A 619084
JEVONS
HG
293
158
A SERIOUS FALL
IN THE
VALUE OF GOLD
ASCERTAINED,
AND
ITS SOCIAL EFFECTS SET FORTH
With Two Biagrams.
BY
W. STANLEY JEVONS, M. A.
Formerly of the Sydney Royal Mint.


EXTRACT FROM THE FOURTH BY LAW RELATIVE TO TAKING
BOOKS FROM THE ATHENEUM LIBRARY.
"If any book shall be lost or injured, the writing
of notes, comments, or other matter in a book shall be
deemed an injury, the person to whom it stands
charged shall replace it by a new volume or set."
Boston Athenæum .
From the
Bromfield Fund.
Received
June
не
21. 1867.
1
184.5
1
1
78
}
185
Tallow: Hiles, etc.
737
| Vils
14
Timber
109
Metals
1
1
100
189
100
130
709
Railway Speculation
Great Commercial Panic
Great Depression.
Great Exhibition.
Speculation.
General Average
720
Peace.
Famine, Revolutions, etc.
90
001-
War with Russia
Commercial Panic
Bank Rate of Disc/General Course)
1850
Stanford With: Charing GesE.
1860
T
N
115
Givil War in V. States.
Cotton Famine.
1845
6
L
8
Depression of Trude
6
1850
1
98
84
621
90
I
992
88
!
I
1
t
1
t
Meat
1
"

Silver
Scale 10 times greater
JON
1022
1000

Logwood, Indigo
100
123
145
100
Sugar; Tea etc.
-100
Hay, Cover, Straw.
100
787
127
Corn
Cotton
100
73
156
Wool, etc.
744
100
-134-
100
8
6
1860
1
ou
է
129
66
108







A SERIOUS
SERIOUS FALL
IN THE
2 8 2 1 1
VALUE OF GOLD
ASCERTAINED,
AND
1
ITS SOCIAL EFFECTS SET FORTH.
With two Diagrams.
BY
W. STANLEY JEVONS, M.A.
FORMERLY OF THE SYDNEY ROYAL MINT.
во

ATHEN
LONDON:
EDWARD STANFORD, 6, CHARING CROSS, S.W.
1863.
1
་
"Now that the pryces of thinges are so rysen, of al handes,
you may better lyve after your degree than we; for you
may and doe rayse the pryce of your wares as the prices of
vittayles and other your necessaries doe ryse, and so cannot we
so much."
"A compendious or briefe examination of certayne ordinary
complaints, of divers of our countrymen in these our
dayes."-By W. S. Gentleman.
London: 1581.
2
1
(See Appendix, note A.)
¡
CONTENTS.
PAGE.
PREFACE
1
CHAPTER I.—OF THE NATURE AND DIFFICULTY OF THE
INQUIRY
3
CHAPTER II.-INQUIRY INTO PRICES BEFORE AND AFTER THE
GOLD DISCOVERIES
15
CHAPTER III. DEDUCTIONS ON OTHER GROUNDS CONCERNING
37
THE FUTURE VALUE OF GOLD
CHAPTER IV.—THE SOCIAL EFFECTS OF THE DEPRECIATION
OF GOLD SET FORTH
47
CHAPTER V.-IS A REMEDY NEEDFUL OR POSSIBLE?
59
APPENDIX
68
PREFACE.
THAT an article tends to fall in value as it is supplied more abun-
dantly and easily than before is a most familiar fact. When the
discoveries of gold in California were followed in a few years by
equally extraordinary discoveries in Australia, and minor discoveries
elsewhere, there was no lack of predictions as to the inevitable effect
upon the value of gold. But with few exceptions there have been
only surmises and conjectures on this highly important subject.
Even after the lapse of ten or twelve years men who give their
whole attention to public and monetary matters, or to questions
of statistics and economy, remain in a state of doubt as to whether
any depreciation of gold is really taking place.
M. Chevalier, in his well known work "On the Probable Fall in
the Value of Gold," presented to English readers in 1859 by Mr.
Cobden, confidently predicted a great fall. He suggested however
that it would be deferred some years by the change of the French
currency which is proceeding. On the other hand, Mr. Newmarch
in the last volume of Tooke's History of Prices, published in 1857,
and Mr. MacCulloch, writing in December 1858,* both doubted the
existence of any depreciation. They also seemed to hold that the
rapid extension of trade and wealth might cause the absorption of
the new supplies of gold without the occurrence of any considerable
depreciation. In brief rediscussions of the subject in the Journal of
the Statistical Society (for March 1859, 1860, and 1861), Mr. New-
march, using a method of comparison in which I have had no choice
but to follow him, has seemed to suspend any definite judgment.
