan. " These banks were made up of a number of persona who, " in time of war or other exigences of State, advanced " sums of money upon funds granted in perpetuum, but '' redeemable The third kind of banks which are both for the convenience of the public and the ad- " vantage of the undertakers, are the several banks of " Naples, the bank of St. George at Genoa, and one of the " banks of Bolonia. These banks having advanced sums " of money at their establishment did not only agree for a " fund of perpetual interest, but were allowed the privilege " of keeping cash." The Bank of England was of this last kind. It was a company which advanced a loan to the Government, and received in exchange a perpetual annuity, and was allowed to carry on ordinary banking business as well. Blackstone says : — " At Florence, in 1344, Government " owed 60,000Z., and being unable to pay it, formed the " principal into an aggregate sum, called metaphorically a " mount or bank." The public debts, popularly called the funds or consols, are legally termed " Consolidated Bank Annuities." There has been one instance in this country of a bank formed out of the contributers to a public loan merely. This was the Million Bank. This company existed till nearly the end of the last century. The essential feature of all these banks was to buy money from the subscribers as a mutuum, which thus became the property of the borrowers, and in exchange for the money they issued a credit, or a certificate with a promise to pay interest. The meaning of the word "to bank " is to issue credit. On the Mechanism of Banking. A banker is therefore a trader whose express business it is to issue credit. It has now to be shown how a banker trade's. Suppose his customeis pay in 10,000/. to their accounts. The money becomes his absolute property as a mutuum. In fact, he buys the money from his customers, and in exchange for it he gives them a credit in his books ; that is, he creates and issues a right of action to his customers which entitle them to demand an equal sum of money at any time from him. This credit, debt, or right of action, is termed in banking language, a deposit. After such an operation his accounts would stand thus — Liabilities. Assets. Deposits - ,£10,000 | Cash - .£10,000 Now, though his customers have right of action against the banker to demand back an equal amount of money to what they have paid in, yet persons would not place money with their banker if they wanted to draw it out again. Nevertheless, some will want to draw out part of their funds • but if some draw out money others will pay money in probably an eijual sum. In ordinaiy and quiet times a banker's balance in cash will seldom differ by more than one tliirty-sixth part from day to day. So that if he retains one-tenth of his cash to meet any demands that may be made upon him, that is ample and abundant in aU ""^ If-then hTthe above example, the banker retains 1,000?. in cash to meet any demands upon him, he has 9,000/. to trade wth; and it is just in the method in which bankers trade that so much misconception exists. It is commonly supposed that when a banker has the 9 OOOZ to trade with, he employs it in purchasing biUs of pxchanse to that amount, and that he receives a profit only on the 9,000/. ; but that is a complete misconception of the nature of banking. . A "banker " never purchases a bill with money, that is it-g business of a bill discounter. A " banker " trades in this way. He sees that 1,000Z. in rash is sufficient to support liabilities of 10,000/. ; con. aeauently he argues that 10,000/. in cash will support liabiUties to several times that amount in credit. When a "banker" discounts a biU he simply buys a rlffht of action, and he buys it exactly in the same way aa be bought the money. That is, he creates a credit, or a debt or a right of action against himself in his books to the amount of the bills, but at the same time charging his customer with the interest agreed upon, which is called discount. That is, he buys a right of action payable at a future time by creating and issuing a right of action payable on demand; and this right of action, credit, or debt is equally, in banking language, termed a deposit, as the right of action he created to buy the money. Suppose that the "banker-" buys 40,000/. of commercial bills at three months, and the discount is four per cent., then the sum to be retained would be 400/. Consequently, in exchange for bills to the amount of 40,000/., he would create credits, debts, or rights of action, technically termed deposits, to the amount of 39,600/. Hence, just after buying the bills, and before his customers begin to operate on their accounts, his accounts would stand thus : — Liabilities, Deposits - - 49,600 .^49,600 Assets. £ Cash - - 10,000 Bills of Ex- change - 40,000 £50,000 The balance of 400/. being his-own property. By this process the "banker" has added or created 39,600/. in credit to the previously existing cash, and his profit is clear. He has not gained 400/. on the 9,000/. in cash, but on the 40,000/. of bills he has bought. This is the true exposition of the nature of banking. Hence the definition of a banker is clear. — "A banker is a " trader whose business is to buy money and debts by " creating other debts " Tlius it is seen that the essential and distinctive feature of a "bank" and a "banker" to create and issue credit payable on demand. A bank is not, therefore, an office for borrowing and lending money; it is a manufactory of credit, which produces all the effects of an equal amount of gold. It is, as Bishop Berkeley said, a gold mine. To show the enormous effects of banking, and especially its importance in the present inquiry, it may be stated that the Scotch banks in 1886, on a cash reserve of 4,042,376/., maintained liabilities to the amount of 90,781,337/., that is a ratio of more than 22 to 1. It would have a material bearing on this inquiry if a complete account of the statistics of the English banks could be obtained in as full a form as those of the Scotch banks, but it does not exist. However, the enormous magnitude of the banking system in England may be conjectured, as it has been recently stated that the deposits, i.e., the liabilities in banking credits, of the London banks alone amount to 526,000,000/. These colossal masses of credit which produce all the effects and act upon prices exactly in the same way as an equal amount of gold, show what an important effect on prices banking credits have, and how entirely misleading is the notion that banks are merely offices which borrow and lend out actual money. On a common Error respecting Deposits. It is indispensable to notice an error which prevails almost universally respecting the word deposit. The word depositum is one of that class of words, of which we have already noticed several instances, which originally meant a material thing, and in modern times has come to mean a right. A depositum in Roman law means anything which is placed in the charge or custody of some person for the mere purpose of safe keeping, and without the property in it passing to him, or his being allowed to use it for his own advantage. It is part of the business of a London banker to take charge of his customer's plate, jewelry, &c., if required to do so. These things so placed with the banker are a depositum ; he acquires no.'property in them, and he receives no remuneration for so doing. It is commonly supposed that when a customer pays in money to his account, that it is a deposit, and the banker is supposed to make advances out of his " deposits." These ideas are erroneous. The money paid in is not a depositum : it is ans«/«Mm," it becomes the banker's property, and he may use it in any way he pleases. In banking language it is not the money which is the deposit but the credit or right of action which is created in exchange for it, so when a banker discounts a bill, he does it by creating a credit or right of action in his books, and this credit is also called a deposit. A banker's deposits are his habilities, and are the price he pays for the money and bills which are his assets. 248 RO"?AL COMMISSION ON GOLD AND SILVEE I A deposit is, then, simply a banldng credit, and a banker does not make advances out of his deposits, but by creating deposits. In Banking Language a Deposit aisd an Issue akb the same. It must, therefore, be carefully observed that in banking language a deposit and an issue are the same thing. A "deposit is simply a credit in a bank's books giving the customer a right of action against it for a sum of money. As soon as the hank has created a credit, or deposit, in its books in favour of a customer, it has issued a right of action against itself. The word issue comes from exitus or going forth, and in mercantile law, to issue an instrument Ts to deliver it to anyone so as to give him a right of action against the deliverer. A deposit is therefore a liability of the bank, and a depositor is a creditor of the bank. It in no way increases the bank's liability to write the liability down on paper. The liability is" created as soon as the deposit or credit is written down in the bank's book, and the liability is only written down on paper in the form of a cheque or banknote for the convenience of transferring the credit or right of action to someone else. It is, therefore, a fundamental error to distinguish banks as banks of deposit and banks of issue. The only dis- tinction is between banks which buy money exclusively, so that the credit created exactly equals the amount of the money bought ; or whether in addition to money, they buy bills of exchange with their own credit, and so create credit in excess of the money they hold. On the method of Utilising Banking Credits. The banker, then, having issued these credits, deposits or rights of action against himself to his customers, they of course cannot transfer them to any one else by manual delivery. In order to be capable of manual delivery they must be recorded on paper, and that might be done in two forins. 1. The banker might give his customer his own notes promising to pay a certain sum to the customer or to bearer on demand. 2. The customer might write a note to the banker desiring him to pay a certain sum to a certain person, or to his order, or to bearer. These, in modern language, are termed cheques. Bank notes and cheques do not create liabilities, they are merely for the purpose of transferring the liabilities termed deposits, or credits in the bankers books. From the origin of banking London bankers all issued notes until about 1793, when they gave up the practice of their own accord, though they were not forbidden to do so until 1844. After 1793 credits in London banks were only transferred by cheques. The banker having created this deposit, the following different results may take place. 1. The customer may draw out the actual money. If he does so it is a resale of money to the customer. The banker buys up the right of action a"gainst himself, and his liability is extinguished. 2. The ch'eque or note may circulate in commerce and effect any number of payments, exactly like money ; and it may ultimately be paid in to the account of another customer of the same bank, and the whole series of trans- actions be closed by the transfer of credit from one account to another. 3. The cheque or note may, after performing similar exchanges, come into the possession of the customer of another banker, and be paid into that bank. So the banker becomes debtor to the customer of another bank. But if the banker A becomes debtor to the customers of banker B, the chances are that about an equal number of the customers of A will have claims against B. If the mutual claims of the customers of each bank are equal, the respective orders are interchanged, and the credits re- adjusted to the accounts of the different customers without any payment in money. Thus, if the mutual claims of any number of bankers exactly balanced, any amount of business might be carried on without requiring a single coin. This is effected by the organisation of the clearing house described further on. It is seen from this that so far as economics is concerned, cheques and bank notes stand on exactly the same footing, and that the more extensive the banking system is, the less is the quantity of coin required. The misconception of the meaning of the word deposit has led to most serious errors regarding the nature of London banking. Because London bankers do not issue notes, it has been very generally supposed that London bankers do not oieate credit, but only lend out the money they have placed with them. But this is a most . important error. Londorl bankers create credits in their books, and all their advances are made by creating these credits, just as they always did. The only difference is that these credits are only circulated by cheques. When it is said that the London bankers have such an amount of deposits, it is commonly supposed that they have that amount of cash to lend out. But the cash a bank has it shown in its assets. .These figures do not show the quantity of cash the banks have to trade with, but they show the quantity of business the banks have done, and the liabilities they have created. They are in fact nothing but bank notes in disguise. A sudden increase in banking deposits is simply an inflation of credit, exactly similar to a sudden increase of bank notes.. After all the great monetary panics it is invariably observed that banliing deposits diminish. This is supposed to be a diminution in cash, but that is an error. After a great monetary panic fewer bills are created, consequently there are fewer bills for the banks to purchase, and if they have no bills to buy they cannot create deposits ; hence, this diminution of deposits is not a diminution of cash, it is a contraction of credit. Error of the common Description of Banking. From the preceding account of the actual mechanism of banking, it is seen what a complete misconception of it, it is to say, that bankers are merely agents between persons who wish to lend and those who wish to borrow. This is entirely untrue in the ordinary sense of " lending " and " borrowing," because in the ordinary case of " lending " the lender deprives himself of the use of the thing " lent." But when a person pays in money to his banker he does not mean to deprive hiniself of its use ; on the contrary, he means to have the same free use of it as if it were in his own house. He "lends" his money to his banker, but at the same time has the free use of it. The banker employs that money in promoting trade. Upon the strength of it he buys debts with his promises to pay several times exceeding the amount of the cash he has, and the persons who sell him their debts have the free use of the very coin which the lender has the same right to demand. Thus, the "lender" and the " borrower " have the same rights at the same time to demand the same coin. All banking depends on the calculation that only a certain portion of each set of customers will demand the actual cash, but that the majority will be satisfied with the mere promise to pay or the credit. Banking, like insurance, depends entirely on the doctrine of chances. It is practically possible that a banker may be called upon to pay all his liabilities on demand at once, just as it is theoretically possible that all the lives insured in an office may drop at once, or that all the houses insured may be burnt down at the same instant. A large and sudden demand for money on a bank is termed a run, and a run on a bank is analogous to a pestilence or a confla- gration to an insurance office. But all banking and insurance is based on the expectation that these con- tingencies will not happen. A banker multiplies his liabilities to pay on demand, and keeps by him a sufficient amount of cash to ensure the immediate payment of all claims which are likely to be demanded at one time. If a pressure comes upon him, he must sell some of the securities he has bought, or borrow money upon them. On the Clearing House. Like everything else connected with banking, the clearing house is a subject of profound misconception. It is usually supposed that the clearing house is an example of the principle of compensation, and that the credits exchanged in it are extinguished. In foreign treatises it is usually called Maison de Liquidation or Com- pensation. This, however, is a complete error. It has been seen that if any number of the customers of the same bank have dealings amongst themselves, and give each other cheques on their accounts, any number of transactions may be settled by the simple transfer of credits from one account to another, without a single coin being required, so long as the receivers of the cheques do not draw out the money. The clearing system is a device by which all the banks which join in it are formed, as it were, into one huge banking institution for the purpose of transferring credits from one bank to another, just in the same way as credits are transferred from one account to another in the same bank, without the use of coin. Before the institution of the clearing house, the system that prevailed was this : every banker has every morning claims against his neighbours, and they have claims against him. At the same hour clerks started from each bank to collect the payment due to it in money and notes. When the clerks returned, the credits were readjusted among the APPENDIX. 249 respective accounts. To meet the claims against it, each hank had to keep a lar^e amount in cash or notes. The consequence is that an immense quantity of cash and notes had to be kept out ol' aol^ive circulation for no other purpose than for meeting the bankers' claims against each other. The Italians devised a plan by which clerks from the respective banks should meet together and set off their claims against each other and pay only the differences in cash. 'I'his system was then adopted in Scotland, and afterwards in London. It is often supposed that in this system, the credits are extinguished, by compensation, but this is an error as may be seen by the following account of its mechanism. Suppose that a eustcmer of the Commercial Bank has 1001. in notes of the Royal Bank paid to him, then he is creditor to the Royal Bank to that amount. He then pays these notes into his account, and constitutes the Commercial Bank his agent to collect them from the Royal Bank and place the proceeds to his account. Suppose that in a similar way a customer of the Royal Bank has been paid 100/. in notes of the Commercial Bank and pays them into his account. He then constitutes the Royal Bank his agent to collect his debt from the Commercial Bank and place the proceeds to his account. Each bank in such case is debtor to the customer of the other. The full way of proceeding would be for each bank to send a clerk to the other to obtain payment of its notes in cash. Each bank then having obtained payment, would credit its customer with the amount. In this way it would require 2001. in cash to adjust the matter. When this was done, each bank would be debtor to its own customer, and there would be no destruction of credit, which would remain as before. The transaction however may be effected in a much simpler way. Let the agents of the two banks meet. The agent of the Commercial Bank says to the other, " In oon- " sideration of your giving up to me the notes on which I " am debtor to your customer, I agree to become debtor to " my own customer." In a similar way the agent of the Royal Bank says, " In " consideration of your giving up to me the notes on which •' I am debtor to your customer, I agree to become '' debtor to my own customer to that amount." The clerks then exchange notes. By this means, each bank is released from the payment of its notes, which as uas been shown, is equivalent to a payment in money, and each bank enters the amount to the credit of iti own customer. By this means each bank instead of being debtor to the customer of the other, becomes debtor to its own customer, and the use for 200/. in cash is saved. Thus each bank, in consideration of being released from its debt to the customers 'O"" tnose changes, m over all countries, would the majority of cases, are greater stability of the standard potlipr limite.! ir, aTv,,^,-,r,f of value be secured thereby? ^ limited in amount. The chief and most perni- cious cause is the issue or contraction of paper money, convertible or unconvertible, unrepresented by coin and bullion. If those issues or contractions are wisely managed, they do no harm ; their effect is even bene- ficial. Suppose a temporary demand for currency should arise in England to the extent of three or four million pounds, then the banks might, during a certain period, increase their loans and discounts, and reduce them afterwards. But when the United States, by the issue of greenbacks, Russia and Austria, by the issue of Government notes, Italy or Prance, by applying to their banks for large and immoderate advances, which, being granted in notes, produce a drain of bullion from those countries, make the currency of the world re- dundant, they create much evil. And when after a certain number of years the notes are redeemed, the bank debts repaid, they harm us once more. It may be proved, I believe, that the inflation of 1873 is due in a great measure to the over-issue of paper in France ; and perhaps "the serious fall in the value of gold ' ascertained by Mr. Stanley Jevons in 1869 was not so much the effect of the Australian and Oalifomian mines as of the American greenbacks, &c. Of course, nothing can be done in the way of inter- national agreements to render these evils impossible. There will be financial mismanagement so long as the world exists, somewhere. But we can widen the field on which the effect of these evils is spread, and this will be done by bimetallism. It seems to me unnecessary to explain in what manner bimetallism, produces this favourable result. It will suffice to quote the well known words used by Mr. Stanley Jevons in his book on money, p. 1 40 : — " Imagine two reservoirs of water, each subject to independent variations of supply and demand. In the absence of any connecting-pipe, the level of the water in each reservoir will be subject to its own fluctuations only ; but if we open a connexion, the water in both will assume a certain mean level, and the effects of any excessive supply or demand will be distributed over the whole area of both reservoirs." ITo doubt if a connexion is opened between gold and silver, gold will share in all the variations to which silver alone is subject now ; but these variations will be greatly diminished. On the other hand, silver will share in all the variations to which gold alone is liable under the present circumstances, and they are far more numerous and important than is generally admitted. I do not believe very much in a marked scarcity of gold ; but I candidly confess that my faith in the stability of gold is not so strong as it was formerly. I fear I have under -rated— and I think the majority of people do still under-rate — the baneful effect of fluctuations in the quantity of notes not represented by coin and bullion. I know that Mr. TuUarton, and other autho- rities of the school to which he belonged, denied the possibility of an excessive issue of convertible notes ; but that is simply a blunder. His argument was that con- vertible notes, when not wanted in the country where they are issued, are returned to the bank. So they are, indeed, but only to be exchanged for bullion, which bullion, when exported, will increase somewhere the demand for commodities, and thus produce a rise of prices. Let us suppose the Bank of France advances money to the Fretich Treasury to the extent of 1,600 million of francs, in notes. The French currency requiring no increase at that moment, these 1,500 million francs will make money redundant, the rate of exchange on London and other places will rise, and 1,500 million francs in gold will be exported. They may be taken out of the bank, if the bank permits it, and in that case the notes will all come back ; the cir- culation in France, after a short time, will be reduced to its old level. Nevertheless, the supply of gold will have been increased to the full amount of 1,500 million francs. Whether the notes issued are convertible or uncon- vertible is quite immaterial ; in both cases they will cause a drain of bullion. The question is not whether they are convertible, but whether they are represented by gold. If they are not, their effect must be as has been described. It is often asked, how will the bimetallic system work, if in one of the contracting States the bank notes are made unconvertible, because issued in too large quantities P I answer, how will the moTOo-metallic system work under those circumstances ? A careful examination of the causes which have led to the crisis of 1873 is highly instructive, and nobody who has learned to* see in how large a measure the over-issue of paper, chiefly in France, has contributed to thai crisis, will be at a loss to explain the depression that followed it. Of course, if one of the contracting States reverts to the coiMS force, it will lend no support to the proper working of the bimetallic system any longer ; but if the other States are in suflScient number, the harm will be unimportant, and the effect of the over-issues in the defaulting country on the value of the currency will be less. These are the considerations which, in reply to your letter, I beg to submit to the judgment of the Commission. I am, Sir, Your obedient servant, N. G. PlERSON. Geo. H. Murray, Esq., Secretary to the Gold and Silver Commission. (2.) Peopessoe Eewin Nasse, of Bonn. 1 To what do you attribute The alteration in the rela- the'fall in the value of silver as ^j j j j^j g^jj^ silYer is nnmntired with gold, hiiice 1874 ^ . .i , i ^ „f oompareu wiui r , primarily the consequence of changes in the mint regulations of most civilized States, in which the German Empire took the lead. The States ot the European Oontinei-.; and the United States of America one after the other closed their mints against the free coinage of silver during the 10 years which followed the Franco-German war. Formerly all the silver which came to London from the countries where it was mined could m all these dtates be converted into legal tender money, and conse- mipntly its sale never presented any difficulty. But w if we except a limited demand for industrial '^nrposes, and for token money, there only remains „ 51080. exportation to Eastern Asia. The balance of payments between Eastern Asia on the one side and the Euro- pean and American States having a gold currency on the other is, therefore, at the present time the point which decides the value of silver. Among the various events which have limited the coinage of silver and so depressed its value special importance is due to the suspension of the free coinage of silver in France and the other States of the Latin Monetary Union. For in these States not only was it possible to get any quantity of silver coined, but by melting down French gold coins of equal nominal value, a pound of gold could be procured for 15i pounds of silver at a trifling expense. So long as this operation was possible, that is, so long as there was unlimited Kk 258 ROYAL COMMIkSSION ON GOLD AND SILVER : coiaage of silvgr and gold coins circulated in France withont any premium, the relative value of gold and silver in general trade could fall but little below the standard of the French monetary law. Even after the Franco-German war the supply of French gold coin was still so large that for several years an exchange of gold coin for silver could have taken place without giving rise to a considerable premium on the 20 franc piece. Against this enormous contraction of the market for silver it is hardly worth mentioning that the United States resumed the coinage of silver on a limited scale in 1878, that Spain has recently coined a considerable quantity of silver money, and that some few other applications of silver to coinage purposes have taken place in Europe. To this diminished demand for silver there must be added an increase in the quantity of silver offered in the market. This has been, in pai-t, of only a transitory nature. The German and Scandinavian Governments offered for sale large quantities of silver derived from coin melted down. The influence of these sales can only be considered as of importance during the years 1876-78, an:d does not at all explain the present position of prices. On the other hand the increase in the production of silver seems to be permanent. This would probably, even had there been no change in the mint regulations of several States, have in time caused a certain move- ment in the relative value of the two precious metals adverse to silver, but that would have been but very slight indeed compared with the movement which set in in 1874. II. What probability is there of a continuance of the fall ? To forecast the future de- velopment of the relative value of the two precious metals is more than I can undertake. I confine myself, therefore, to speaking of the main points which are likely to influence this rela- tive value. First of all the policy of Governments in regard to their coinage will regulate the relative value of the two precious metals. Further steps towards the demonetisa- tion of silver, such as the Eepeal of the Bland Bill, the . sale of large quantities of silver coin by the Continental States, the restriction or suspension of a bilver coinage in British India, would in any case cause a rapid fall in the piice of silver to a quite unfathomable degree. The resumption of the free coinage of silver over any considerable part of the world would naturally exert the contrary influence. Were this resumption of the free coinage of silver to take place in States which had a plentiful circulation of gold coin, then the value of gold and silver in the world's trade would approximate to that fixed in the coinage system of these States. This influence would continue so long as gold coin circulated without premium in these States and could be repre- sented by silver as a substitute. So soon as the supply of gold coin approached exhaustion, the influence of the mint regulations of these States on the relative value of the two metals would disappear. If however the policy of Governments with regard to their coinage remiains as it is, then he price of silver will for the future depend, on the one hand, ' upon the amount of silver produced, and, on the other, upon the balance of payments between countries with a gold currency and those with a silver currency. Amongst the latter the East Indies and China have so prominent a position that, more than all others, they will exercise a preponderating influence. The export of commodities from the East Indies, the extent of the capital trans- ferred thither, the amount of the Government bill sold in London, the requirements of the populations of Eastern Asia either for currency or for hoarding, all these are points which cannot fail to exercise an influence on the price of silver in Etirope. All these points, how- ever, are uncertain, and, therefore, so long as they predominate the relative value of gold and silver must continue to fluctuate. A circumstance unfavourable to the price of silver may be found in the fact that in India the hoarding of gold seems to take more and more the place of the hoarding of silver ; a favour- able circumstance on the other hand is the possibility of a great extension in the circulation of silver coinage throughout the whole of Eastern Asia, owing to in- crea^'ng trade and further econorolic development. 111. To what do you attribute TVip pnnairlpvnVilo Pnll 4,, the fall in the wholesale prices , , consitteiaWe tall in of many commodities which has wnolesale prices ot most corn- been in progress duriuR the last modities during the last 12 ^"[V.^'H^^'it Extended to (a) °r ^ years is pmthj due to retail prices, (b> wages and the inevitable reaction from other payments for services the exaggerated rise in prices rendered, (c) land and houses ? ■, . °°, iAX, « VI. Do you consider that the during the years 1871-3. countries using tlie gold stand- After periods of excessive suffering frZ an tajurS con! speculation, of too great ac- traction of the currency which tivity m production, and of might have beSn obviated or high prices, times of indus- mitigated by an increase in the , P, -^J ' "."^^^ Ui iiLULiD supply Of gold? trial depression and low VII. To what extent and in prices necessarily follow. iK'S'^ofrSin? , The movement in prices, metals used as standards of however, during the last ™Vin. What is the relation, if f 7^^ ^^ fS^* ^^ars can cer- any, between the supply or tamly not be explained by quantity of the precious metals this. There must be another and the fluctuations of credit? „„„„„ f„ ±.r, ,^ t. r ^^ /• IX. Has there been during C^use for the great fall of the last 15 years any important late years. development of the system of n^v^p nliPTinTnPTirvTi ititio+ cheques, bank credits, bills of ■, pnenomenon ^ must exohange.or other means econo- nave arisen irom circum- ™ismg the use of the precious stances which either were connected with the condition of money, or influenced the supply of, or demand for, commodities ; in other words, it will have to be sought for either on the money side or on the commodities side. Without wishing wholly to deny the influence of the former, still I hold that this fall of prices is chiefly the result oi facilitated proditction' oi commodities. The grounds which lead me to this conclusion are the following : — (1.) In the last 20 years a very great decrease in the cost of production of nearly all important commo- dities has set in, and this of necessity found its expression in the prices of the commodities, as it was not accompanied by corresponding alterations in the cost of the production of money. The chief cause of the largely facilitated production is to be sought in the largely increased area, over which well-organised agricultural and industrial operations have extendei It is this most important advance which has given a peculiar character to the economic developinent of recent times. The interior of large continents has been opened up to the traffic of the world by railways, and the natural productive powers of large countries which hitherto were out of the reach of the commercial and industrial nations of the world have thus become attainable and available. The American Civil War, the European wars of 1866, 1870-1, and 1877, having for some time retarded progress in this direction, so much more rapid became progress when these hindrances were removed. In an exceptionally rapid course during the peaceful times of the last 10 years thd intelligence and growing capital of the commercial and industrial nations have been applied to the development of these newly opened gifts of nature, and to the application of the labour of less civilized countries to their utilization Consequently not only European countries formerly shut out from the commerce of the world, but also the interior portions of America, Russia, and India can now deliver at the seaport a whole mass of economic commodities -with but little trouble or expense. To this we must add the consideration that transport by sea from all parts of the world to Europe has been facilitated and consequently cheapened in a manner hitherto unheard of and unexpected, by a series of improvements in sea transport. Closely con- nected with these advances, which are peculiar to quite recent times, there is an unceasing advance in technical skill and economic knowledge. Special progress has been made since the year 1870 in many important industries, such as the working of iron and steel, the preparation of sugar and paper. All this must have depressed the price of nearly all commodities, pro- vided that gold remained a steady standard of value. All this progress, especially the cheapening of transport by sea, and the increase in the area under cultivation has continued even during the last sis or seven years ; and besides this, over a large part of Europe there have been several exceptionally good harvests. Against this view it has been urged, that in former times also, namely during the period from 1850 to 1873, great prog|ress in production was made without any corresponding fall in the price of commodities. I will leave it an open point whether in manufacturing industries the advance made during that period was so great as during the last 16 years ; but in the production of raw material for food and blothing, in tb© carrying .APPENDIX. 259 trade, and in commerce, it was undoubtedly not so great. .Formerly, improvements in manufacture were in their effects upon prices counteracted by the increasing diffi- culty in supplying? the necessary raw material for the use of a rapidly increasing population. A prominent German economist expressed, as the result of careful examination of the change of prices during the present century, an opinion that goods tended to become cheaper in proportion to the amount of manufacturing labour they required, and that they tended to rise in pi ice when the price of the raw material constituted the greater part of the cost of production. At present, however, facilities for production and fall of prices are more remarkable in the production of raw material than in manufacturing. A fall in the price of raw material must, however, exercise a much greater in- fluence on ail other prices than a fall in the price of m.anufacture does. A further difl'erenoe between these two periods will be found in the fact that during the period 1850-60 perhaps the greatest diminution in the cost of production took place in regard to gold. Although usually changes in the cost of production of the precious metals are slow to exercise any in- fluence on their value, still the revolution caused by the Galifornian and Australian discoveries was so great that the enormously increased production of gold could not remain wthout influence as a counter-agent to the the tendencies of the general movement of prices. (2.) In support of the above explanation of the fall in the price of commodities, another circumstance should be mentioned. Wages have not, or at all events not in equal measure, fallen with the wholesale price of commodities. It is true that wages could not every- where be maintained at the height which they suddenly attained during the period of stimulated speculation which followed the Franco-German war in many parts of Europe and especially in Germany. But compared with either 20 years ago, or 10 years ago, wages have on the whole hardly fallen ; rather have they in many oases visibly risen. This contrast in the movement of wholesale prices and wages was, perhaps, more marked in Germany and many other parts of the Continent of Europe than in Great Britain. The industry and trade of Great Britain has of late years lost from various causes many advantages which it formerly possessed over its continental rivals. The difference between English and German wages is slowly diminishing. The latter are approximating naore and more to the former. To this, in my opinion, must be attributed the pressure on the English labour-market, which has lately been so marked. In Germany, on the contrary, the Prussian Minister of Agriculture maintained in the recent debates on the new Corn Bill in the German Keichstag, without being contradicted, that agricultural wages had been on the same level since the first years after the Franco- German war. Again, the Factory Inspectors state, in their annual report for 1885 (p. 109, official edition), " Wages have, on the whole, remained at their former " height; in some single cases, indeed, they have " risen"; and in their report for 1886 (p. 74 of the official edition), " Wages remained, on the whole, at " their former height; often, too, they experienced a " not inconsiderable rise. A fall in wages has only " taken place in isolated cases. But in some cases " workmen suffered, because industrial establishments " were compelled in consequence of unfavourable con- " junctures, either to shorten the hours of labour or to " suspend their work entirely." In conclusion, the remark is made, "Instead of the alleged lowermg of " the price of labour we have to report, takmg a wide " extent, rather a rise in wages." Similarly, by the same officials, in the five previous years more frequent mention is made of a rise in wages than of a iaU. Also, most reports on large industrial undertakings, especially those on mining and iron industries, maintain that since 1878-9 the money wages of the workmen have risen. It would lead us too far to bring together here a collection of statistics on the movement of wages in Germany. But I believe that those who have latterly followed this question in Germany, will be dis- posed to assent to what I have stated. The same Remark will probably hold good in regard to Switzerland ^""tUs^ difference between the movement of the price of commodities and the movement of the price of labour which has now lasted through a series of yea,rs, is Hara to explain if we attribute the fall in price of the former to circumstances connected with the condition of money. Want of money must in the end make itself felt in aW relative prices. The difference requires no explanation li the diminished quantity of labour required for the pro- duction of commodities is the cause of their fall in price. (3.) Were contraction of the currency the chief cause of the fall in the price of commodities, then in countries which have a gold currency this want must express itself by high rates of dAsoowni. All States with a gold currency are States with high economic development. But in these any con- traction or surplus of the means of payment soon converts itself into a demand or offering of short loans, and exercises an influence on the rate of discount. The persons, who need means of payment, draw what they require from small or large banks with which they are connected, and deposit their surplus with their banks. Even the very smallest business, in which there can be any question of a fluctuating requirement of the means of payment, is now wont to be in connexion with some savings bank, or bank, or some similar loan society. To these it remits all its available cash in order to earn all possible iuterest on it, and to avoid the keeping of money, and from these, in case of need, it draws ready money, either as a repayment of deposit or as a loan. The small banking establishments, again, are in close connexion with the great banks as common reservoirs, and pay into them their superfluous cash, or obtain cash from them when they require any large quantity of the means of payment. Thus in the far west of the United States a scarcity of money leads to an increase in bills discounted, loans, &c. in the New York banks ; the autumnal demand for money in Scot- laud is supplied from the Bank of England ; in Germany, on the dates when most payments are niade, about the middle and beginning of the year the amount of bills discounted by the German Imperial Bank, and of notes issued by it, increases quite regularly. A deficiency of the means of payment must therefore make itself felt in the great banks, and force them to resort to extra- ordinary raising of the rate of discount, in order to protect their reserves of ready money. In the same way the forwarding of gold which reaches any country from abroad, or is taken from it in order to adjust the international balance of trade, shows itself by an addi- tion to or subtraction from the bank reserves, and consequently this international flow and ebb of gold does not immediately influence the price of commodities, but affects in the first instance the rates of discount, and through them the price of commodities. On examining the fiuctuation of cash reserves and of discount rates of the great banks since 1876 and com- paring them with former times, no disturbing circum- stance can be discovered which might be attributed to any exceptional scarcity of gold. The gold reserves of the most important banks and treasuries in all the commercial and industrial States rose according to Soetbeer's estimates, from 1,035,800 kg., or about 145 million pounds sterling, in. the year 1877, to 1,806,500kg., or about 252 million pounds sterling, in the year 1885. The average rate of discount for the last 10 years, in nearly all large European banks, has been lower than in former times. Even if this circumstance is not to be attributed to an exceptional surplus of gold, but is due to other causes, still, at any rate, it does not, on the other hand, indicate any scarcity of gold. It is true that during the last 10 years the banks which pay in gold have been repeatedly obliged to protect their stock of gold by raising the rate of discount, but that occurred not unfrequently in former times also, and in the last 10 years milder measures than formerly were sufficient for the attainment of this end. The Bank of England during the years 1875-1886 never raised its discount to 6 per cent., while this rate of interest was reached in seven years during the period 1863-74, and