The question thus continues an open one.
I was only led to form an opinion upon this subject when
engaged in compiling tables of the monthly prices of many articles
since 1844. I was so much struck with the enormous and almost
general rise of prices about 1853, that I was led to suspect an
alteration of the standard of value. At the same time the late
comparative depression of trade in reducing prices as low as they are
likely to go, (as it were to low tide), has seemed to me to render the
* Encyc. Brit. Art. Precious Metals.
B
2
PREFACE.
:
subject more and more mature for decision. It shows that the great
rise of prices in 1853 has not been, and thus probably will not be
compensated by any equal fall; that there is consequently a per-
manent rise of prices certainly constituting a fall in the value of
gold, and probably arising from the gold discoveries.
In the following tract I commence by endeavouring to unfold the
fundamental difficulties of the inquiry, afterwards discriminating the
various causes of fluctuation in prices, in order that we may the more
surely recognise the effect of the permanent cause in question. I then
introduce tables formed and reduced in accordance with the principles.
of the subject so as to exhibit a depreciation of gold if any exists.
The large depreciation rendered apparent is confirmed by an extended
inquiry as regards the prices of 1860-62. The future depreciation
of gold is considered on somewhat à priori grounds, and the social
effects are lastly deduced and commented on.
At the same
While I must assert the fact of a depreciation of gold with the
utmost confidence, I assign a numerical amount to it with equal
diffidence. The lowest estimate of the fall that I arrive at is 9 PER
CENT, and I shall be satisfied if my readers accept this.
time in my own opinion the fall is nearer 15 PER CENT.
be more than this. Many years, however, must pass before nume-
rical estimates can be properly stated to possess more than a slight
degree of probability.
It may even
CHAPTER I.
OF THE NATURE AND DIFFICULTIES OF THE INQUIRY.
I.—Of the Meaning of a Fall in the Value of Gold.
ALL that is meant by a fall in the value of gold, is the fact that
more gold is now usually required to purchase an article than some
15 years ago. The comparative values of two articles are said to be
altered when the proportion of the quantities usually exchanged in
the open market is altered. This alteration may arise from circum-
stances affecting the supply or demand of either article, just as a
balance may be disturbed by an upward or a downward force, applied
to either arm. There is nothing in this single change to indicate
from which side the change comes. Thus during the years 1845-50
a ton weight of copper was, on an average, exchanged for about 88
gold sovereigns. During the years 1860-2, the rate was a ton of
copper, to about 101 sovereigns. There is nothing in this to show
whether gold is become more abundant and easily obtained, or copper
more scarce and troublesome to procure. It may be, and probably is
the fact that the circumstances of demand and supply are altered on
both sides. The observed effect is then the sum or difference of
effects, of which we learn nothing from the simple alteration of values
stated.
When a number of articles are exchanged against each other we
are still unable to say with certainty, on what side arises any change
in the proportion of the exchanges Thus, if the value of an article.
A (gold, for instance), falls in comparison with several other articles,
B, C, D, E, (copper, lead, tin, silver, for instance) so that the same
quantity of A purchases less of each of B, C, D, E, than it used to
do, this may arise either from causes affecting A only, or from causes
affecting each of B, C, D, E. The value of A may fall from a less-
of each of B, C, D,
E, may rise from increased demand or lessened supply. The mere
alteration of values is the same fact, whether arising on one side or
the other.
ened demand or an increased apply. The value
B 2
4
FALL OF THE VALUE OF GOLD,
There is something however which we may say in the case of five
articles, but not say in the former case of two articles. It is more
likely that the alteration should have arisen on the side of A than on
the side of B, C, D, E, because one cause affecting A, will suffice to
explain the change, four separate but concurring causes respectively
affecting B, C, D, E, will be needed on the other side. The odds
are four to one in favour of the cause of altered values being in A,
and not in B, C, D, E.
If again we compare A with a still larger number of other articles,
B, C, D, E, F, G, H, etc., and find that all of these have risen or fallen
with regard to A, the odds are still greater in favour of A having
caused the alteration. It is obvious, in short, that an alteration in
any one article, A, is shown in its rate of exchange with all other
articles, so that the fact of an alteration may be ascertained with a
continual approach to certainty, by examining more and more arti-
cles against A. But there always remains the alternative of a con-
currence of causes affecting the other articles, not a single cause
affecting A.