in four years between 1851 and 1862. The Bank of France can- not be brought into the comparison, because it escapes from any unpleasant demand for gold not by raising the rate of discount, but by paying in silver and giving out gold only at a premium. The Imperial German Bank, on the contrary, pays in gold, and is in a pecu- liarly delicate position, because it holds its reserve to a great extent in silver. Nevertheless there were only four years during the period 1876 to 1886 in which the rate of discount reached 6 per cent. The Prussian Bank, from which the Imperial Bank took its rise, transacted all its business in silver, and had to raise the rate to 6 per cent, in- six years of the period from 1863 to 1874. I admit that during the last-named period, war requirements twice contributed to a specially increased demand for money in Germany. During 1875-86, however, occurred the extraordinarily increased demand for gold, caused by the re-establishment of the Kk 2 260 ROYAL COMMISSION ON GOLD AND SILVEE ; gold standard in the United States of America and in Italy, and by certain minor changes in the mint regula- tions of the commercial and industrial nations. In spite of this no perceptible disturbance of the Euro- pean money market has arisen during this period, and this I regard as the result, not the cause, of the low position of prices which tended to compensate for the scarcity of circulating media. I also regard it as a sign, firstly, of the quantity of the stock of gold which is able to stand so great and extraordinary a demand for gold ; and, secondly, the elasticity of credit, which during the last 10 years has uninterruptedly de- veloped itself. The very slightest shock to credit would have caused far greater disturbance in the money mar- ket than the demand for 100 millions of gold for America and Italy. On this subject, however, I shall under the next head submit some further remarks. (4.) By commercial and industrial nations gold is in these days required, apart from its uses in manufactures, for two purposes only, firstly, for such payments in home trade as are too large to be made in silver coin, and too small to be made in bank notes, cheques, and the like ; and, secondly, for the settlement of the interna- tional balance of trade. With good organisation of bank- ing and credit systems, the requirements for these two purposes are reduced to a minimum, compared with the bulk of the transactions which both in home and foreign trade are adjusted without recourse to gold. This is not the place to describe the system of payment which depends on credit. Its different incidents can all be reduced to the fact that in place of cash payments claims are tratisferred, that is, debts circulate in the place of gold and silver money, and at last are set ofi" the one against the other. But, although the demand for gold for these two purposes is insignificant com- pared with the bulk of the transactions among the industrial and commercial nations, still it is subject to fluctuations, and, therefore, every country requires a reserve of gold for temporarily increasing the require- ments for small payments, and for payments abroad. This cash reserve is to be found principally in the European States in the great central banks which con- stitute the basis of the whole edifice of credit. Now, it is not necessary that this reserve should always preserve an equal proportion to the bulk of the transactions, which are eflfeoted without recourse to gold coin. On the contrary, the money transactions can expand largely, whilst the gold reserve of the country remains the saxae, and as a rule there is a tendency to counteract any scarcity of gold by improved or increased application of methods of pay- ment based on ci-edit, and by greter economy in reserves of money which are lying idle. I will adduce a few examples of this tendency. Is not the difi'erence in the amount of money transactions in difierent periods of the year very great ? Nearly everywhere times of commercial dulness alternate with times of brisk exchange of commodities and large and frequent pajTnents, In the country, in which I live, the difi'er- ence in the need of media of payment at different seasons of the year is perhaps exceptionally great. But this regular requirement is fulfilled without any great difiiculty by the Imperial Bank and some other small banks issuing more notes some weeks and allowing a small amount of their cash reserve to enter into cir- culation. The amount of the bills discounted by them increases, and private depositors withdraw a corre- sponding amount. Consequently disturbances in the commodity market do not arise. No trace can be seen of any periodical change in the prices of commodities corresponding to this change in the demand for money. As a rule, not even a rise in the rate of discount takes place in consequence of this periodical demand. In the years 1879, 1881, 1883, 1884, 1886, 1886, and the note circulation of the Imperial bank in each case, reached its maximum on the Slst of December, immediately before the great increase in payments at the beginning of the new year. But only in one of these years, 1886, did the maximum of the rate of discount coincide with this increased demand for money. In England the maximum of home requirements for media of payment falls, as far as I know, in the autumn, and. the money market is more disturbed by it than is the case in Germany. But even there not a word has been uttered of any periodical fluctuation in the price of commodities, and; moreover, its influence on the rate of discount could easily be obviated were the Bank of England permitted to issue 11. notes, and were they made legal tender throughout the United King- dom. In that case, too, credit would without any difficulty be able to undertake the equalisation of the fluctuating demand for media of payment. This tendency and this capability of credit is visible also in non-periodical or irregular fluctuations of the dem-and for means of payment. As a rule, credit is developed proportionately with business, and gives its aid with wonderful elasticity towards the making of payments and economising of metallic money _ Now, in this way it appears to me that two important historical facts find their explanation. Eirst, the great fluctuations in the annual producbion of the precious metals since the discovery of America have on two occasions only, exercised a marked influence on the value of the precious metals, namely, in the second half of the 16th century, and during the period from 1850-73. In both cases a total revolution of the conditions of production, in the 16th century of silver, and in 1848-61 of gold, took place. All other changes in the conditions of production have had no clear or recognizable efiect upon the prices of commodities. Second, in the last three decades before the dis- ooveiy of the Californian and Australian goldflelds, in spite of the diminished production of silver and the great increase of population, and of the circulation of money, still the prices of commodities in the world's markets fell either not at all, or very slightly, and, on the contrary, over the_ greater part of the European continent a eery considerable rise in the prices of nearly all commodities and of wages took place. The growing economy in the use of gold and silver money througlidevelopingcredit counterbalanced the enormous and ever increasing demand for media of payment. It is true that opposite views have been expressed. It has been maintained that the diminution of the American output of silver which occurred in the third decade of this century was the cause of the fall ia price of many commodities which took place during that period. Some have, indeed, maintained the view that during the whole of the first half of this century in consequence of an insufiicient production of the precious metals, a gradual rise in their value and a fall in the money value of all commodities arose. But the considerable fall in the money value of many commodities after the year 1820 is sufficiently ex- plained by the diminution of the cost of their produc- tion, which began after the great French wars, and next by_ a succession of good harvests following a series of indifi'erent harvests during the first 20 yeai-s of this century. During the war, production was on all sides interrupted and oppressed with various burdens, after the war not only did these hindrances disappear, but there also commenced a period of the most marvellous progress in production {vide Tooke, History of Prices Yol. II., p. 346 onwards). A general fall of all money values during the whole of the first half of the century I am not disposed to admit, for in by far the greater part of Europe, in all inland districts, a considerable nse of prices can be traced during the period from 1800 to 1850. English political economists who main- tam the contrary, have nearly always looked upon England or London as the centre of the world's com- merce, and are apt to forget the gradual levelling of the difi'erence of money value in Europe which resulted from the improvement of all means of communication by the growing traffic. The tendency of credit to counterbalance a growing deficiency of metallic money, has also been remarkable d.uring the last 12 years. In many countries a con- siderable progress in economising the use of gold has taken place during this period (Question 9). I confine myself to producing some proofs of this progress from Germany ; as regards other countries others will be better able to judge. In Germany a system of deposit accounts began at the Imperial Bank in 1876. Since then the amount of deposits m the Imperial Bank has grown to more than 350 miUion marks (1 7i miUion pounds sterliug) . Of these deposits the owners or depositors can at any time avail themselves by means of cheques, and make their pay- ments throughout the whole empire without any expense. Whilst in this way these deposits furnish the ready money reserves for the depositors, they are not kept by the Imperial Bank in the form of ready money. The bank utilizes them not only according to usual banking principles ; but also the reserve of cash which the bank necessarily holds for sundry repayments of deposits, can, according to the wording of the bank law be reckoned in with its other cash reserve and the total sum regarded as cover for notes. The bank law does not trouble itself about the cover for deposits, but APPENDIX. M61 regards the whole cash reserve as destined only for cover for notes. With the increased total amount of its cash reserve, the bank consequently increases the amount of notes which it can issue without any impost, although its cash reserve has to serve as cover both for notes and deposits. This measure of the Imperial Bank has, moreover, still further oontribvited to increase the custom of making payments by means of cheques, and to extend it into wider circles. There have sprung up in the great centres of commerce clearing-houses for cheques, which ten years ago were quite unknown in Germany. To this mtist be added the progress made in the absorption and utilization of the very smallest reserves of money. The savingsbanks have been per- fected during the last few years, and above all, in the country parts they have been further extended. There are now scarcely any peasants left in Germany who keep ready money on hand to any considerable amount, and in families in which a few decades ago every child possessed his money box filled with gold and silver pieces, now every child has his savings bank book. From all that has been set forth above it will be under- stood that I am disposed to trace the cause of the fall in the price of commodities, less to the altered condition of money than to the facilitated production of commodities. V. Has tke fall resulted in any If^ as I have striven tc SetXHet'S inte^\ts°"? Prove, the general fall of the world f price of commodities in wholesale trade chiefly is caused by economy in the labour required for the production of commodities, or, what is the same thing, by greater efficiency of human labour, then this circumstance must in the long run prove most highly beneficial to all human interests. An advance has been made which is thoroughly analo- gous to all other economic improvements, discoveries, and inventions. For all economic improvements con- sist, as has often been said, in the last instance, in economy of labour, or in the increased superiority of man over the outer world. Especially to manual labourers who have no property mast this circumstance prove of benefit, and as a matter of fact it has improved their position in the most important industrial and commercial nations. The i-ate of wages has fallen either not at all or not in the same ratio as the price of food and clothing of the labourer. The share of the national income, on the contrary, which the propertied classes receive in the form of rent and interest, has become smaller. For the opening up of extensive and fertile tracts of land in the interior of the continents of the northern hemisphere, and the lessening of the cost of transport, have depressed the rents in the countries of ancient cultivation and dense population ; and, moreover, interest on capital has fallen under the in- fluence of universal peace and increasing wealth. In this way there is being brought about a great transfer of the income of the nation, which the philanthropist can but greet with joy. But even the most desirable economic development must, if very rapid and sudden, be accompanied by losses, and these losses may have such an extent that an industrial depression succeeds, and thus a period of great economic progress may be found to be a period of widely spread calamity, .bor erery sudden shifting in production and consumption necessarily leads to the temporary throwing out of employ of capital and workmen. An altered distribu- tion of the national income, even when m itself ot a happy nature, and when it does not on the whole decrease the national income, must always bring about an alteration in the direction of consumption. In the same way an unexpected fall in prices causes a whole mass of undertakings, which were founded m reliance upon high prices, to become unprofitable, irequent and unexpected losses, moreover oocurrmg m well planned undertakings, deter people from new ventures and produce a feeling of insecurity such as during the Lst few years has taken hold of the whole industrial world A slower alteration of prices would, therefore, ^^T[srr?robX'S':"c:ntinuance of the extra ordinary proLction of gold, such as that which took Sace [I the years 1850-1860, or a free coming m all furopean StatL of the increasing out-put of silver, would Sve^exerted a counteracting influence to the depression of prices. Perhaps in that case the prices of oom- nodtties would have fallen somewhat less, and wages ^ould have risen somewhat higher, and thus similarly favourable results could have been gained for the work- ine classes, vrtth a higher level of prices, and without so great an industrial depression. But it seems to me more probable that there would have been, from time to time, as wag the case from 1850-73, periods of over- stimulated enterprise and over-speculation, which would have raised prices for a certain time, without in the long run preventing their fall; for such times are followed by commercial crises and the sudden- shattering of credit, in which the prices of commodities often fall still lower than they had previously risen. The unstable progress of production, moreover, caused by over specu- lation, and the consequent depression is so great an evil for the whole economic and moral life of the people, and under it the labourers suffer so heavily that I would not exchange it for the industrial depression and losses under which, in these latter years, the commercial and industrial people of Europe have suffered. X. Do you consider that an Av, inl-.PTnnt-.inTial norpn international agreement could ^^ mcemational agree- be made for the free coinase of ment tor the purpose of the gold and silver as legal lender free ooinaere of sold and sil- money at a fixed ratio P ,„„ „„ i„5 i j. j ver as legal tender money at a fixed ratio I should regard as a happy circumstance, if its punctual observance and its continuance were assured. Whether these two great aims can be per- manently secured, seems to me in the higtiest degree uncertain, and therefore I cannot advocate any such international arrangement. I maintain that a growing preference for the use of gold for purposes of money clearly manifests itself among all industrial and commercial peoples. When once people have learnt to recognise the charm of gold coins they will not do without them. The substitu- tion of gold for silver coins in B'ranoe, between 1850 and 1860, caused scarcely any opposition in public opinion, but when, from 1871 to 1874, the supplanting of gold coin by silver began, opinion was unanimous that that was not to be borne. At present the circulation of the old silver coins, to which in former times people took no objection, is everywhere impeded. The silver dollars, the 5-franc pieces, the German thalers, are continually collecting in the coffers of the central banks, or of the State, notwithstanding all the trouble that is taken in all these countries to put them in circulation. Newly coined silver pieces would certainly meet with the same fate as the old ones. Every new coinage would increase the reserve of silver in the central banks and treasuries, if these had not the right to refuse them. That, however, would be a very dangerous condition for the money and credit system of a country such as England, Germany, or France, if the cash reserve in their central banks, the only available cash reserve of the country, consisted wholly or mainly in a money reserve, the value of which partly rested on the fragile basis of an international agreement. In order to avoid so dangerous a position, tne bank authorities would have to take precautions, by all manner of means, to drive away silver and to attract gold, and it is pro- bable that the State treasuries would support them in these endeavours, as is indeed now the case in France, Germany, and other countries. I apprehend a secret struggle for gold would at once begin between the banks and the State authorities, so soon as the date of the international agreement were decided. For what guarantees would people have for the continued and honourable fulfilment of the agreement on the part of all the contracting States ? Even in times of peace it would be hard to prevent obstructions to the free coinage, of silver, still less is it possible to say what would happen in time of war, when all agreements between the combatant States are annulled. It is main- tained that the well understood interest of all the States would ensure the punctual carrying out of the agreement, and make its repudiation impossible. But do nations really allow themselves in their inter- national relations always to be guided by their well understood interests, and not very often by prejudices or national hatred P Do we not often see a people doing itself an injury in the hope of imposing a still greater injury on another nation ? At the outset the silver would be very unequally divided between the con- tracting States ; trade would make, later on, a still mare unequal distribution, and hence the different States would have an unequal interest in the maintenance of the agreement. All this would, in my opinion, readily lead at first to complaints of disloyal carrying out of the agreement, and of over -reaching by foreign nations, and, finally, to an open repudiation of the convention Those States which had taken silver in larger quantity into their ou-culatiou, or into the cash reserves of their central banks, would be severely injured in the order of their money system. 262 ROYAL COMMISSION. ON GOLD AND SILVER: XI. Is it in the power of Go- Should the agreement be vernments to maintain such a. concluded between the most the°praXI'l>fre^comm»^^^^ important commercial and world follow the law P industrial states, and ac- tually bo carried out, then the fixed relation of gold and silver would also necessarily rule in the commercial world, because everybody by the coining of silver and the melting down of a corresponding amount of gold coins could procure gold for silver at the agreed relative value. Only the loss by melting, the cost of coining, and the loss of interest which would be entailed by these operations could give to gold a trade value a trifle above that fixed by the agreement. As soon, however, as it grew impossible to withdraw gold pieces from circula- tion for melting down without expense in any quantity, then the relative value of the two metals would diverge from that fixed by the agreement. G-old coins would circulate at a premium, and the intention of the inter- national treaty would be frustrated. The possibility of some such development cannot in principle be denied ; whether and when it would operate would depend — (1.) On the demand for gold, either for hoarding or for currency, in the countries which at present have only a very small circulation of gold money or no gold money at all. How much gold would for these purposes disappear from the circulation of the States which concluded the agreement, and have at present a sufBcient circulation of gold money? The latter are only a small part of the whole world which makes use of the precious metals. In the vast districts in which silver or paper form the ruling medium of payment, people would certainly be glad to strengthen their supply of gold, either in order to have a convenient circulating medium, or for hoarding purposes. At present gold is kept in the well-to-do States with a gold currency by means of their monetary laws. After the conclu- sion of the agreement it could be replaced by silver in these countries. It cannot with exactitude be forecast how it would then be divided in the world. (2.) On the use of gold for industrial purposes. How important this use is, late researches have sufB.- ciently proved. (3.) On the relative production of the two precious metals. A further reduction of gold production, a further increase of silver production, could in the course of time cause gold coins to come into circu- lation less and less frequently, silver coins more and more plentifully, so that in order to retain the former, a premium above their legal value would have to be paid. The relative amount of the silver and gold produced will be greatly inflaenced by the relative value of the two precious metals that may be fixed in the international bimetallic agreement. The rate of 1 : 15J must stimulate the production of silver more than one of 1 : 20. XII. AVbatwouldbetheeflect An international bimetallic ot such an agreement, if carried agreement would, in my out, upon W prices, and (6) the ''B':°Y , , j j. production oif the precious opmion, have a tendency to metals? raise prices. In this respect it seems to me that the immediate increase of the metallic legal tender money in the industrial and commercial States would be of far less moment (for it could operate only very slowly) than the moral _ effect which this proceeding would exerb on the reviving of speculation. I fear, indeed, that the conclusion of the agreement would, unless political disturbances inter- vened, be the signal for a period of exaggerated com- mercial activity and over-speculation, which would end in a crisis of trade and credit. A rise in prices thus induced would be only transient. To what extent a lasting rise in prices would ensue, cannot, in_ my opinion, be predicted with any exactness. I believe, however, on the grounds I have stated, that ^ the influence on the raising of prices would, in the long run, be inconsiderable. XIII. Do you consider an A bimetallic agreement On international agreement lor hi- ii.„x,„H;„ „?„ ^.a+nn of 1 ■ 20 metallism possible on any other tne DasiS 01 a ratio 01 J. . ^V, ratio than 154 to If would have many less con- siderations against it, and much more prospect of permanence than one on the basis of a ratio of 1 : 15|. A ratio of 1 : 20 would cause less disturbance in the com.meroial relations between gold and silver currency countries. For people have now for many years been accustomed to a similar relative _ value in the trade of these countries. Now a rapid rise of the Indian exchange to the relative value of 1 . 16i would produce a disturbance similar to that caused at the time of the sinking to 1 : 20. The wildest speculations on the rise in price of silver and on alterations in the price of commodities would be the consequence of any such artificial raising of the price of silver within a short space. With a ratio of 1 : 20 there would be leas appre- hension of any considerable stimulus to silver pro. duction, and in case of the ceasing of the agreement the fall of the price of silver would not be so severe. The contracting States would therefore run much less risk with this relative value than with one of 1 : IS^- Throughout the whole world the want of confidence in the maintenance of the silver value fixed by the agreement would be much less if something like the present relative value were agreed upon, than if the value of silver were again artificially screwed up. The more general the confidence felt in the maintenance of the silver value agreed upon, the less would be the weight of the arguments adduced against the bimetallic agreement. It is true some of the contracting States would, with a ratio of 1 ; 20, not obtain certain advantages . which would come to them with a relative value of 1 : Ibi. If the ratio of 1 : 151 were accepted, the United States of America would have the advantage of reooining their silver dollars, so far as they are in the possession of the Treasury, with a considerable gain. For they were coined at the ratio of 1 : 16. The silver dollars which were in circulation would be melted down by private persons at a profit. That the United States would choose the other plan and have its gold dollars made more heavy in order to attain the relative value of 1 : 15i, seems on various grounds, and par- ticularly from the cost of the operation,- quite impro- bable. Thus it would come to pass that the only State which, untroubled by the fall in price of silver, has gone on coining silver and drawn great profit by it, would then obtain a further financial gain from the inter- national agreement. The United States would further be in the enviable position of entering into the Oonven-. tion without any stock of silver currency, with an exclusive gold circulation, and be less burdened with a dead weight of silver coins than other States, as, for instance, Germany, which has made great financial sacri- fices in order to diminish its stock of silver money. The injustice of this result might possibly impede the conclusion of the agreement on the ratio of 1 : ISa Germany, the Netherlands, and the States of the Latin Monetary Union would, if a ratio of 1 : 20 were decided upon, have to renounce all hope of seeing their 5-franc pieces and thalers, which, owing to the depreciation of silver have been reduced to the position of token-money, once more converted into coins of full value. Germany, however, could easily give up this advantage, for the amount of its thalers is so small that their reten- tion as token-money can cause no serious apprehension ; France, Italy, Belgium, and the Netherlands, are all, in consequence of the large amount of their silver coins, so much interested in the upholding of the pre- sent value of silver, that they would hardly refuse an agreement on the basis of a relative value of 1 : 20, especially if they were able to place confidence in the permanence of such an agreement, and could not obtain the still greater advantage of a convention on the basis of 1 : 15J. XIV. Failing an international The means which, apart bimetallic agreement, what from an international bi- measures could be adopted by -v,„i„n;„ „,„„„.„ j. ■ t_j. the commercial nations of the metallic agreement, might world for giving increased sta- be taken in order to give golifandsifvcrf ''*'°" '""'^'" Srea.teT fixity to the relative value of gold and silver, might have for their object either to assure a greater application of the use of silver, or to induce a greater economy in the use of gold. A somewhat larger employment of silver for coining purposes could be secured if the commercial and in- dustrial nations agree to issue no small paper money and no small gold coins. People win be slow to give up the convenience of a gold coin or paper note of the amount of 10 shillings, francs, or marks, but smaller gold pieces or paper notes could be very well withdrawn from circulation. In England, it is true, no new application for silver would be created by this, bat in the States of the Latin Union, in Germany, and in the United States, the silver coins which are lying in the banks or treasuries, would partly enter into circulation. The money market would APPENDIX. 263 by this freeing of the banks from silver coin become somewhat less sensitive ; but as regards the price of silver, there would be very little help given by it Of greater importance would be the entrance of Austro- Hungary and Eussia into such a convention- but this can scarcely be counted upon. Every step bv which the two last-named States would get rid partly or entirely of their depreciated paper currency, would be favourable to the value of silver. For neither Russia nor Austria, it seems to me, as far as I am able to judge, can substitute a gold currency for their paper money. If they wish to have a metallic currency they can only have a silver currency. At present there is no prospect of either Austria or Eussia adopting a silver currency. In the course of time, however, people in both countries will perhaps begin to see that silver is still a better medium of payment than a depreciated paper money. Greater economy in the use of gold for mint pur- poses could be attained, in my opinion, by an extension of the circulation of bank notes. In England, G-ermany, and some otiier countries, the central banks could issue notes of small amount down to 11. If the banks held a reserve of gold equal to a part — say half the amount of the small notes in circulation — the metallic basis of the whole money system would not be weakened by such an issue, but strengthened. For the demands made on the increased cash reserve of the banks would be smaller instead of greater. The inland drain of gold would either disappear, or at any rate become less and occm- less frequently, if the banks. In all cases in which an increase of small payments or a crisis in credit necessitated a corresponding in- crease of currency for small payments could pay out small bank notes instead of gold. For the exportation of gold a larger cash reserve would be available, and hence a rise of the discount rate in order to protect the reserve would be less often required. In Q-reat Britain and Ireland a further economy of gold could be made if the notes of the Bank of England were universally received throughout the whole United Kingdom. The periodical flow of gold to Scotland could by that means be avoided. The United States of America have more than any other country the opportunity of introducing economy in the use of gold by improvements in the issue of bank notes and paper money. Were they to determine upon the foundation of a central bank, and to entrust to it the cash reserves of the Treasury as well as to allow a certain freedom in the issue of notes, their currency would gain a greater elasticity more suited to its varying needs. Thus, it seems to me, many irregularities of the American money market would be obviated, which now arise from the storing up of gold in the Treasury at "Washington, and from the varying needs of American trade for media of payment. XV. It is argued that, in the It seems to me not un- ahsence of bimiitallism the reasonable to suppose that effect of any disturbance oi /r , j. f-^j. i, the currency is limited to half the effect of any disturbance the currencies of the world, and jjj currency, in the absence thereby increased m intensity, ^p >,;„„(.„ iii„„ ;„ limited to Do you consider this view cor- OI Dimetailism, IB iimiiea to rect; and.if so, doyouthinkthe half the currencies ot the evil a serious one ? world, and that consequently XVI. If the effect of such .^jjg^ ~j.ga,t disturbances Bonn, October 1887. ^^^a'u'Sn^sfwould |Ser arise, the money market may stability of the standard of value be more intensely affected • be secured thereby ? ^^^^^ would be the case were the bimetallic system universally introduced. Much Weight, however, I would not attribute to this cir- cumstance. The area of the gold currency comprises nearly all the commercial and industrial nations of the world, and as their currency is based on highly developed credit, its elasticity is so considerable that disturbances in the metallic circulation of one country have only a very small influence on all the rest. This appears to me to be proved by the experience of the last few decades. For the last thirty years, gold has been the international medium of payment between the most important commercial nations, and greater disturbances in the circulation of gold money than have taken place in the last thirty years can scarcely occur. The suspension of cash payments in the United Scates, in 1861, in Italy in 1866, in France in 1870-71 ; the adoption of a gold currency by G-ermany and Scandinavia ; the resumption of casn payments in France, Italy, and the United States ; one would have thought that every one of these events must have shaken the money market in the other commercial States, and yet in every case the only result of these events was a moderate rise in the rate of discount. Every crisis which shakes credit, such as that which occurred in the Autumn of 1857, or that in May 1866, spreads much more quickly and in a more destructive manner throughout all countries of the whole world, whether they have a gold, silver, or paper currency, than any one of the so-called disturbances of the metallic circulation. Against such crises of credit which arise from over speculation and exaggerated commercial and industrial activity, an important means of protection is, in my opinion, the extension of the gold currency in commeroial States. For during a period of exaggerated and unsound rise of prices and speculation the cash reserves gradually disappear from the banks. With a gold circulation this drain will, as a rule, be quicker and more powerful than with a bimetallic currency. In the latter case the banks can meet the drain of cash by always making their payments in the less demanded metal. With a gold currency the banks have not got this means of help. Moreover, a gold drain is likely to have more intensity than a silver drain, because, in these later times, gold is the precious metal most in demand. The rapid drain of their cash reserves compels the banks at an earlier period to meet, an unsound rise of prices by a rise of discount, and thus it prevents the evil from reaching the height which creates a destructive crisis. I do not then deny that the money market, or to speak more precisely the loan market, would gain greater stability with bimetallism than with a gold currency, but I do not regard this an undoubted gain, for I hold the greater sensitiveness of the money market with a gold currency to be a valuable safeguard against unsound and unstable rise of prices and the crises which are its sequel. A gold currency exercises the same wholesome and correct- ing influence, which England by Peel's Act, and other nations by similar restrictions of free movement in the conduct of their central banks, have sought to provide. Erwin Nasse 264 KOYAL COMMISSION ON GOLD AND SILVER : (3.) Professor Lexis, of Grottingen. „ I- To what do you attribute The Ml in the value of the fall m the value of silver, as „•! ■ , j j ux j.t. compared with gold, since 1871? Silver is beyond doubt the consequence of the coinci- dence of the various causes which were enumernited in the Eeport of the English Silver Committee of 1876. Two of these causes have been but transitory in their working, viz., the unwonted increase of supply caused by the silver thrown on the market by Germany up to 1879, and, on the other side, the unwonted diminution in the export of silver to India which has continued for some years. We must regard as permanent causes of the depreciation, firstly, the almost continuous increase in the production of silver for the last 20 years, which latterly amounts to more than double tlie annual aver- age of the years 1866-1870, and secondly, the diminished use of silver in consequence of its exclusion from the coinage system of several important countries. This last fact, however, has a far greater importance than all other causes of silver depreciation together, for if it were possible, as formerly, to have eilver freely coined in Paris, Brussels, Berlin, and elsewhere, and so to have an unlimited exchange for money of generally recognised value, then an increase in the supply of silver would simply cause an increase in the coinage of silver money, and consequently the influence of the increase in supply would be more or less perfectly counteracted. It was, besides, of the most decisive importance that the States of the Latin Union by limiting and finally stopping their coinage of silver completely set aside the action of the machinery of their double currency, which had up to that time served to keep the relative value of gold and silver approximately stable. Before then silver had always been able to find in France, Belgium, and Italy not only a market that was constantly open but also a fixed price in francs ; in other words, any quantity of silver could be changed according to a fixed scale into a money which was legal tender all over a large and rich area ; and moreover, even outside this area it had no depreciation to fear, as the circulation of francs was backed in Prance alone by a large gold reserve. It may, therefore, be fearlessly maintained that had the States of the Latin Union determined to continue the unlimited coining of silver after the year 1873, as Prance after the year 1851, in spite of the warnings of many authorities, continued its coinage of gold without restriction, then the other causes of the depreciation of silver above mentioned would at least have been almost completely neutralized for a series of years, and the price of silver would only have fallen slightly. Similarly, had America also coined as many standard dollars as has been actually the case, it would beyond doubt have been quite sufficient to maintain the value of silver if in Prance and the other states of the Latin system an additional sum of 100 to 120 million francs yearly had been coinedinto silver currency. There would then in the years 1874-1887 have been coined in these countries a surplus of 1,600 to 1,700 million silver francs. The continuous inward flow of silver would certainly have caused an outward flow of gold from the Latin States, but according to the experience of the reverse movement of the precious metals which took place in Prance in the years 1850-1869 it may be assumed that the amount of gold exported would be far from reaching that of silver imported. It is true that under these conditions a premium of varying amount on gold would have asserted itself in these States, i.e., in the open market there would be a certain deviation from the legal rates (15i to ]), but in consequence of the very large reserve of gold in those countries, and especially in Prance, the premium up to the present time would hardly have risen higher than the maximum rate attained in the time of Louis Philippe before the Oali- fornian discoveries, which gave rise to a relative value of about 16 to 1. If, however, the Latin double currency, working without hindrance, very probably would have main- tained nearly the old price of silver up to the present day, on the other side it is true that its influence nmst gradually have grown weaker if in the future the ]3ro- duction of silver continued to increase and the produc- tion of gold as hitherto went slowly down. Silver money would then, in spite of the legal system, have attained a predominance in the Latin States, gold would have completely disappeared, if not entirely from the country at any rate from ordinary currency, payment for notes and exchanges would be made only in silver, and in order to retain the gold a premium would have to be paid, rising higher and higher by reason of the gradually growing absolute and relative abstraction from the gold reserve. The mechanism of the double euiTency would be powerless against this rise in gold unless some consider- able increase in the gold production were to ensue, and that is certainly not to be expected. Bat after all, under our hypothesis, the relative fall in the value of silver would ensue not only much more slowly and with fewer violent oscillations than has actually been the case, but the depreciation would have been far from reaching the point which it now actually has attained, because silver would then, in an important group of countries, have maintained an unimpeded and increasing applica- tion as a money metal. II. "What probability is there If the United States and of a continuance of the fall ? t,^.-14., „ i-A j-i, ^; ^ India continue tneir coinage of silver to their former extent, then with the present relative production an average price of 44 to 45 pence for the ounce of standard silver may be maintained. In this computation sight has not been lost of the fact that in consequence of events in the trade of Eastern Asia there have been exceptions on the one side up to 42 and on the other side up to 47 or 48 pence. That the price of silver for a very considerable tinae was fairly main- tained at 61 pence, and only in 1886 was reduced by a new blow to the above-mentioned average, may be explained by the following. Not till 1885 did speculators begin to give up the hope of some general regulation in favour of silver on the part of Germany or other States, so that now for the first time the normal price has assorted itself. Were, however, the United States to suspend the coinage of silver dollars, then the balance between production and consumption would be again wholly upset. Nearly a quarter of the whole annual production of silver, which hitherto has been retained in America owing to artificial appreciation, would then come as an ordinary commodity upon the world's market and would have to find a sale, thus lowering prices regardless of consequences, either in trade in Eastern Asia or for industrial purposes. Whether the price would then fall to 35 or 30 pence or even lower still can naturally not be foreseen. Ajad it is quite impossible to estimate how far the depreciation of silver would go should a suspension of coinage in British India deprive silver of what now is its most important market. ..Ill-, To what do you attribute The fall in price of many the tall in the wholesale prices „ „ ■,.,. K " ^^tuiij of.'many commodities which has Commodities in Wholesale been in progress during the last trade may be attributed to 10 or 12 years ? various causes, of which each is of special importance to special branches of produc- tion. The most important of these are : — (1.) The competition of newly-opened districts in which certain products, such as grain, can be grown with much less cost than in Europe. This competition has become possible chiefly thi'OQgh the building of great railways in America and India, and through the cheapness of sea freights. (2.) The considerable increase of large industrial factories, not only in the original industrial nations, but also in those which were formerly more or less backward. Their custom is now being more and more withdrawn from the former. APl'ENDIX. 2fi.: (3.) Tlie stimulation to the export of agricultural pro- d\icts from Eastern Asia in consequence of the depreciation of silver, and, from the same cause, the impediment to the import of European articles of industry into these countries. The first cause operated more especially in depressing the price of wheat owing to American competition, which, during the last 10 years, has attained an extra- ordinary extent. It may be argued that the export of wheat from America has considerably decreased of late, and, eg., in the fiscal year 1885-86 it amounted to only 68 million bushels as compared with 153 million in the year 1879-80.