The chief difficulty of thus investigating an alteration of values
arises from the independent alterations of value, which each of B, C,
D, E, will doubtless undergo. Besides rising from an alteration
in A, B may rise still further from an alteration peculiar to itself.
On the other hand C may not rise at all or may fall in value, because
its rise due to A may be neutralized, or more than neutralized by a
fall due to itself, and similar of D, E, F, etc. All will suffer the
effect due to A, but this will be disguised by the various accidents
which effect B, C, D, etc.
We must again fall back upon mere probabilities. If the majority
of B, C, D, etc., have risen in value, and only a minority fallen, it is
more likely that a single cause acting on A should have led to a
general rise than that the majority of B, C, D, etc., should have been
affected by separate but concurring causes.
And in determining the average alteration of value with respect
to A, of a sufficient number of articles B, C, D, E, etc., we may
always ascertain the common alteration probably due to A. For
the various and contrary alterations peculiar to B, C, D, etc., will
destroy each other, more or less completely in drawing the average,
and only that common alteration, which all equally suffer in being
measured against A, will remain undiminished.
AND ITS SOCIAL EFFECTS.
ст
5
To apply this analysis to our present inquiry, we have only to consi-
der A as being gold, and the rates of exchange of B, C, D, etc., the
prices of articles in pounds sterling and their fractions as usually
quoted. If prices on the average have risen ever so little, this consti-
tutes a fall in the value of gold. If only one article had risen in price
while the others remained as before, gold must be said to have fallen
in some degree. Value is a vague expression for potency in purchasing
other articles, and if gold has become less potent with respect to some
and not more potent with respect to others, it has fallen in value.
The same may be said, however various and contrary the altera-
tions of prices, provided those rising preponderate in a certain way
over those falling. It must be confesssed, however, that the exact mode
in which preponderance of rising or falling prices ought to be deter-
mined is involved in doubt. Ought we to take all articles on an equal
footing in the determination? Ought we to give most weight to
those which are least intrinsically variable in value? Ought we to give
additional weight to articles according to their importance, and the
total quantities bought and sold? The question, when fully opened,
seems to be one that no writer has attempted to decide-nor can I
attempt to decide it. Fortunately, the conclusions I shall have to
adopt, may I believe be sustained under any and all modes of estima-
tion that are likely to be proposed. I regard the fall of value as
conclusively proved, although the exact nature of the problem is left
amid the obscurities of economical science in general.
All that I can pretend to prove in this inquiry is that, subject to
the vagueness just referred to, the prices of commodities have risen,
or that the rise of prices of those which have risen, preponderates over
the fall of those which have fallen. This is, and constitutes the alte-
ration of value of gold asserted.
It is quite another question how this fall of value is caused. It
may be from an increased supply of gold, or a diminished demand forit.
It
may also arise from an increased demand for one or more articles
not accompanied by a corresponding demand for gold, or a diminished
supply not accompanied by a corresponding change of supply of
gold. Anything affecting the value of gold, in short, must affect
either gold apart from other articles, or other articles apart from gold,
or at least it must affect one side more than the other. It is with a
less degree of confidence and certainty that it can be stated on which
side of the balance the disturbance arises. If, as is no doubt the
6
FALL OF THE VALUE OF GOLD,
case, disturbances on both sides contribute towards the effect, it will
be still more difficult to discriminate between the portions of the total
effect due to one cause and another. By what has gone before, how-
ever, it is obviously more likely that any considerable and general
change of prices should arise from a single circumstance affecting the
demand or supply of gold only, than from a variety of circumstances
separately affecting all or most other commodities. Joined to the
fact that circumstances have occurred in the production of gold
which would probably cause a considerable rise of prices, it is hardly
to be doubted that any rise of prices which we may discover is for
the most part due to such circumstances. But I am far from deny-
ing that there may have been such alterations in the comparative
demand for gold, and for certain other chief materials of manufac-
tures, or other articles of commerce, as might contribute in an appre-
ciable degree to the change of prices in question.
In the minds of some few there may be confusion between the
exchange value of gold, the value of money in the money market, and
the Mint price of gold. These things have not the slightest con-
nection with each other. The value of money in the money market,
means the interest or profit yielded by money or capital which is
lent and borrowed. But as the loan consists of gold, or at least of
something estimated in gold, and the interest is also paid by a cer-
tain percentage of gold, this percentage or ratio is quite independent
of the value of the gold which forms both capital and interest.