* How then has it come about that it is exactly in that year 1885 that the price of wheat fell lower than ever P To this it may be replied that it does not depend upon the quantity of wheat which America actually delivers in Europe but upon the quantity in hand or quickly procurable, which in case of an increased demand could be at once delivered at the low price quoted. The harvests in Europe were, of late years, comparatively good, and their increased yield, as com- pared with the years 1879 and 1880, had to find a market by competing with the American wheat. This was effected by extensive lowering of price, which injured the producer both in America and Europe. But whilst the European farmer very frequently failed to recover the cost of production at these prices, the wheat grower of the American West only lost a possible extra profit. For him even the low price leaves a normal profit over, and so at these prices they keep on pressing upon the European market with the whole of their producing power. The theory of Eicardo, according to which the price is equivalent to the cost of production under the most unfavourable conditions (including the normal interest on capital), only holds good on the sup- position that the more favourably situated classes of producers are already fully engaged to the extent of '■-heir whole producing power. If, however, one of these favoured classes can further extend their production, then it rules the market, and fixes the lowering of price, be its actual sale great or small, i.e., whether it compels the less favoured competitors to suspend their produc- tion or to sell at a loss. Analogous to the fall in the price of wheat is the extraordinary fall in the price of copper which has con- tinued until October 1887. In the western territories of the United States, especially in Montana, new and rich copper mines have been opened, and through their output the American production rose from 40,000 tons in 1882 io 74,000 tons in 1885. As simultaneously the great Spanish mines increased their output, this extraordinarily augmented quantity of the metal could only find a sale by a reduction in price, which, in the end, fell to two thirds of the former average price. Many of the smaller and less productive mines were certainly obliged to close operations ; bat the diminution in production caused by this was inconsiderable, com- pared with the constantly increasing quantities thrown upon the market by the larger works in spite of the considerable reduction in their profit. Over-production, which, in the case of copper, has been caused by the opening of new mines, has, in the case of many branches of industry, arisen simply from the fact that large manufactories, iron works, and other busi- nesses have been started whose power of production far exceeds the present demands of the market. The more favourable the conditions of production of such an under- taking the more will it strive to bring to the market a quantity corresponding to its actual power of production , and even if this cannot be done, yet it co-operates m causing a depression of prices under which the less fa- voured undertakings can earn no profit, or mdeed suffer Ictual loss. Of these latter some fall to the ground but precisely those whose production most contributes to t^he result will not allow^hemselves to be crowded out, but continue their operations even ^^le^^f ^^Tf J ar^ out profit owing to a glut of the ^^Vl^^^'T^^^tf ^^^^ the laree industrial joint stock compantes Their direc- tors have m immediate interest in keeping the under- Sing In ope^tion, even although it yields no dividend SXsha?eholderWrequite content, provided^ be no deficit to be covered j and even ^^ *Xlt ^^ °^'4' thev prefer as a rule to issue preference shares and to take th^^m up themselves, ratherthan to go into hquida- tiS In Sheave they wouldprobably lose their whole capital. In this way industrial over-production « , a competitive struggle and a standard of Pn^es which renders a great pirt of t he commodities produced ^e Triie importation of flour has certainly increased, but only from 6 to 8 million l"*"^''- o 51080, produced without the usual profit or even to be sold a^ a loss, may become chronic, and there appears to be no other means of protection against it than conventions between the great producers. These have latterly been frequently attempted, although their action has rarely had any lasting result. The infiuence of over-production on prices is naturally intensified by the fact that it has arisen simultaneously in all industrial countries, and that many countries whose industries are less well developed impede the import of foreign manufactures by protective duties. Finally, as regards the influence of the depreciation of silver, it operates on export and import in countries with a silver currency, just as the depreciation of paper money does in countries where there is a paper currency. Those who have lived in one of the latter know from daily experience that even considerable movements in the premium on metallic money exert for a considerable time no noticeable influence on the retail price of inland products, on wages, and on rents. This is the case too with regard to the movement in value of the rupee as compared with gold, even though this fall in the Indian currency has arisen from quite other causes than (,e.g.) that of Russian paper money. Were, then, the exchange value of the rupee to go further back still in India, so far as regards labour and the ordinary products of the land, it would maintain for some time the same purchasing power. These pro- ducts, therefore, if valued in gold can be produced at a less cost, and consequently they can be sold in the gold-currency countries either at a greater profit or, if lower prices are necessitated, at all events with the normal profit. The first case will only be of a transient nature, for competition will soon, cause the extra profit, which at first may be regarded as a kind of premium on exporta- tion, to disappearfrom the difference in value. Especially in the case of wheat, a commodity which is thrown upon the European market in such superfluity, the depreciation of the rupee can only serve to induce a lowering of prices for the Indian product in Europe by which it forces a sale for itself. Therefore the differ- ence in the price of wheat in London and Bombay is not greater than it would have been under the former value of silver after allowance is made for cost of tran- sport and traffic. The Indian wheat growing districts which have now become opened up by railways possess through this difference in value as well as through their natural advantages for production a still further advan- tage, so that they must be classed on the European market with the most favourably situated competitors who in the matter of lowering of prices are able to go the furthest of all. An opposite effect is produced on the importation of the products and manufactures of the gold-currency countries into India and China, owing to the depreciation of silver. The wages and the nominal income of the great mass of the population there are expressed in silver and have risen either very little or not at all. The population of India is now therefore not in a position to pay any more rupees for English cottons than in the time when silver was of full value. For the English exporter, however, a simi- lar amount of rupees now yields in gold 30 per cent, less than before, and he must therefore either suffer a diminution in his sales or lower his prices calculated in gold to correspond to the depreciation of silver. Finally, mention must be made of yet another uni- versal cause of the fall in price of many commodities which arises I'rom the aggregate of these single causes. The latter have caused many necessary elements in production, such as raw materials, machinery, and the like, to become much cheaper. In consequence the cost of production of many other commodities has in turn been reduced, both those which had already been inde- pendently affected and also those with which this was not yet the case. Owing to the present keen competi- tion in all branches such a reduction of the cost of pro- duction must again in its turn lead to a reduction in the price of the product. Further, in every branch of industry great efl'orts are being made to compensate the loss of profit by the introduction of economical improvements inmanagement, more suitable machinery, and the like. These improvements contribute a factor to the depression of prices, and moreover one which in time to come will still exert an influence. There is thus being adjusted a new system of relative values based on a lower level of prices, and in it only those will find themselves in a satisfactory position who are not dependent on the past owing to too high expenditure on capital or debts. LI 266 ROYAL COMMISSION ON GOLD AND SILVER : The above-mentioned causes appear to me to fully account for the fall in the price of commodities, especially when we see that, owing to combinations which counteract these causes, in certain commodities an upward movement of prices can be caused, as has been the case latterly with copper and tin.* _ Considerations of currency come therefore, in my opinion, into our problem only so far as the depreciation of silver stimu- lates export from Eastern Asia and depresses import into this great trading district. The assumption that the depreciation of prices rises from a scarcity of gold and a consequent rise in the value of gold, seems to me not yet to be justified by the facts. In America, France, Germany there are, besides the gold coins, immense sums of silver money, paper money, and uncovered bank notes, and these media of circulation are fully equivalent to gold in value owing to public or private credit, and therefore in the fixing of prices they have the same influence in commerce as a corresponding amount of gold money would have. No one can maintain that in these countries there is any dearth of media of circula- tion. The United States coined from 1877 an annual average of 48 million dollars in gold, considerably more than was coined iu the period from 1851-1860, in which the annual average was only 33 million dollars. Besides this there are annually about 28 million standard silver dollars which enter into circulation as such or are made available in the form of silver certificates. Except France during the years 1851-1860 no country has so largely increased its stock of metallic money as have the United States in the decade from 1877 to 1886, and yet prices in that country have manifested the same movement as they have in Europe. In France for the latter years we find in the vaults of the Bank a cash reserve of 1,100 to 1,200 million francs in gold and a like amount in silver of legal tender. Besides this the note circulation amounts to 2,600-2,700 million francs, and is therefore covered to the extent of nearly a half in gold, and nearly five sixths in metal. Were there an increased demand for circulation there could be — political quiet and peace being assured — an issue of 500 to 600 million francs more in notes covered by the existing cash reserve without causing thereby the least injury to credit. In Germany too there can be no talk of any dearth of circulation so long as the Imperial Bank holds a cash reserve of 650 to 750 million marks in gold and silver, which is treble the sum which before 1870 was quite sufficient for the Prussian Bank. Nearly three fourths of the amount of the notes issued by the Imperial Bank and the other banks of issue are usually metallically covered, and therefore the issue of notes could, if it was only a question of the credit of the notes, be increased by a sum of some hundred million marks on the present cash reserve. The Bank Act which imposes a duty on uncovered notes when the issue exceeds 385 million marks would certainly restrain such an additional issue, but would never in any way pre- vent it were the needs of commerce seriously to require such an issue. In England people talk of a scarcity of gold when the reserve of the Bank diminishes and consequently the oflScial rate of discount is raised. These, however, are only symptoms of the sensitiveness of the English money market, chiefly caused by the unelastic organisa- tion of the Bank according to the Peel Act. There is no evidence from it that it is occasioned by a universal scarcity of gold, for we find that in the year 1857, the period of most active gold production, the reserve of the Bank of England was lower and its rate of discount higher than has ever been the case in the last 10 years. Similarly, we find a sharp stiffening of the rate of dis- count and a large diminution of the reserve in the year 1873 — the period when the prices of the commodities were highest; Certainly the aggregate reserve of gold in England has of late years experienced a diminution owing to excess of its export over import and to its application to industrial purposes. This fact depends partly on the extension of the gold currency system in that now there is a more complete adjustment between England's gold reserve and that of other countries. But, besides this, it must be noted that England has always striven to do with the smallest possible cash reserve, and all its arrangements have been made with this end in view. Owing to the retarded flow of business a portion of its gold reserve became superfluous, and also the amount of payments through the Clearing House decreased. ♦ The prices of lead and zinc also had previously risen. The departure of a certain amovmt of gold must, there- fore, be regarded not as the cause but the effect of depression in trade. In any case there is no justification for the statement that England possesses less circulation than are normally required, as we see that the average rate of discount remains very low, and owing to substi- tutes of other kinds, especially to the facilities of the Clearing House, there is less use made of metallic money than was the case in former years. But even if England had really lost too much gold, the fall in the prices of commodities could not be attributed to it, because it is a universal phenomenon to be observed even in the countries which receive gold from England or in other ways have increased their cash reserve at its expense. A low rate of discount is not of itself a proof of a superfluity of circulation, but only of an accumula- tion of unplaced and movable capital. Wien, however, this coincides with large cash reserves in the banks, as has been for many years the case in France and Germany, then a proof may undoubtedly be seen in this coincidence that there is no truth in the asser- tion of the existence of a dearth of money operating to depress prices. It is certainly possible, and indeed probable, that in the future, if the circle of gold currency countries is enlarged, or the production of gold further decreased, that scarcity of gold and consequent appreciation of gold as compared with commodities might be occasioned. I believe, however, that this circumstance could be at once detected in the rise of permanent and increasing premium on gold in those countries which, like France and the United States, have concurrently with gold a large silver circu- lation and much paper money or great power of extension in their issue of bank notes. Hitherto, how- ever, in these countries but few and transient Tpremia on gold have been paid which can well be accounted for by temporary conjunctures. IV. Has it (the fall in prices) A further argument fsrw^esanllhelf a/mints against the assumption of a for services rendered, (c) land universal rise in price 01 gold andhouses'f may be found in the fact that the depreciation of prices has confined itself almost exclusively to commodities in wholesale trade ; and even in these not without considerable exceptions. Only in the case of single articles, e.g., sugar and petroleum, have retail prices followed to any great extent the movement in wholesale prices ; in the case of most commodities on the contrary, especially in the case of bread and meat,* only a very slight cheapening or none at all has occurred in retail trade. The wages of the industrial classes have on the whole gone back but slightly, and are still higher than they were in the year 1870. Agricultural labourers have almost completely maintained the rise which they gained in the years 1872-3. The wages of servants show a continuous rising tendency, and even services of a higher class, e.g., those of artists and medical specialists, are on the whole more highly remunerated than formerly. The same holds good of theatrical repre- sentations, concerts, and the like. Moreover, the increased discrepancy above mentioned between retail prices and the depressed wholesale prices can partly be accounted for by the higher value of the services rendered in connexion with retail trade. Besides, the glittering ornamentation of shops and the higher rent paid in good localities frequently contribute to the same end. Farms and land in the country have more or less fallen, still not so extensively as might have been expected from the lowering of rent. This may be ex- plained from the fact that the return from State and other good securities has also fallen, and therefore the factor of capitalisation has risen in favour of the land property. Certainly if land is sold by auction under a forced sale it often realises only a very low price, but in ordinary free traffic on the other hand the ground land- lords hold out for comparatively high prices. The prices of houses have on the whole not fallen although building materials are cheaper. House rents in Berlin have, it is true, not been able to keep at the extraordinary elevation which they attained there under exceptional circumstances in the year 1872 ; but in general in the German towns, although there is a great deal of building in nearly all of them, they have for the last 10 years remained about the same. Certainly, in Germany, people, and especially the middle classes, have the impression that during the • The wholesale price, too, of meat, that is, the price paid to the growers, has fallen in Germany but slightly. APPENDIX. 267 period of pretended increase in the porohasing power of money, cost of living has become greater for them. The ^ Grovernment too has given expression to this opinion by recognising a rise in the stipends of its officials as jnstified thereby. V. Has the {all resulted in If fre consider the present any material prejudice to the ._„„ i. c • • j.i commercial or general interests movement Of prices m the or the world? aggregate from the stand point of nniversal economics then we are hardly justified in saying that it has done harm to humanity. The powers and treasures of nature in newly opened districts have been pressed into the service of the civilised world, and an immense apparatus of railway, steamers, machines of every de- scription has, in consequence of the keen competition of its owners, rendered to human society its mechanical services for an unwontedly low price. The profits of capital have diminished, but on the other hand the value of human labour, including all kinds of services, has risen rather than fallen. The fall in the price of wholesale commodities has been prejudicial to certain classes and groups ; but other classes must have bene- fited to an equal extent, and, if these latter are not the consumers, then it must be the middlemen in trade or the classes which work directly for the public. Amongst these many during the last decade have attained to prosperity, especially bakers, butchers, publicans, and, in many towns, masons and others em- ployed in building. Symptoms of general economic pressure are certainly not to be found in Germany. The number of new buildings is, as was said, very large in many towns, and the new houses are if not in every case very tastefully built, still erected with a far greater attention to luxury in the way of decoration and comfort than was formerly the custom. The public places of amusement are more frequented than ever, the number of tourists increases every summer ; all watering- places and summer resorts are full to overflowing. New necessities of existence and requirements of luxury are always extending in wider circles, and the feeling men- tioned above as to ^the increased expense of living is undoubtedly closely connected with this increase of the superfluous things which are regarded as necessities. Although meanwhile humanity in general has suffered no economic injury through the fall in prices, still on the other hand it is possible that one particular country may have received more harm than benefit from this evolution. England, perhaps, is in this condition, because so far as its industry is concerned, this lowering of prices is bound up with increased competition abroad and the loss of a part of its foreign trade. It is possible also that in a specified country the operation of a lowering of prices even when, regarded purely arith- metically, it balances itself in gain and loss, may sfiill give rise to a division of wealth which from the social point of view seems less desirable than the former. In Germany it would be regarded as a very deplorable change and an inj ary to the common weal if the indepen- dent smaller landowners who work their own ground were ruined by the low price of grain and their farms conglomerated into the " latifundia " of the great capi- talists. VI Do you consider that As has already been ^^lnS"^r'ln7ofthem.'a™ argued, the fall in the price sr^riSg from an injurious of commodities cannot, m contraction of the currency jjjy opinion, be attributed to S ""oniSedXt scarcity of media of circu- increase in the supply oi gold f lation nor to a scarcity ol sold Still less cannot be maintained that in conse- quence of insufficient import of gold trade has been iniured by a high rate of discount. As a matter of fact ihe official rate of discount of the Ba,nks of England, and Erance, and of the German Imperial BanJi, taking the average of the years 1877-1886 has been lower than ^ any former decade, and in the private discount market this is true in a still higher degree. The maxi- mum quotations, too, of the official rates have ^n the last decade not risen so high as formerly The Bank of England did not in this period raise its rate above ?ii peTcent., whilst we find for 1873, eg., ^ maximum nFstner cent , for 1872 6f per cent., for 1866 10 per cent ^for T^hh per cent., fo/l864 9 per cent for 1857 9I per cent. The Bank of England is compelled owmg to its legal organisation, not by any general scarcity of 20ld, to enter from time to time upon a struggle for Sold; it has, however, as we see, been obliged m tlie time of the richest gold production to enter upon this struggle with much severer measures than m the last decade. VII. To what extent and in The amount of the pre- ^y^theTuaStlt/'^flhe^'S cious metals used for money or metals used as standards of purposes stands m no Uxed ™'"eP 3,2^ specified relationship to the prices of commodities, although in general it is indubitable that very great alterations in its amount may in the end conduce to depreciation or appreciaition m the value of the metals as compared to commodities in trade. What under given circumstances really happens depends upon the particular nature of those circum- stances. It is possible for a considerable increase in the metallic money of one country to take place without prices rising ; conversely too a considerable and general rise of prices may occur without any increase in the cash reserve of a country, or even simultaneously with a diminution of the cash reserve. Eor instance, the gold and silver reserve of the United States was considerably increased from 1878 to 1887, and for all that prices there as in Europe have gone back. Erance on the other hand had in 1873 prices quite as high as other countries, although it had lost more than 60G million francs in metallic money owing to the payment of the war indemnity to Germany. England and other countries too had in 1872 and 1873 to pay gold to Germany, and still prices rose in their markets as well. A general rise of prices always takes place when there is a general upward movement of the economic conditions of life caused by great speculative activity or rapid business advance. If the real conditions of an extention of production and commerce are recognizable then business without any difficulty whatever finds for itself in one form or other the necessary auxiliaries for the circulation. A large reserve of metallic money is to this extent favourable to a rising movement in prices, in that it afiTords a surer bases to the mechanism of credit and facilitates its extention to a further extent than would be practicable with a smaller cash reserve. On the other hand a mere increase in the metallic reserve is in itself not in the position to cause an im- provement in the economic relations of a country. What is the gain if, e.g., England sells commodities in America at a loss and receives in exchange for a part of these exports not cotton or other American products but gold ? If business languishes in a state of stagnation then this gold will make no difference in the position ; it will be stored up in the bank and so change a certain number of formerly uncovered notes into covered notes, or take the place of other auxiliaries to the circulation whose application will be correspondingly reduced. The Bank of England in July 1879 had a cash reserve of over 35,O0O,O00Z. . whilst only 29i million of notes was issued to the public, for which in consequence there was a surplus cover of nearly 6,000,0002. And yet this quantity of gold in spite of a very low rate of discount did not suffice to give any movement to business, for the temporary improvement of prices which occurred shortly afterwards proceeded from the American market and was in no way produced by the offer of gold by the Bank of England. VIII. What is the rela,tion, Eixed relations between quSW^I'hrpScior^e'ials addition _ to the quantity of and the fluctuations ol credit P the precious metals and ex- tension of credits are not to be discovered. A large cash reserve in a country may operate in causing a part of the auxiliary means of credit in business to be crowded out, or, more especially, in confining the extension of such auxiliaries. So, for instance, in Erance, a country which still of all European countries possesses the largest metallic cash reserve, the cheque and Clearing House system is but little developed. Under other conditions, on the other hand, a large cash reserve may favour a proportionate extension of credit, as was undoubtedly the case in Germany, for instance, in the years 1872 and 1873. Just so we find in the first years after the discovery of gold in California and Australia, an exceptional extension of credit in Europe coinciding with a great increase in the metallic money. This was specially the case in speculative matters until the crisis of 1857 gave a check. I have already given the reasons above for considering that the movements of the rate of discount of the Bank of England, and consequently the extension and contrac- tion of the willingness of this institution to give credit, are not immediately caused by the general economic relations of the import of gold, but depend upon causes which ensue from the Bank Act, LI 2 268 EOYAL COMBIISSION ON GOLD AND SILVEK ; IX. Has there been durinp; In Germany the use of Ihe last IB years atjy important a,uxiliaries to the circulation chlqueTtank tliCmi Which save the onrrency has or exohanRc, or other means of made considerable progress, nconpmising^^the use of the jj^pg^jg^^ mention must here precious, • ^^ made of the development of the " giro " system in the Imperial Bank, a system of deposit and payment which embraces the whole empire, insomuch as the depositors can avail themselves of the branch ofSces (over 200) as well as of the head office. The aggregate amount of this business, which m 1876 was quite inconsiderable, has since then steadily grown. In the year 1886 it had reached the amount of 28,820 million marks. Besides this the Imperjal Bank has m connexion with many other banks instituted Clearing Houses in nine towns, through which in 1886 payments to the amount of 13,356 million marks were made. X. Do yo\i consider that an An international agree- iute.rnational agreement could -^^-^^ fgr the free coinage of he made for the free comage of '""i . j • j. "old and silver as legal tender gold and Silver according tO money at a fixed rate ? a fixed relative value would in my opinion be possible if England were uncondi- tional! v to enter into this bimetallic convention, and so allowed an. unrestricted coining of silver currency riioney according to the accepted value. "X 1. Is it in the power of A general agi'eement as to Governments to maintain such ^^ relative value of the two a ratio iP agreed upon ; ana . would the practice of the precious metais on a given commercial world follow the ratio, if accepted by England, '*^' the United States, Gfermany, France, Italy, and other States for their coinages, would exert a much stronger influence on the relative value olDtaining in free trade than did the French double currency system formerly. If the bimetallic union were to fix upon the old French rates as its basis (15i to 1), then silver would undoubtedly in a very short time rise to 60| pence for the ounce of English standard fineness, because any amount could be made to realise this value by the most important mints. How Ion 3-, however, the value of silver as compared with goM could be maintained would depend upon the relative production of the two precious metals. The theory of bimetallism has silently taken for granted what certainly corresponds to actual experience hitherto, that 60^?!. precious metals will again be subjected to periodic increase and decrease cf production. For it would certainly always be possible by means of a bitnetallio system to support a metal which was tempo- rarily threatened with depreciation iii',consequence of an increased supply, until, by a considerable diminution in its production, or a great increase in the production of the other metal, a reverse movement occurred. If, however, the production of silver steadily increased (even with "diminishing celerity and not above a certain fixed upward limit) while that of gold continued slowly to decrease and approximated to a do wnward limit, then even a world-wide bimetallic union could not maintain in theopen market the former relation of value between the two precious metals. The amount of silver money to hand in the bimetallic states would then reach very soon the double, then the treble, and more of the supply of gold money, silver money would then become the actual general measure of value, the. representative of the standard value of the country, and gold would as compared with it reach to a premium, the amount of which could by no manner of nieans be limited by the bi-metallic organisation which would then be working with empty hands. For such an organisation can prevent the sinking of a plentiful product but not the rise of a metal which is becoming scarcer. Now, however, the production of silver in spite of fall of its price has continued for a long series of years to increase more and more, and now, reckoned in the old value, it has attained to an annual amount of 560 million marks. All this goes to show that in con- sequence of the improvement of means of transport m the American mining districts and of the progress made in the technique of metallurgy, together with the practically inexhaustible wealth of ore in North and fcouth America, the production of silver will still further increase. A rise in the price of silver would also immediately bring with it a marked increase of produc- tion since at present great quantities of poor ore are set on one side which, with silver at a higher price, would ■ be smelted with profit. On the other side the production of gold has tor 20 years kept slowly receding and now it reaches an annual average of only 400 million marks. It is precisely on the part of bimetallism th^t the arguments tave been exposed which make probable the continuance of this retrograde movement, and show that discoveries such as those in California and Australia in 1848 and 1851 are not to be expected. I believe indeed that quartz mining is capable of greater development, but it is in any case very probable that the annual yield of gold will fall within a short time to 360 million marks and later perhaps still further. On the other hand, according to Soetbeer's estimate, there is now an annual consumption of 250 million marks of gold either in the form of new bars or of coin for industrial purposes, and this amount will most probably be increased by degrees as the population and prosperity grows. Besides this, there is an annual flow of about 70 million marks to India which is either melted down or hoarded there. Even at the present moment, therefore, the greater part of the annual production of gold is not devoted to any permanent monetary purpose. The more this annual production diminishes the more will its use as a material for money decrease in importance ; indeed, it might well be possible that in the end the annual requirement of gold for industrial purposes would equal the amount annually yielded. But long before this point had been reached the trade value of gold, consequently in the bimetallic union the premium on gold, quite independent of any influence exerted by a legal relative value, would be able to rise, because the industrial demand for gold would have become by far the most important. But in the form of coin, too, gold would acquire a greater preference in proportion as the amount of silver money was increased. If the old prices were restored the annual production of silver would certainly exceed 600 million marks, and it would then, after fulfilling all the needs of industry and Eastern Asian trade, leave over 300 million marks which must be coined into silver money in Europe and America. Thus, in 20 years, the amount of silver money would have been augmented by more than 6,000 million marks, whilst the supply of gold coin would have increased only by a few hundred millions. Such an increase of metallic money would, it is true, be in itself neither excessive nor injurious to humanity, especially if some of the countries which now have a paper currency were to resume cash pay- ments ; but the official relative value of the two precious metals would, under snch circumstances be made wholly illusory by a premium on gold which would rise slowly indeed, but surely, and with no limit to its height. XII. What would he the If the former relative value eQcct of such an agreement, if .r. .-i ^ j.,„... ^ ,■ j. i„ carried out. upon (a) prices, of the two precious metals and (6) the preduction of the were restored by the forma- precious metals? ^i^^ ^f a bimetallic union, which regulation, however, according to what I have just mentioned, could only be carried through, so far as free trade is concerned, for a not very long series of years, then, owing to the permanent increase of silver money, which would finally become the actual standard of value, certainly slowly increasing depreciation in the value of money as compared with commodities would set in. For the whole development of modern trade is directed towards the object of making an increasing number of business transactions possible by means of balancing and accordingly limiting the use of actual money. Germany and France, for instance, are continually striving to make the use of metallic money dispensable to the same degree that it already is in England. If, however, in spite of this a considerable and indefinite coinage of silver throws a continual increase of metallic money into cjrculation, and does this coincidently in all lands of economic importance (which will prevent the escape of the surplus), then this fact in combination with the existing tendency towards a decrease in the demand for money will cause a gi'adual sinking of the value of money as compared with marketable commodities. As, however, the production of gold will in all probability decrease, we may assume that the aggre- gate of coinages from new gold and silver in 20 years would still not be greater than it was in the years 1850-1869, and the operation of this increase of money on prices would in future jrobably be smaller than in the above-mentioned period, because it would now take place with a far greater quantity already on hand, with a greater population, and with a larger bulk of saleable commodities. Should Russia or Austria replace their paper money by metal, which certainly could only be (lone with a wider application of silver, then, as above stated, the influence of the increase of money would be still more considerably weakened. I have already discussed the influence of the restoration of the former relative value of the precious metals upon the production of silver. APPENDIX. 269 . XIU. Do you consider an The adoption of an inter- international iiKi-eemont lor bi- „„4.- , ^ tS /it iin^or- mntallism possible on any other national DlmetalllO relative ratio than 164 to 1 ? valne approximated to the „„, , „i i 1 ,, present price of silver abont 20 to 1 or 21 to 1 would bo much more commendable thau the return to that which exists in the Latin Union The production of silver would in that case experience no exceptional stimulation, and gold would retain the advantage in value which has accrued to it from its increasing scarcity. It is true if the production of silver continued to increase and that of gold further decreased then even with this raised relative value of gold there must in the end arise an ever increasing premium on gold. But the point of time, when the ofBcial relative value would be definitely superseded by that of trade, would certainly, by thfe adoption of the new relative value, lie in a far more distant future than it would where the old relative value retained. England would, perhaps, be the easiest to win over to this form of bimetallism, G-ermany would then perhaps also decide for it ; but France and the United States would probably fight against a bimetallic system with depreciated silver value with all their strength. For both countries possess enormous sums of silver money coined at the relative value of 154 to 1 and 16 to 1, which by the new system, even if gradually introduced, would have to be recoined at a heavy loss, a loss which in France might amount to 600 million francs. In America there is a further consideration, the important group of those interested in silver who would raise an energetic opposition to any such oflacial and final recognition of the depreciation of silver. Consequently- for the practicability of the realisation of this relatively most durable form of bimetallism there are no practic- able prospects in view at present. XI^'. Tailing an international Any permanent fixity of bimetallic agreement, what .,„ J^„i„„ c „-i i measures could be adopted by Jhe value of Silver can only the commercial nations of the be occasioned by the assured bilitVS'rtr^eVuonrLl'e" ^^^ .f ^^^^ Portion of the Kold and silver ? metal which is not applied to industrial purpose and export to Eastern Asia as material for money by as many mints as possible. Isolated coinages even if they amounted to more than 10,000,000Z. or 20,000,0002. would only temporarily raise the price of silver and consequently only produce fiuctuations which in the interests of trade are not at [all desirable. If, sup- posing the continuance of the American coinage of dollars, it were possible for the European mints still to work silver, at the present price, to an annual amount of 3,000,0002., as a raaximuni sum, then this price would probably from time to time be exceeded, but a further sinking would hardly occur. As, however, the Euro- pean States which have gold currency would not likely determine upon a coinage of silver currency, even in limited sums, it appears to be more practicable for these states to organise to a certain extent an ofiicial trade in silver with the intention of maintaining the value of this metal above a certain boundary and keeping as far as possible stationary. Let us suppose England, Germany, Prance, and other states declare themselves ready to buy at any time silver at a price which even under the present relative value might easily be still farther exceeded. This they would do by means of paper money, which would be based on gold currency and covered by the silver so bought. Then at once in every official place of deposit there would be some millions of marks collected whilst the price would be prevented from falling below the official quotation. This collection of silver would, however, scarcely ever reach a burdensome or considerable amount, because the price fixed for purchase would be, as was said, fixed somewhat low, namely, under the mean of the fluctua- tions of the last few years. A temporary brisk demand for Eastern Asia or for industrial purposes would then cause ■■'■ rise in the price of silver, which, however, would be at once combated by heavy sales on the part of the places of deposit, and so compressed within the narrowest limits These sales could be made to work against srold as well as against the funded paper money; in the first case tl.e still outstanding paper money would be fully, or, indeed— on account of the small profit on its sale-more than fully covered by gold by the deposit stations. Should the whole amount of the silver bought be absorbed by the sales, then the operation would have to be begun again at a higher buying price. If, on the contrary, in spite of a cautious choice of the initial Gottingen, 1st December 1887. buying price, an excessive collection of silver occurred, then certainly that price would have to be lowered, and the state would then, through the depreciation in value of its reserve of silver already in hand suffer a loss at least for a time, but that might be equalised by the profit which later on it might make when prices were better. The initial price would have to be so chosen that a fall of this kind must appear exceedingly impro- bable. Moreover, the danger of such an excessive accu- mulation of silver would be reduced for each individual state in proportion as more states participated in the carrying out of this system. With an increasing dimi- mution of the production of gold, the silver-covered paper money, by which the principle of gold currency would not be attacked, would become a very useful substitute for gold, and therefore could be issued to a considerable extent without any detriment being to bo feared from it and from the accumulation of silver connected with that issue. XV. It is ai'Kued that, in the The double nnrrt^-nnv absence of bimetallis-m, the . • .i" ? . currency effect of any disturbance of during the rule m France tlie currenej; is limited to half had the efieot of keepinff the ihe ourroncies of the world +,„„ • j. i * i° , and thereby increased ii ^^^ preoiOUS metals closely intensity. Do you consider this within bounds during fiuc- r;^Vt"h"eTv1;:Sii'us"on'eV™' tuations in their relative ,. . value. Especially but for tho equahsmg influence of this system would the deprecia- lation of the value of gold as compared with silver in the 50 years have been much more considerable. Con- versely, as has before been remarked, the fall of silver would have been almost wholly postponed for several years, perhaps indeed up to the present day, had Franco and the states in its coinage union been able to maintain the double currency with unlimited coinage of silver. The stability of the relative value of the two precious metals is a matter of advantage for the economy of the whole world, for large and frequent fluctuations make trade between the gold and silver currency countries a gambling speculation, and produce the artificial advan- tages partly for export and partly for import of which mention has been made above. dis^IrU'cefUS'=\,e°'spS When the influence of a overall countries, would greater great and sudden increase in stability of the standard of production, whether of silver value be secured thereby ? t,^ „<■ „„ij' """""'^ ui oiivej. or of gold on the relative value of the two metals, is weakened or altogether neutralised by a double currency system, then at the same time the influence of the disturbance is extended over the whole mass of gold and silver money of all countries, and consequently on the whole greater stabi- lity in the money value is maintained. For all sudden and immediate influences on money have relatively greater power than have quantitatively equally great influences which assert themselves but slowly and through manifold intermediaries. For the future deviations in the increase of the produc- tion of gold and silver, as hitherto they have actually occurred, are hardly to be expected any more. Our knowledge of the geographical distribution of gold and silver is, it is true, not yet perfect, but it is sufficiently- advanced to justify the assumption that the production of gold will steadily diminish, although, perhaps, not to an unlimited extent, whilst the production of silver will still furthur extend. An internationally flxed relative value for the two metals is only in a position to be able to protect silver which is produced in greater quanti- ties from a corresponding, depreciation, but it is not able to prevent the rise in value which gold by reason of its gradually increasing scarcity attains. An ever- lasting relative value could therefore under such circum- stances never be flxed ; such a relative value, however, as corresponded with the present price of silver would enable a sufficient fixity of this price to be maintained for a long series of years. If, moreover, America continues for some years longer to coin silver dollars, then, perhaps, the silver question will practically and simply be .settled by the United States being compelled owing to their supply of dollars to go over to actual silver currency. Then perhaps other States would again be more friendly to silver, and so the necessity of applying this metal once more in some way in larger quantity as the material for money for most countries in view of the probable future diminution of the production of gold would be practically more and more recognised, 3?E. W. Lexis, 270 EOYAL COMMISSION ON GOLD AND SILVER; (4) M. Bmile de Lavblete, Professor of Political Economy at the University of Lifege. I. To what do you attribute It is perfectly evident that the fall in the value of silver, as j.