The Mint price of gold again merely defines the weight of
a sovereign, or the number of sovereigns, and parts of a sovereign
into which the Mint converts an ounce of gold. The delusion of
those who want free trade in gold as well as everything else, merely
amounts to doing away with coins of any fixed weight. They might
as well, at the same time, do away with all fixed weights and mea-
sures, so that all fixed promises should be impossible, so that he
should get who can, and give who cannot help.
II.—Of the meaning of an average Rise of Prices.
There is no such thing as an average of prices at any one time. If
a ton of bar iron costs £6., and a quarter of corn £3., there is no such
relation or similarity between a ton of iron and a quarter of corn as
can warrant us in drawing an average between £6. and £3.; and so
of other articles. If at a subsequent time a ton of iron costs £9,
AND ITS SOCIAL EFFECTS.
7
and a quarter of corn £3. 12s, there is again no average between
these quantities. We may, however, say that iron has risen in price
50 per cent, or by ; what was 100, has become 150; corn has
risen 20 per cent, or by 1-5th; what was 100 has become 120.
Now the ratios 100: 150 and 100: 120, are things of the same kind,
but of different amount, between which we can take an average.
This average percentage or ratio must be not the arithmetical but
the geometrical average; not 100:
or 100: 135, but
100: 120 × 150, or the ratio of 100 to rather more than 134.16.
120+150
2
The mean ratio
134.16
100
indeed differs so little from
135
100
that in common
business matters it would be sufficient to take the simpler arithmetic
mean in place of the other, and neglect the error. But this cannot
be done in the present inquiry, where our alterations of prices have
a large range, from more than 50 per cent decrease to more than 100
per cent increase. Thus the price of cocoa has nearly doubled since
1845-50. It has increased by 100 per cent, so that it is now nearly
200. Cloves, on the contrary, have fallen 50 per cent, and are now
200+50
at 50. The arithmetic mean of these would be
2
or 125. The
average rise of cocoa and cloves would then appear to be 25 per cent.
But this is totally erroneous. The geometric mean of the ratios 200
and 50, or which is the same of 2 and, is 100 or 1.
On an average
of cocoa and cloves there has been no alteration of price whatever.
The price of one is doubled, of the other halved-one is multiplied
by two, one divided by two—on the average, then, the prices of these
articles remain as they were, instead of rising 25 per cent.
A corresponding error of less amount would be committed in
every case did we take the simple arithmetic mean of percentages.
The general result would be greatly to exaggerate the prices which
have risen at the expense of those which have fallen. The average
rise of prices would come out much greater than it really is, and our
results would be utterly erroneous.
To take the geometrical mean of two ratios we must multiply
them together and extract the square root of the product. This is
easily accomplished by turning the numbers into their common loga-
rithms, the arithmetic mean of which is the logarithm of the geometric
mean required. All the percentages required have accordingly been
8
FALL OF THE VALUE OF GOLD,
calculated in logarithms, and the averages drawn in that form, but
afterwards turned back into ordinary numbers. Without guarantee-
ing the absolute accuracy of every figure, deduced from tedious cal-
culations, it may be said that more than reasonable trouble has been
employed to ensure accuracy, and that the final conclusions cannot
be erroneous in any appreciable degree.
III.—That we must discriminate a Permanent from Temporary
fluctuations of Prices.
So far we have considered only the mode by which we may ascer-
tain alterations of prices in general, between any two periods, without
reference to the character of the alterations. There may, however,
be alterations of prices which are temporary, and it is a more difficult
matter to prove that any alteration observed is a permanent one.
For
this purpose we must briefly analyse the whole causes of fluctuations
in price. Such causes may be divided into (1) those which affect the
supply, and (2) those which affect the demand for commodities.
IV. Of fluctuations of Supply.
All articles of commerce might be arranged in a list according to
the degree in which their supply is subject to natural fluctuations
unconnected with the demand. The more variable of course are
those agricultural products entirely dependent on the seasons. Hops
perhaps stand at the head of the list, soon followed by potatoes, and
by the several kinds of grain. All vegetable commodities are more or
less variable. Animal products, such as butcher's meat, dairy
produce, hides, sperm oil, undergo much slower temporary fluctua-
tions. Finally we reach mineral substances, especially the chief
metals, iron, copper, lead, silver and gold, of which the natural
conditions of supply experience no temporary fluctuations of impor-
tance. The gradual exhaustion of mines is compensated by occasional
new discoveries, but except in very rare instances the changes are
slow and small. Social causes, such as wars, civil disturbances, dis-
putes among workmen, are also incapable of causing fluctuations of
supply of any importance. Hence many of the metals may be taken
as comparatively stationary in value, except so far as the price may
be dependent on variations of demand.