-u„ f„ii •_ j.t. -^ahiR nf hiItpt eompared with gold, since 1874? ^'^^ ^^^^ ^^ ^P-^ ^^V^®. °^ SUVer as compared to gold is entvreki due to the legislative measures that have been adopted by different States, i.e., firstly, the adoption of the gold instead of the silver standard by Germany and the Scandinavian States, and, secondly, the suspension of the coinage of silver by the Latin Union, to begin with, and afterwards by all other countries, save India and the United States. If the coinage of silver had not been abandoned, this metal would not have lost in value through increase in its production. As all silver now produced finds readily employment, and that no stock of it accumulates any- where, is it not quite clear that had the mints of Germany, of the Latin Union, and of America been kept open, they would very easily have absorbed the surplus production ? As a kilogram of silver will always fetch 200 francs in standard money at the Paris mint, it is quite certain that the price of silver would have maintained itself at about 6Qid. per oz., precisely as during the time that the bimetallic system was in vigour in France. II. What probability is tb'sre of a continuance of the fall P Will the fall in the value of silver continue ? That depends on America. If the Bland Bill is repealed a fresh fall is inevitable. x,^^J-,?'?'^^'^''^?y?^'\*'^'^."*® The fall of the price of the fall mthe "wholesale prices . ■ j-±- • n j. of many commodities which has eertam commodities IS due to been in progress during the last the increase of their produc- 10 or 12 years? ^^^^^ to improved facilities for transport, to the advance made in machinery, and to a general amelioration in all modes of fabrication and manufacture ; but a universal fall in prices, afi'ecting all produce, even that which is in no way touched by the afore-m.entioned causes, can only be explained by a general reason, and this general reason must necessarily be monetary contraction. Indeed, simple common sense alone would solve the question. Between the years 1850 and 1870 all prices rose, and economists agree in attributing this rise to an increase in the production of gold. Since 1873 just the contrary has occurred. The production of gold has steadily diminished, and silver is no longer allowed to make up the deficiency, a fact wholly without precedent in economic history. The coinage of moneys, so active formerly, has now almost ceased, while, at the same time, the exchanges efi'ected are far more numerous than they used to be. All economists, without excep- tion, teach that when cash diminishes, cmteris paribus, prices fall, and it is quite certain that since 1873 the stock of gold in Europe has immensely decreased, partly from the exports of gold to America and partly also because industry is ever absorbing a portion of the monetary stock. The present production of gold is clearly insufficient. It is estimated to be about 18,000,000?. or 19,000,0002. annually. According to Burchardt's and Soetbeer's very careful statistics, trade yearly absorbs about 12,000,0002. in gold, due allowance being made for re- meltiug ; the extreme East has of late years taken about 4,000,OOOZ. ; the losses from wear and tear, shipwrecks, hidden treasures, and such like, amount to at least another 1,000,0002. There remains, therefore, at most two millions sterling to face the fresh demand for coin, which the immense increase in exchanges all over the world gives rise to. As population and business steadily increases in the two principal gold producing countries, the United States and Australia, these keep for themselves all the precious metal they produce. In England between 1879 and 1884 the gold coined amounted to 7,922,8302., during the same period the coinage of gold in Australia was 24,112,0002. and in the United States 231,000,000 dollars (46,000,0002.) The coinage of gold in the States ex- ceeded the production by 150,000,000 dollars, and this excess was of course supplied by gold from the outside world. The consumption by trade combined with the mone- tary requirements, more especially if the Bland Bill were repealed, would absorb all the gold produced in America, and the more so that this demand would be ever steadily increasing owing to the rapid growth both of population and riches. It would be the same in Australia and in the extreme East. Europe would, therefore, have only Eussia to look to in the future for her provisions of gold. At the present moment all European countries, with the sole exception of France, have not sufficient gold in circulation. In England, indeed, this scarcity is an acknowledged fact. " Ten years ago," says the " Eco- nomist," "the disposal of the London Stock Exchange " was estimated by a competent authority to be about " 4,000,0002. ; at the present time it is far below that, " when a demand for a million of gold absolutely carries " oif this sum from the market, and detains it else- " where, there is a sensible pressure on the exchange." " (Economist," February 4th, 1886.) This strange state of things to which the "Economist " here refers was again perceptible this autumn 1887, and is still felt while I write these lines. Italy has already lost a considerable portion of the gold which she procured at such heavy cost, when pay- ments in cash were recommenced there. Gold is every- where at a premium from 2 to 4 per thousand in Paris and in Belgium, even at 8 at this moment (October 1887), from 2 to 3 per cent, in Spain, from 16 to 18 per cent, in Eoumania. Holland, though a very rich country, has scarcely any gold in circulation, payments being effected in either silver or notes. Germany is lacking in gold to complete her monetary reforms, and Austria and Russia and all Eastern Europe have no gold in circula- tion. The scarcity of gold is indeed an undeniable fact, observable on all sides at the present time, and destined to become more and more apparent. It may be objected that gold is not yet absolutely wanting ; this is true to a certain extent, because, as prices fall when gold becomes scarce, the quantity of money always appears sufficient. This is a special economic phenomenon. It may be maintained that there will always be a sufficient supply of gold, because all prices fall when the means of exchange are diminishing, and therefore a greater number of exchanges can be effected with a less supply of gold. Theoretically, cash might be reduced to a minimum, and it would still suffice, because .prices would fall proportionately. And indeed the less plenti- full it is the more abundant would it appear, for, as the lowering of prices would render all business slack, the non-employed capital would be deposited in banks. This has been the case during the last few years. It is very easy to prove beyond a doubt that the marked and universal fall in prices is not due solely to an increase of production and to improved methods of transport. Between 1850 and 1870 the railway deve- lopment and the application of steam made greater progress than during the last ten years, new inventions of all kinds in the industrial world rapidly succeeded each other, and yet during that time production immensely increased and prices rose. Between 1870 and 1885 economic progress was also considerable, but less than during the previous period, and nevertheless prices fell to a lower level than in 1850. How then can it be denied that monetary contraction was the cause of this. According to Mr. Sauerbeck, production in England between 1850 and 1870 increased 2f per annum, and between 1870 and 1885 IJ only ; while prices rose during the first-mentioned period from 18 to 20 per cent., and fell during second 30 per cent, F- A''^'* ?¥ ^H^ ^' P""®*' The fall in prices has been extended to (a) retail pnces, i i x _ i "'=°" (S) wages and other payments general, but Wages have not for services rendered, (c) land been SO much affected, for and houses ? ^j^g motives already indicated by Adnm Smith. APPENDIX. 271 V. Has the fall resulted m In theory it IS unimportant any mateniil prejudice to the w>,q-h,q-.. ^^i t'y """■'■'' oommeroial or general interests ^ Pnces are high or of the world 9 low, but practically a fall . affects all long - standing creditors, companies, share holders and holders of mortgages, and benefits people with fixed revenues ■ or, m other words, as Stuart Mill puts it, the active portion of society lose and the non-active are gainers; but the effects of the fall, while it is actually taking place, are still more serious. All transactions and enterprises payable at fixed terms are exposed to an inevitable loss, and this is most discouraging to public initiative. Hence the stagnation in business now obser- vable. The capital put into the fresh undertakings started each year has diminished by one half. The reverse takes place during a period of expansion : all prices rise, profits are therefore assured. Another serious drawback to the present situation is that as the ratio of value between gold and silver has become uncertain since the bimetallic system no longer exists in France, all commercial relations with countries where the silver standard is admitted are subjected to an alea which is most unfavourable to sound trade. ^J^- ^°7°^ consider that Q-oId standard countries the countries using the gold i a- , in standard, or any of them, are a,lBO sufler to an equal degree suffering from' an injurious from the evils here above contraction of the currency -pfifnTpd +.n ar,^ pll tliio wmilrl which might have heen ob- reierea TO, ana all tms wouia ■viated or mitigated by an have been avoided if silver increase in the supply of gold ? tad been allowed to fulfil, as formerly, the office of standard money. As gold alone has now to replace the two metals, as far as coinage is con- cerned, all countries fight for it, and the total quantity existing is insufficient. Hence the struggle for gold now taking place. As M. Bismarck says, the blanket is not wide enough ! VII. To what extent and in All economists agreed that what way are prices affected „ •„„ j„„„„ j„ „„ j-ir„ „„i„j.;__ by the quantity of the metal price depends on the relation or metals used as standards of existing between the mass ^"■'"^^ of articles to be exchanged and the amount of credit or metallic means of ex- change, due allowance being made for the rapidity of circulation of these means. VIII. "What is the relation. The amount of money does if any. between the supply or . j„fp„™,„p (.>,„ farilitv of quantity of the precious metals T^°^ aetermme ine laciiity 01 and the fluctuations of credit? credit. For instance, credit is more general in England than in France, although England has certainly one half less than France, but taking into account the monetary situation of a country, the influx or exports of gold act momentarily on the rate of interest, because in order to maintain sufficient cash in hand banks must raise their rates of discount when gold is being absorbed elsewhere. For example, we know that the Bank of England regulates the rate of discount by the influx or drainage of gold, but the interest on capital is fixed by the abundance or scarcity of capital, not of money. IX. Has there been during Mr. Eobert Giffen is of the last 15 yeara ajQy important opi^io^ that during the last development of the system of "-r, ,, R_ , cheques, bank credits, bills fifteen years there has been of exchange, or other means of j^g greatincrease in themeans ^fe^SSals'^ "" "' *"' Of payment, cheques, bank credits, and bank notes, and I think he is right. The clearing house operations have certainly diminished. X. Do you consider that an J^'o one can question the ifm"de Z\hTf?eTcoLage"if possibiUty oi an international gold and silver as legal tender agreement tor the tree coin- money at a fixed rate t ^ge of gold and silver as legal tender money at a fixed ratio. xr. Is it in the power of Governments would not , ?°STVr^e'd"u^r;'?S impose the ratio they adopted, would the practice of the but the enect oi tneir adop- commercial world follow the tion of a certain ratio, let us ^""^ say 15i to 1, would be auto- matic and perfectly natural, and consequently it would impose itself upon the commercial world. If for one kilogram of silver, y% fine, I can obtain from the mints of the Latin dnion 200 francs in standard coinage, and from the mints of all other States, England,Germany, and America, an equivalent amount, it is quite certain that I should not choose to sell it under this price. Silver would therefore maintain itself at its usual value of 60^ or60Jperoz., as during the 70 years when Prance alone had adopted bimetallism, without this country having once to attempt any interference as to its price or relative value. The self-acting result of the free coinage of the two metals is one of the least clearly understood sides of the problem, XII. What would be the A treaty establishing inter- eneot of such an agreement, if .. i V; 4.„n;„»„ -m-„„i;i carried out, upon (a) prices, national bipetaUism would and (6) the production of the produce no immediate results precious metals? ^^ p^oes for there is no great stock of gold or silver to flow into the mints, but it would stop their fall and would' insensibly be productive of a certain rise. As the price of silver would increase its production would also increase a little. XIII. Do you consider an For the ratio between gold SeUu"ss^ler4'Shir- and silver it might, perhaps, ratio than 154 to 1 ? be Well to adopt the American 16 to 1, but the French 15J has been in vigour so long that it seems almost to impose itself. It is the basis of all contracts between States of the Latin Union, and in Spain, Germany, and Holland, and all Eastern Europe. Besides, America would as readily adopt the 15J ratio as the 16. And if the ratio were once established by international contract it would impose itself. XIV. Failing an international Failing an international S?alS^co„Td™^^ltptel\1 bimetallicagreement Iknow the commercial nations of the of no measure which could S?J^'t'rt^r?flSTe^w?en S^ «^^^"i.^ *» the price of gold and silver ? Sliver. It it cannot be freely coined, it becomes mere mer- chandise,, subject, like all other merchandise, to varying and limitless changes in value. XV. It is argued that, in the The disturbances of the absence of bimetallism, the j j i effect of any disturbance of currency were produced by the ciu:rency is limited to half the proscription of silver, but the currencies of the world, j.i,p^ „_„ ^.^t ponfi-npd tn and thereby increased in ™®y . ^^® ^°*. connned to intensity. Do you consider this certain countries. IJiey at- think't™e^l™'^ri'' *'°' *"•?''" ^^^^ all, to a greater or less us one . degree, because commercial relations are now such that the entire world forms one great market. The fall in prices has been universal and has been productive everywhere of great sufiTering, ruin, and loss. XVI. If the effect of such If all the great commer- disturbances could be spread • i ° , , over all countries, would greater Cia I powers were to come to stability of the standard of an international bimetallic value be secured thereby? agreement, sudden distur- bances would no longer take place and changes brought about by increased or diminished productions of the mines would be very gradual, almost insensible, as they would extend over such vast territory. After the year 1850 bimetallism in France, by assisting the absorption of about 260,000,000Z. in gold, prevented the too great depreciation of this metal and arrested the rise in prices. It acts like a parachute, and even such mono- metallists as Michel Chevalier and Jevons admit this. 272 ROYAL COMMISSION ON GOLD AND SILVER: (5.) The Hon. David A. Wells. I. To what do you attribute To aa increased supply of the Ml in the value o£ silver, as oilTrpT nnd in a rppoo-nitirm compared with gold, since 1874 P ®"^®^ ' ^""- J'° ?" recogmrion on the part of countries ot high civilisation, through what may be termed a pro- cess of evolution, that gold is the best instrumentality for effecting exchanges and measuring values. The movement in favour of a gold standard, and the partial disuse of silver in such countries, has been brought about, in my opinion, through the same influences that prompt the substitution, regardless of cost, of new machinery for old, if the minimum of gain can be thereby effected in the production and distribution of commodities. II. What probability is there I do not apprehend a fur- o( a continuance of the fall f ^.j^^^. ^^^^.^^ ^^ ^j^^ ^^j^^ ^f silver as compared with gold. On the contrary, I look for a gradual advance in its value, and eventually a return to a parity of value with gold. My reasons for such opinions are briefly as follows : — Silver is the coin medium for countries of compara- tively low prices and wages and limited exchanges (and these mainly internal or domestic). Such coun- tries embrace more than one half the world's present population; and as they progress in civilisation and increase their exchanges, which is a condition of pro- gress,' a larger per capita demand for silver coin will follow. A comparatively 8ma;ll per capita increase must create a demand that will ultimately greatly advance the value of silver. HI. To what do you attribute To conditions afl'eoting the fall in the wholesale prices ,. • onnnlv and HpTnanH of many commodities which has tneir supply ana aemana. been in progress during the last If any. Or all other causes 10 orl2 years? have contributed to the remarkable decline in wholesale prices since 1873, the nfluence exerted has, in my opinion, been very incon- siderable. I doubt if any one can name one commodity whicTi has notably declined in price in recent years, for which satisfactory evidence can be adduced to the effect that such decline has been occasioned by any appreciation in the value of gold. IV. Has it (the fall in prices) The decline in wholesale extended to (.a) retail pnces, _,-,;„„„ %.„„ affprtRci rfit.a.il (S) wages and other payments pnces nas anectea retail for services rendered, (c) land prices to some extent, but and houses? jiot proportionally. Wages have everywhere tended to advance. The same is true in respect to other payments for personal service, salaries. &c. Land, generally, outside of large centres of population has not advanced in value. House rents in the Uni ;sd States does not seem to me to have varied much in recent years. V. Has the fall resulted in The remarkable and con- any material P'eJ"^}''? f" *Jl« tinned fall in prices since commercial or general interests ,„„_ , • j i. j. of the world? 1873 has occasioned what is popularly termed ' ' de- pression of tr-ade." An analysis of what is involved in this expression shows that it cannot mean that trade has been restricted or has declined in volume, for the world's trade or exchanges measured by quantities has gone on progressively increasing during the whole period of depression, and is probably larger at the present time than at any former period in the world's history. Many people, however, have made less money in trade in recent years than before, in consequence of such depression, and many have lost money. But apart from such disturbances (which are temporary), if the fall of prices has been mainly due, as I believe to be the fact, to natural and permanent causes, namely, the increased power of mankind on the work of production and distribution, then the 'result by creating greater ahundanoe and bringing a larger amount of the same within the roach of the masses with a less expenditure of labour or money has been one of the greatest of blessings. VI. Do you consider thut the countries using the ijold standard, or any of them, are suffering from an injurious contraction of the currency which might have been ob- viated or mitigated by an increase in the supply ot gold. VII. To what extent and in what way are prices affected -i by the quantity ot the metal "ere e.tpress. or metals used as standards of value ? No opinion that 1 care to I fail to find any evidence that any countries using the gold standard have suffered or are now suffering from any contraction of currency. I do not believe that any VIII. What is the relation, if any, between the supply or . , . • ■„.- quantity of the precious metals permanent relation exists and the fluctuations ot oriidit ? between supply of the pre- cious metals and fluctuations of credit. IX. Has there been during There has been duriug the the last 16 years any important i„„j-tk „„„ „„ ™«„„4. J„„„1„„ development of the system of last ] 5 years a great dcvelop- cheques, bank credits, bills ment in the United States of exchange, or other means of ijj ^jjg ^gg ^f cheques, bank eooncmising the use of the "" , . „ -.-"^^i^^o, "<•" precious metals ? credits, bills of exchange, and other instrumentalities whereby the use of the precious metals has been econo- mised. X. Do you consider that an H ig certainlv within the international agreement could „„'i,'i-j.- „ j.t, j. • j. be made for the tree coinage of possibilities that an mter- gold and silver as legal tender national agreement could be money at a fiiced rate ? ^^g^^ ^^ the free coinage of gold and silver as legal tender money at a fixed ratio ; but I do not think any such agreement is probable. XI. Is it in the power of If such an agreement Governments to maintain such -i,„-,ij i,n «-.,«« n^j.„i„j „ „ a ratio if agreed upon; and should be once entered upon, would the practice of the I do not believe it could be commercial world follow the long maintained, because the conditions on which the per- manence of such a ratio would depend are not within the control of Grovernment, and are certain to vary. XII. What would be the jq^ot believing that anv effect of such an agreement, if „, ^„ 4. ■ t j. j carried out, upon (a) prices, ?iioli agreement as indicated and (5) the production of the in question No. 10 could he precious metals ? j^^de or maintained, it seems useless to speculate as to results if the contrary should happen. XIII. Do you consider an If an international agree-i international agreement for bi- „j. i'„ i ■„ i j n metallism possible on any other ment for making gold and ratio than 154 to 1. legal tender at a fixed ratio could be entered into, it would be manifestly the part of wisdom to adopt such a ratio as would occasion the least disturbance to the mass of the then existing coinage. Under existing circumstances it would seem to me to be folly to attempt to establish either an international ratio of 15§ to 1 or any other ratio. , .^l^-„^''''l'"S an international In default of an interna- bimetalhc agreement, what ,• , i •,„ , i,- . measures could be adopted by tional bimetalhc agreement, the commercial nations of the I do not see what measures world for giving increased sta- „„,,iri Up oflnTitprl Iro- +>io bility to the relation between COUia De auopcea Dy tUe gold and silver ? commercial nations of the world for giving increased stability to the relation between gold and silver which would not be likely to result in more mischief than good. XV. It is argued that, in the All the disturbances which eilecr^of Iny^'TsSSce* of ^ave accompanied the change the currency is liraitL'd to half in the relative values of gold ^1 'XrebT incJe^erTr; . and silver are in my opinion, intensity. Do you consider this the same m character as have view correct; and, if so, do you always accompanied the use think the evil a serious one " „ -^ ^ . J^ , _ XVI. It the effect of such of a depreciated fluctuating ,. , , ,j u J currency ; with this addi- disturbances could be spread ,. i j i i- -^ over all countries, would grenler tional and novel peculiarity, stability of the standard of namely, th;j,t while, hereto- value be secured thereby ? f^..^^ depreciation of currency has been due to the forced issue of redundant and ir- redeemable paper money, or debased coin, and has been local in its influence. The present experience is duo to a depreciation in the value of oue of the precious metals with reference to the other, and extends to many countries in different degrees. In all this there is, however, nothing unprecedented or in the nature of the unexpected, and there is no good reason for sup- posing that the disturbances which have characterised the trade of Europe with India and the East during recent years from fluctuations in the price of silver have been any different in kind than, or as great in APPENDIX. 273 degree, as those wHch oharacterised the trade of Europe with the United States from 1861 to 1879, or which characterise to-day the trade of the outside •world with Eussia, whose currency is depreciated and fluctuating. "If trade can go on profitably with " countries having an inconvertible paper of a widely " fluctuating kind and the rest of the world, a fortiori, " it can go on between gold and silver-using countries." Such disturbances constitute obstacles in the way of trade or exchanges, but trade soon accommodates itself to them, and the volume of business soon resumes its former flow in a continually increasing ratio. This has been the world's experience in the case of the recent Norwich, Connecticut, U.S., December 1887. decline in the relative value of silver"; the disturbances from which have, in my judgment, been greatly exag gerated, and have resulted mainly from apprehension, or sca/re of what might happen, but which has not hap- pened. Future generations will, I believe, include in one category the alarms which have prevailed, and the dolorous predictions which have been made in recent years by reason of the decline in the value of silver with those which a century or two ago were consequent upon the appearance of comets, and the action of inter- national conferences will be likely to have as much of influence in respect to the one as the " Bull " of the Popes had upon the other. David A. Wells. O 51080. Mm 274 EOTAL COMMISSION ON GOLD AND SILVER: ANALYSIS OP EVIDENCE. Me. R. WIL LIAKSON, H.P. i Is engaged in trade with' CHili and California, 6945 -49. Increased use of the gold standard has laeen injurious by lowering prices and interfering with exchange, 5950-58. Explains obstructions to trade with silver-using coun- tries, 5954-58, 5983-86, 5996-97, 6015-16 ; and to invest- ments in those countries, 5954-55. Difficulties of the situation are increased in Chili owing to the existence of inconvertible paper currency, 5957-60, 5998-6006, 6015-16. Inducement to countries now using inconvertible paper to resume specie payments, if there were a fixed relation between gold and silver, 5960-61. Alleged advantages arising from increased trade with silver-using countries have been exaggerated, 5962-65, 5979-81, 6017-24. Difficulties of the Indian Government, 5962, 5987-95. Probable effects on trade of the Indian Grovsrnment borrowing in silver, 5966-68. Thinks that the growth of our national wealth in recent years has been exaggerated, 5969-74 ; depreciation of shipping property, 5970-73. Proposed remedy of bi-naetallism is merely a reversion to a state of things which existed previous to 1874, 5976-78. Difference between the apprehensions current in the time of the gold discoveries and at the present ■ day, 6007-14. Me. J. BARE EGBBRTSON" : Statistics showing net import of gold into this country from 1858 to 1875, and net export since that date, 6028-42, 6105-7. Opinion as to mode in which the increased quantity of gold in the earlier period was disposed of, 6043-87. Statistics as to import of silver into this country and India, 6088-6101, 6108-9. Imports of gold into India, 6102-4. Estimate of money in circulation in the United King- dom, 6111-32, 6179-81. Fall of prices consequent upon reduced circulation, 6133-38, 6149-63, 6179- . Relation between rate of discount, currency, and prices, 6139-48, 6189-94, 6239-66. Estimate of circulation in India, and its effect upon prices, 6164-77. Currency demands of the United States and other countries, 6196-6208. Effect of the Indian Council Bills upon the silver market, 6279-86. Maintenance of the bi-metallic system of the French Mint from 1803 to 1873, 6209-6209. Effects of the appreciation of the standard on the different classes in the country, 6267-78. Does not think that bi-metallism will maintain a suffi- ciently stable standard of value, 6287-92. Proposal to issue inconvertible paper in sufficient quantities to maintain the standard at one level, 6293- 6304. Mr. THOMAS COMBER : Is engaged in trade between Lancashire and India, 6305-8. Statement of what he understands to be the bi-me- tallio proposals, 6311-12. Remarks on the possibility of establishing and main- taining a fixed ratio, 6314-70, 6563-75, 8136-9, 8273-80, 8309-11. Experience of France and India in this respect, 6314- 35. Explanation of the steadiness in the relative values of the two metals down to 1873, 6336-42, 6568-72. - The fixed ratio will diminish the production of gold and stimulate that of silver, 6343-66, 8293, 8307-10, 8323-31. Summary of objections to bi-metallismj 8264-71, 8306-*?, 8320-48. Position of England and India as affected by the appreciation of gold, 6371-85, 6602-20, 8140-6. Alleged depression of trade may be due to other causes besides appreciation, 6386-8 ; causes of the fall of price of wheat, 6388-6408, 8147-80. A fall of prices not necessarily injurious, 6409-15, 8196-8212,8272,8316-19; stability of the standard is, however, desirable, 6416-18, 8309. Effect of appreciation on those who have to make fixed payments, 6419-26 ; and on the wage-earning class, 6426-51, 8181-92. Extent to which prices would be affected by bi- metallism, 6452-91 ; effect upon the trade of silver- using countries, 6492-7. Investment of capital in silver-using countries, 6498- 6618. Production of wheat and cotton in India as affected by the fall in silver, 8213-64. Alleged nnsettlement of trade with silver-using countries, 6619-67; position and difficulties of the G-overnment of India, 6558-628, 140-6. Is opposed to any action being taken by this country ; but thinks bi-metallism might be adopted by other countries, 6577-89. Mr. B. W. CUERIB: Existing standard of value is in his opinion satis- factory, 6646, 6713-26, 6838 ; thinks the evils arising from the alleged scarcity of gold, such as a fall of prices, have been much exaggerated, 6647, 6736-38, 6762, 6757, 6894-99. Prices are affected by other causes, such as extension of credit,_ 6647, 6768-96. Statistics showing extension of banking facilities, &c. in recent years, 6648-52, 6665-66. Effect of supply of gold on prices, 6682-97, 6846, 6900-1. Remarks on alleged scarcity of gold, 6662-57, 6663-64, 6894-99; connexion between the rate of interest and the supply of gold, 6658-62, 6754-56, 6884-93. Is aware of the inconvenience caused to the Govern- ment of India by the alteration in the relative value of gold and silver, but would deprecate any attempt to remedy it by legislation, 6667-68. Effect upon our trade and industries of the fall in the value of silver, 6769-96, 6844-45, 6847-83. Objections to bi-metallism, 6669-74, 6739-44, 6841-42. Fiiuotions of Government as regards cm-rencv 6838-40. ^ The financial and commercial supremacy of this country due in a great measure to the existing standard 6669-70,6698-6712, 6753, 6797-6809, 6843. Traditional preference of the people for gold rather than silver, 6671-74, 6745-51, 6810-24, 6836, 6902-7. Effect of reduced cost of production on the sunnlv of silver, 6675-81. ff J ^'■ Effect upon England of the bi-metallic svstem in France, 6727-34. Remarks as to alleged steadiness of the relative value of gold and silver previous to 1873, 6721-24, 6828-32. Me. H. L. RAPHAEL : Bi-metallic arrangement practicable if agreed to by the United States, France, Germany, and England 6909. ^ Doubts whether the agreement would be maintained very long, 6910, 6976-81, 7026. Other objections, 6918-19, 7027. The only possible ratio is 15| to 1, 6911. Difficulties of re-coinage, especially in India, 6911-17 7013, 7057. _ ^ ^ J , ^ >.i, Effects of bi-metallism at 15i to 1 on the supplies of the precious metals and upon trade generally, 6918-19. Doubts if the financial supremacy of England is very largely due to her gold standard, 6920-23. As to adoption of gold standard by Germany, 6923-30. Causes of the fall in silver since 1873, 6931-34, 6998-1 7011,7024. Probabilities of a further fall, 6935-36, 7014-16 ; effects of a suspension of the Bland Act, 6937-39, 6990-97 ; aboli- tion of the duty on silver plate, 6940. Losses caused by the fall in silver have been chiefly temporary and not permanent, 6941-45, 6982-89, ANALYSIS OP EVIDENCE. 275 Circulation of coin in the United States, 6946-47. Difficulty of obtaining gold in the banks of Franoej Germany, and Italy, 6948-50.. Causes and effects of tho fall of prices since 1874, 6951-63, 7030-46. No scarcity of gold in this country, 6964, 6969 ; mode in which prices are affected by quantity of gold, 6965. Connexion between the rate of discount and quantity of gold, 6966-74, 7047-54. SiK EVELYN BAEING, K.G.B. : Effects of the fall in exchange upon the people and Government of India. 7068 ; and upon the employes of the GoTermnent, 7116-23. Difficulties of imposing new taxation, 7069-85, 7103 ; and of obtaining necessary capital for productive public works, 7086-89. Industrial effects of the fall in exchange in India, 7090-7100, 7109-13, 7167. Serious results of a further fall, 7102-6. Opinion as to the practicability of bi-metallism, 7108, 7124-73. Mk. H. D. MACLEOD : Prices are affected by credit in all its forms equally with gold, 7177-78, 7192-7206, 7233-62, 7301-98. Relation between prices and quantity of bullion depends upon the organisation of credit in a country, 7179-80, 7186-91. Recent fall of prices due to contraction of speculative credit, 7209-16, 7286-94 ; and increased production, 7220-21. Trne relation between prices and bullion, 7224-32 ; and between credit and bullion, 7271--94, 7387-98. Mr. H. WOLLASTON BLAKE : Is a director of the Bank of England, 7399. Alleged scarcity of gold has been much exaggerated, 7402-3, 7422 ; is not necessarily shown by a fall of prices, 7404. Accounts for fall in several articles independently of scarcity of gold, 7406-8, 7500-25; no fall in wages, 7409-15, 7601-5. Causes of the fall in silver, 7416. Effect of the fall on the people and Government of India, 7417-21 ; and on the producers in India and this country, 7450-57. Objections to bi-metallism, 7423-25, 7470,. 9, 7530-53. Impracticability of maintaining the ratio between the two metals, 7470-83, 7486-99 ; contracts would still be made payable in gold, 7484. ^-^ i, ■,-, Relation between prices and the quantity ot gold, 7428-41. Annual production of gold is too small m proportion to the whole mass to affect prices, 7442-48. Effect of bi-metallism in distributing fluctuations in the amount of currency over the whole world, 7423-<34, 7446-49. . . Effect of the general adoption of a gold standard in the world, 7461-67. Me. J. C. FIELDEN: Is engacred in the cotton trade and is intimately acquainfed-with the position of the workmg classes connected with that trade, 7571-7576. "°The benefits of the fall in prices have been onlypartly secured by the working classes, 7577-7607, 8004-8005, noVTaratircStion of the working classes at different periods, 7608-7620; unsatisfactory character of the usual tests of their condition 7621, 7971 7979 Statistics of recent reductions m wages, 7621-7636, "^^rWition of the cotton industry and of the population engaged1L^°t, 763^7669 7671-7673, 8079 8080 ; con- Sn of other trades-the engineers, 7674-7679 ; the ^on moulders, boiler makers and iron shipbuilders, roS founders, 7680-7686 ;. reports from Sheffie^^^^ Wolverhampton, the Potteries, 768^7690 811^8118 ; Tminers, 7691-7700 ; building trades, 7700 ; woollen tradeB, 7988, 7989. Summary of the position of ten large trade societies, showing number of members, number unemployed, &c 7950,7982,8083. ^ Comparative growth of population and employaient, 7955-7961, 7980, 7991-8003. f :t , Consumption of raw cotton at different periods, 7972-7977. Check to the development of the cotton industry dating from about 1874, 7961-7981. Ascribes this to Indian competition consequent on the depreciation of silver, and to the fall of prices in the East, 8006-8012. Statistics with regard to comparative cost of pro- duction in India and England, 8013-8035. Competition of India in neutral markets, 8006-8008, 8035, 8036. Comparative growth of Indian and English cotton trade, 8036. Cotton trade of America, 8070-8077. Advantages to England and India of restoring the former value of silver, 8037-8045, 8103, 8129-8135; opinion as to the ratio which should be adopted, 8050- 8059. Disadvantages of the separation of standards, 8046- 8049, 8065. Difficulties of trade with the East owing to fluctuations in exchange, 8046, 8060-8069. Effect upon existing contracts of restoring the value of silver, 8091-8097. Mk. WILLIAM EOWLER : Opinion as to the alleged scarcity of gold, 7703-7721, 7774-7800, 7889-7902, 9062-9066, 9147, 9167-9171, 9295- 9311. Fall of prices explained by other causes than appre- ciation of gold, 7704h-7705, 9135-9146; illustrations showing how the fall in prices can be explained by alterations in supply, improved processes, competition, cheap transport, &c., /7A3-7753, 7764-7773, 7805-7848, 8349-8354. Causes of the fall in silver, 9114-9131, 9295-9306. Existing supply of gold, 7705-7717, 9147. Relative advantages of high and low prices, 7717, 7718, 7940, 7941, 9105-9111. Relative value of the precious metals apparently unaftected by the supplies, 7719-7721. ■ Effect of the standard and of the quantity of money on prices, 7722, 7742-7755, 7846-7888, 7903-7939, 8482- 8511, 8570, 8571, 9059-9066, 9148-9166. The precious metals not consumed like commodities, 7735. Recent economies in the use of gold, 7736-7741, 7799- 7802, 7944, 7945. Observations on prices in Russia and India, 7742- 7745, 7942, 8383-8413. . . Criticisms of the system of index numbers, 7766-7763, 7802, 7803, 9138-9140. Fluctuations in prices ,in previous periods, 7818- 7821. Probable effect of bimetallism on prices, 7865-7883. Objects on principle to the fixing of value of any two commodities by law, 8365, 8356, 9081-9088. Possibilitv of fixing and maintaining a ratio between the two metals, 8357-8376, 9273-9291. Differences of opinion as to the ratio and the number of countries necessary for the proposed agreement, 8367- 8367, 8420, 9267-9272. Effect of Russian and Indian supplies on the wheat trade, 8377, 8398-8403, 9092-9104. Effect of the rate of exchange on production and export, 8381-8397, 8435-8446, 8482-8504, 9067-9079, 9092-9104, 9183-9253, 9321-9341. Effect on the bimetallic arrangement of an increase in supply of one of the metals, 8414-8434, 8447-8453, 8560-8571. Comparative advantages of the existing market ratio and that of 16i to 1, 8420-8434, 9270-9272. Doubts whether bimetallisra would add to stability of the standard, 8447. Probable effects of bimetallism on the commercial position of this country, 8414, 8447-8466, 8473-8481, 9112-9122, 9293. Extent of the inconveniences caused by the existing system, 8467-8481, 8512-8659, 9173-9266. Summary of objections to bimetallism, 9112-9122, 9267-9294. Summary of views as to the questions submitted to the Commission, 9123-9294. 276 KOYAL COMMISSIOK ON GOLD AND SILVER: ANALYSIS OF EVIDENCE. Me. HERMANN SCHMIDT: Is engaged in business in the City of London, 8572. Believes that the increased purchasing power of gold is due to the fall in the value of silver and the dislocation of the ratio between the two metals rather than to the greater demand for gold, 8573, 8710-8713 ; and does not arise to any great extent from cheaper production, transport, &c., 8599-8632, 8731-8736. Explains how gold prices generally have been affected by the depreciation of silver, 8576-8698, 8783- 8788, 8794-8800. Prices have also been affected by a decrease of the total volume .of currency in the world, 8592-8594, 8674-8693, 8789-8793. Increased burden of contracts, debts, &o. owing to the appreciation of the standard, 8633-8661. Difficulties in carrying on trade owing to fluctua- tions in exchange, 8626, 8627, 8822-8827. As to the choice of a ratio between gold and silver, 8663-8670, 8780, 8832-8838. Effect of breaking the ratio on the Indian demand for silver, 8689-8693. Observations with regard to the system of index numbers, 8694-8709. Effect of bimetallism on our foreign investments, 8714. Stimulus to production and export caused by a depreciated currency, 8715-8730, 8760-8764, 8806- 8808, 8817-8819. Explanation of the fact that while silver has de- preciated in Europe, it retains its purchasing power in the East, 8743-8759, 8802-8804. Probable effect of restoring the ratio in the produc- tion and use of the two metals, 8766-8775, 8781, 8782, 8820, 8828, 8829 ; effect on prices of the adoption of the existing ratio, 8815,\8816. Course that will probably be adopted in America under present circumstances, 8809-8814. LoED BEAMWELL : Probable effect on the use of the two metals of allow- ing contracts to be made for payment in a specified metal, 8842-8845, 9019-9027, 9039-9043. Thinks that the Gresham law might be defeated by a sufficiently large combination of bimetallic Powers, 8847, 9043, 9044. Burden of proof lies upon those who maintain that bimetallism would be preferable for this country, 8847. Injustice of any measure that would arbitrarily raise prices, 8847-8849, 8881-8883, 8968-8971, 8995-8999, 9028, 9029. Doubts the fact of the alleged appreciation of gold, 8850, 8885-8897, 8924-8927, 8944, 8972. Effect of the appreciation on the rate of wages, 8973- 8881. Effects of bimetallism at the existing market ratio, 8852-8864. Effect of bimetallism in removing the difficulties under which trade with silver-using countries is now carried on, 8865 ; and upon the interest arising from our foreign investments, 8866, 9047-9050, 9053 ; on the production of the two metals, 8959, 8960. General objections to bimetallism, 8866-8870, 8982- 8994, 9015-9018. Argument that the financial and commercial position of this country is due to its standard, 8871-8880. Difference between the circumstances existing now and at Ihe time when the change of standard was made in this country, 8898-8917. Increased consumption of gold for industrial pur- poses, 8915-8919, 9001, 9005. The future of gold as an efficient standard of value, 8920-8922, 8947-8962. Keasons why the relative value of gold and silver has altered, 8923, 8924, 8962-8966. Difficulty of the Government of India under present circumstances, 8929. Silver mono-metallism, 8936-8943. Probability of the ratio, if fixed, being adopted and maintained, 8931-8935, 8954-8968, 9001-9008, 9019- 9026, 9030-9036, 9039-9044, 9064-9056. Advantages of a gold over a silver standard, 9009- 9014. Legal tender law in California, 9022-9024, 9033. Mk. DANIEL WATNEY: Views as to the alleged appreciation of gold, 9372- 9376 ; and its effect on prices, &c., 9392-9406, 9437, 9438, 9473-9486. Effect of the quantity of money on prices, 9377-9386, 9491-9497. Alleged bonus on the export of wheat from India, 9387 9498 9499. Objections to bimetallism, 9407-9432, 9456-9471, 9504--9518. Suggestions for increasing the economy of gold, 9433-9456. LoKD ADDINGTON : Puts in a paper expressing his views, 9620-1. Admits difficulties of existing situation, but has no remedy to suggest, 9522-3, 9534, 9569-71. Compaiative advantages of silver and gold as stan- dards of value, 9524-32. Probable effects of fixing a bi-metallic ratio, 9575-88, 9592-9601. Difficulfy of fixing a ratio, 9535, 9573-5, 9588. Difficulties of two separate standards have been exaggerated, 9536-9, 9551-6, 9603-16. Effect on gold prices of a depreciated currencv. 9640-50. ^ As to the alleged bounty on the production of wheat in India, 9557-68, 9690-1. LONDON: Printed by E T R B and Spottiswoodb, Printers to the Queen's most Excellent Majesty. For Her Majesty's Stationery Office. GOLD AND SILVER COMMISSION. SECOND REPORT OF THE ROYAL COMMISSION APPOINTED TO INQUIRE INTO THE RECENT CHANGES IN THE RELATIVE VALUES OF THE PRECIOUS METALS; With Minutes of Evidence and Appendices. ^resfenteiJ to botft ^on^ti of ^^arliameirt ftp Commantr of Itr ^Majesitp* LONDON: FEINTED FOR HER MAJESTY'S STATIONERY OFFICE, BY EYRE AND SPOTTISWOODE, PRINTERS TO THE QUEEN'S MOST EXCELLENT MAJESTY. And to be purchased, either directly or through any Bookseller, from EYRE AND SPOTTISWOODE, East Harding Street, Fleet Street, E.O., and 32, Abingdon Street, Westminster, S.W. ; or ADAM and CHARLES BLACK, 6, North Bridge, Edinburgh; or HODGES, FIGGIS, & Co., 104, Grafton Street, Dublin. 1888. E^'^i-^a oefc^ -.--i-i >1S9^^p«|B 1^- r<'-c<20^^<^'''^.M is^"- ■>?r*^-^v^^ .^..^: M % »'.:^ f^ Lj&- ?