Our duty as regards fluctuations due to changes of supply is to
have nothing to do with them, but to eliminate the effects from our
inquiry as soon and as completely as possible. That a commodity
AND ITS SOCIAL EFFECTS.
9
is naturally very variable in price, is no reason for excluding it wholly
from our tables. It is only necessary to select such a number and
variety of articles independent in their fluctuations, that the fluctua-
tions of some may probably compensate the others. Were we to
begin by excluding commodities because variable in price, we should
not have more than two or three articles left. Wheat, for instance,
because it varies in a few years from 40 to 60 and 80 shillings per
quarter, does not the less suffer an additional alteration from
any change in gold. Alone it would afford no sure indication of
such alteration in gold, but we take it in company with hay, clover,
and straw, with meat and butter, with cotton from several parts of
the world, with sugar from the East and West Indies, with spices,
dyewoods, and various other important products, each subject to its
own independent natural fluctuations, but all subject to vary in price
with the variations of value in gold of which we are in search. In
drawing our averages the independent fluctuations will more or less
destroy each other; the one required variation of gold will remain
undiminished. Again, were we to exclude some commodities from
oùr tables because variable in price from natural causes, we should
have to exclude nearly all the rest from variations depending on
demand. The only mode of eliminating these fluctuations is to render
our inquiry not more exclusive but more inclusive.
V.-Of Political Causes of Fluctuation.
During the Russian war the prices of Hemp, Flax, and Tallow,
of course rose above their ordinary or natural level. During the
present blockade of the ports of the Southern United States, Cotton
has risen to three or more times its natural value. It will be more
generally satisfactory, no doubt, to exclude such unusual fluctuations
from our inquiry altogether. This accordingly has been done. In
the case of Hemp and Flax, the prices of 1853, 1854, and 1855 were
struck out and numbers interpolated in a geometrical series between
the prices of 1852 and 1856. In the case of Cotton, the prices of 1861
and 1862 were struck out, and that of 1860 adopted for those years,
as being obviously unaffected by the present cotton famine. In the
case of Tallow, the correction was accidentally omitted.
It is, however, an open question whether such extraordinary rises
of price are not compensated by a corresponding fall in the prices of
other commodities due to the stagnation of trade which a war or the
UorM
10
FALL OF THE VALUE OF GOLD,
stoppage of a great branch of industry occasions. For the sake of
clearing the inquiry of difficulties, I do not insist on this view.
VI. Of Variations of Demand.
Important variations of demand arise only from changes of fashion,
taste, habit; from a few exceptional causes, such as wars, national
works, or fêtes; and from certain great fluctuations in industry,
which alone need be further analysed here. The demand for bread,
meat, spirits, spices, and articles of food and personal use generally,
may be regarded as constant, or only affected slightly and indirectly
by the floods of prosperity and depression depending on the commercial
fluctuations to be further mentioned. Thus, articles of immediate
and personal use, speaking generally, are constant in demand, variable
in supply. Metals, timber, and other articles of more permanent and
remote use, are comparatively constant in supply, but I have to show
that they undergo great variations in demand.
VII.-Of Variations of Permanent Investment.
That great commercial fluctuations, completing their course in some
ten years, diversify the progress of trade is familiar to all who attend
to mercantile matters. The remote cause of these commercial tides
has not been so well ascertained. It seems to lie in the varying
proportion which the capital devoted to permanent and remote invest-
ment bears to that which is but temporarily invested soon to reproduce
itself.
A large part of the industry of the country must annually be ap.
plied in agriculture and manufactures to produce the food, clothing,
and other articles required for immediate use, the demand for which,
as I have said, cannot much vary. It is by the sale of these finished
articles that capital invested in materials, and the payment of wages,
is returned as ready money, available for fresh investment. While
uninvested, it contributes to form the reserve of loanable capital in
the Bank of England, and in other banks, or private hands.
It is quite otherwise with those permanent investments in houses,
ships, improvement of land, manufactories, mines, railways, foreign
loans or undertakings, of which the result is durable, and not ex-
pected to make a ready money return for what was invested, but
after the course of many years, or as annual interest. These under-
takings are the great means by which the wealth of the country is
AND ITS SOCIAL EFFECTS.
11
!
increased. Temporarily, however, they absorb the means of subsistence
of the community-they are wealth in posse, rather than in esse?
Were a certain definite proportion of the capital of the country set
apart every year for such long dated investments, the returns of
capital which they would make would be as regular as the absorption
of capital. But this is not the case. It is the peculiarity of these
great and permanent works to multiply at particular periods. When
capital is abundant, its owners look out anxiously for some mode of
profitable employment. Any new discovery, or fresh employment for
money is eagerly taken up. Hope of gain is a most contagious emo-
tion among business men, and presently hundreds set themselves to
carry out this new discovery upon a most extended scale.
While one scheme is prospering so well, the circumstances of the
market and the feelings of men are not less propitious for any other
schemes which have at all a good appearance. Further descrip-
tion is needless; it is well known nothing is so difficult to restrain
within prudent bounds as these manias for speculative investment.
It is needless also to add that the most extraordinary of these
manias was that for railway construction in 1843-6, when hundreds
of millions were rashly subscribed among the various classes of the
community.
During such a mania industry is thrown into extraordinary activity,
and also into unusual channels. The ordinary consumption of food,
clothes, etc., goes on of course as usual, or even increases somewhat.
On the other hand, the demand for timber, iron, bricks, and countless
other commodities of more permanent nature, is greatly increased.
Their production being incapable of any but a slow extension, their
price rises.
Part of the available labouring power of the country is
transferred to their production. Prices are thus started upwards,
and unwonted prosperity and hopes of gain fall upon nearly every one
in the country.
The wealth created during such a period of unwonted activity, pro-
bably far overbalances any loss which follows. Hitherto, however,
great losses have usually followed. To explain exactly how the re-
vulsion comes, is perhaps a feat of analysis not yet accomplished.
The salient fact is a great dearth of capital, or loanable money (gold),
due no doubt to the previous great permanent investment. The
arrival of this dearth is generally accelerated by the failure of the
harvest, or some event which cuts off a large part of the anticipated
Uor M
12
FALL OF THE VALUE OF GOLD,
gains of the country. The result is that the stocks of commodities
cannot be sold against the stock of available ready money at the point
to which prices have advanced. Merchants would gain if they could
hold but they cannot hold on because there is no one to lend them
money to pay their bills, with which they have bought their goods.
To sell at less prices is loss or even ruin. Then comes the panic and
the collapse of credit.
on,
That these great commercial fluctuations arise in the periods of
great permanent investment is perhaps sufficiently shown for our
present purposes, in the following table:-

Years.
Price of Welsh
Bar Iron in
Liverpool.
Years.
Bricks made
in U. K.
Loads of un-
Sawn Timber
imported.
Millions
Thsnds.
£.
S.
d.
Millions. Thsnds.
£. S.
1821
979
417
8
17
6
1841
1,426 756
†1822
993
583
8 7 6
1842
1,274
527
1823
1,265
545
8 7 6
†1843
1,161 708
5
1824 1,493
611
10 0 0
1844
1,420 758
*1825
1,991
1826 1,381 612
1827
1,124
1828 1,104 530
1829 1,135 557
755
14 0 0
1845
1,821 1077
10 7
6
1846
2,040 1249
533
9 10
0
*1847
2,042 1031
9 2
66∞ er or a Price of Welsh
Bar Iron in
Liverpool.‡
d.
5 0
0
0
0
0
5 15 0
7 6
0 0
6
8 17 6
1848
2,194 929
7 7 6
1849
1,461
818
7 0 0
5 12
6
1830
1,112 505
6 10 0
1850
1,463
868
5 0 0
1831
569
6 2
6
†1851
1102
4 17 6
†1832
998
557
5 17 6
1852
924
5 17 6
1833 1,036
527
6 15
0
1853
1834 1,152 558
7 0
0
1854
1835 1,349 694
1836 1,606 688
*1837 1,491
1838
6 15 0
1855
10 15 0
1856
660
9 5
0
*1857
725
9 10 0
*1839
1,576
726
9 15 0
Duty
repealed (1850.)
1180
8 10 0
1216
909
9 7 6
7 17 6
1081
8 0 0
1179
7
10
0
1840 1,748 817
8 7 6
Years marked * are those of commercial difficulty and revulsion. Years marked
† seem to be those with which the great commercial fluctuations begin and end.
‡ From a circular of an old Liverpool iron exporting firm.
The high price of iron, and the increased production of bricks,
show periods of great investment, and these correspond exactly with
the well known periods of commercial difficulty, in 1825, 1836-9, and
1847; indeed, if the above numbers were drawn out in a curve, its
form would be found to correspond closely with the curve of bank-
ruptcies during the same years.
:
}
AND ITS SOCIAL EFFECTS.
13
-
:
VIII.—Of Prices as dependent on Credit.
What greatly assists a rise of prices, started in a period of free in-
vestment, is the system of credit on which trade is necessarily con-
ducted. By this system a trader is not obliged to be the real owner
of the goods in which he trades, but may freely buy by giving the
promise of payment in, perhaps, three months time. Thus the goods
really belong to the holder of his promissary note, or bill; only the
margin of profit or loss usually falls to the share of the trader. The
result of this system of purchase on credit must be that the prices are
not restrained at every moment by the quantity of gold in the
country to make payments. Prospective payments take the place of
present payments, and in the mean time the bills created may circu-
late from one to another as if they were an embodiment of so much
gold.
So long as prices rise every trader is enabled to discharge his
liabilities at any required moment; they may be bought by others
with a still more free recourse to credit. Thus, prices and credit
mutually inflate each other. But there is a check to this process.
Though the merchant does not own the goods, there must be some
one to own them, to advance capital, or, as it is said, to discount the
bills arising out of the transaction. Now this capital is limited, and
the available amount is reduced during the period of permanent in-
vestment, from which a rise of prices proceeds. It is the exhaustion
of this capital which limits credit; it is the limitation of credit which
must sooner or later bring prices to a stand, or even cause them to
recede to a rate much lower than they had reached. In this revul-
sion and recession of prices, some class must suffer a loss; those who
are too much dependent on credit will suffer bankruptcy, and inflict
part of the loss on others.
While the elasticity of credit, then, may certainly, as it seems, give
prices a more free flight, the inflation of credit must be checked by
the well defined boundary of available capital, which consists at the
last resort in the reserve of notes, equivalent to gold, in the Bank of
England. Prices temporarily may rise or fall independently of the
quantity of gold in the country; ultimately they must be governed by
this quantity. Credit gives a certain latitude without rendering
prices finally independent of gold.
14
FALL OF THE VALUE OF GOLD,
IX.-Of Prices after a Revulsion.
A revulsion occasioned by a failure of the national capital must
cause, not only a collapse of credit, and of any inflation of prices due
to credit; it must put an end to the formation of new schemes of
permanent investment. Schemes already on foot will, as far as pos-
sible, be continued, and must for a time keep up the price of perma-
nent materials. As by degrees these schemes are completed, the
demand for materials will decrease as rapidly as it formerly increased.
Their prices, therefore, will fall and remain low until the fresh accu-
mulation of free capital causes speculation again to germinate.
X.-Of other supposed causes of Fluctuation.
Even if there be nothing erroneous in the preceding analysis of a
great commercial fluctuation, I am far from supposing that the exact
relations of prices, commodities, gold, and capital, have been hit upon.
I do not believe that any of our economical writers have yet untied
this Gordian knot of economical science, although some cut it in a
very unhesitating manner. One of these summary modes of pro-
cedure is the currency theory, which attributes every fluctuation of
prices to an extension of the bank-note circulation. Now by the
action of the Bank Charter Act, it is provided in the most satisfac-
tory manner, that every note in the country that is likely to be pre-
sented at the Bank for payment, shall be met there by its equivalent
amount. Thus, any influence which the note can have is that of its
equivalent gold. Under the old state of things it was almost the
same, because the prudence of the Bank management, might be
said to maintain the notes really convertible.*
Another favourite theory of some is the dependence of our commer-
cial condition on the foreign exchanges. This is another twist in the
Gordian knot which it is not easy to untie in detail, and is not right to
cut. But taking a general view of the matter, it will appear that the
foreign exchanges merely link trade in one country to trade in another.
The natures of gold, of capital, and of commodities are not changed
by being carried over the sea, and with certain minor exceptions,
trade between England and Germany, or England and America,
* On the relation of the note circulation to prices, see App. Note B.
AND ITS SOCIAL EFFECTS.
15
is subject to the same great laws as trade between England, north
and south of the Trent, or between the manufacturers and the agri-
culturists within the nation. The fluctuations of investment of
capital, prices, stocks of commodities, and of the standard of value,
whether gold or not, would not be altered in nature if we had no
foreign exchanges at all.
}
Ї
CHAPTER II.
INQUIRY INTO PRICES BEFORE AND AFTER THE GOLD
DISCOVERIES.
XI.-Of the Elimination of temporary Fluctuations.
WHAT little has been correctly stated in the previous chapter as to
the procedure of commerce, may serve to explain the real fluctuations
of prices which my tables will disclose. At the same time, we shall
be put on our guard against mistaking any temporary fluctuation due
to excessive investment or credit, for the effect of gold depreciation.
The twelve years which have elapsed since the Australian discoveries.
have scarcely covered more than a single great fluctuation of com-
merce, in the effect of which those of gold depreciation must neces-
sarily be disguised. To eliminate the effects of such commercial
disturbances, in our comparison of prices before and after the gold
discoveries, we might compare the prices at corresponding points of
the commercial tide. This method, proposed by Mr. Cobden in the
preface to his translation of Chevalier's Essay, is theoretically cor-
rect, but practically useless. Commercial fluctuations are never
so similar and well marked that we can discover exactly correspond-
ing points in each. Since 1851, too, they have been so much inter-
rupted by wars, that we find no definite undulation of prices suffi-
ciently comparable with that of 1844-50.
In these circumstances, I adopted the method, partly the same as
that previously used by Mr. Newmarch, of comparing the prices of
16
FALL OF THE VALUE OF GOLD,
every part of the commercial fluctuations since 1851, not with the
similar parts of a previous fluctuation, but with a certain average price
fairly drawn from all parts of the previous fluctuation of 1844-50.
We must then form the best judgment we can as to the part of the
commercial tide, in which any year since 1851 is situated, and allowing
for the height of the tide, judge how far the level of prices has been
permanently altered by the gold discoveries. We thus eliminate, I
conceive, so far as it can now be done, the fluctuations of prices
due to varying demand, and dependent on the manias for permanent
investment, and the inflations of credit. The natural variations of
supply, which chiefly affect the articles of more immediate use, are
at the same time destroyed, as far as may be, in the drawing of our
averages.
XII.-Of the Method adopted.
To carry out the inquiry on these principles, I proposed to define
the commercial tide which culminated in 1847, as commencing with
1844, and ending with 1850. For these tides begin and end with
abundant capital, and with low water, as it were, in the rate of inter-
est. Thus the turn of the tide will be at the moment of minimum
rate of interest, or perhaps more truly about the middle of the period
when interest is at or near its lowest. Now the rate of discount or
interest was at its minimum, in the years 1843 and 1844, when it
sank as low as 12 per cent, and scarcely rose at all above 2 per cent.
It gradually rose during 1845, reached 5 per cent early in 1846, and,
after a temporary relapse, advanced to 10 per cent, its culminating
point, in November 1847. Before the commencement of 1848, it bad
already dropped to some 4 per cent, and thence continuously fell
to 2 per cent in 1850. A temporary rise in 1851 was succeeded
by the extraordinary depression to 12 during the last 8 months of
1852. It was now that the speculative period of 1853 commenced,
only to terminate completely in the stagnation of last year (1862). I
think there are two pretty well defined periods of low interest, 1843-4
and 1849-52, neglecting in the latter the very minor rise of interest
in 1851. It is accordingly in the middle points of these periods, the
beginning of 1844, and the end of 1850, that I place the limits of the
fluctuation of 1847. The average prices of this period I regard as
1}
AND ITS SOCIAL EFFECTS.
17
free from any influences of speculation, or inflated credit. At the
same time, this period affords a good average price of grain and other
agricultural produce, because these articles suffered a well-marked
fluctuation of prices, culminating in the famine of 1847, just about
the middle of the period.
By a further happy coincidence, this period 1844-50, selected with
reference only to the rate of interest, is also nearly the best we
could have selected with reference to the date of the gold discoveries.
The year 1851 is that of the Australian discoveries, and that also
about which the supplies of Californian gold began to be of
importance.
In place, however, of the seven years average, 1844-50, I was obliged
to adopt the six years average, 1845-50, because the price lists of the
Economist, which I used, do not commence at all till July 1844, and
did not assume the full form which they have ever since retained till
the beginning of 1845. To have used data for 1844 drawn from
other price lists, would have introduced doubt and error in place of
additional certainty, because articles are not necessarily quoted in an
exactly similar manner in different lists. There is also no reason to
suppose that the inclusion of the year 1814 would have sensibly
altered the average. To include 1851 in my average in place of 1844,
would only increase my estimation of the subsequent rise of prices.*
It may perhaps be objected that six years are not sufficient for
furnishing a correct average of prices. But if the period were
extended at all, it would have to be extended to the commencement
of the previous commercial tide, some ten years earlier, about 1833
or 1834.
This would have added greatly to the labour of the
inquiry; it would also have rendered it less worthy of reliance.
Recourse must have been had to various different lists of prices, and
numerous discrepancies in the qualities of the articles quoted, or the
conditions of their production must have crept in. The shorter the
space of time over which our comparison extends, the less will it be
affected by long continued and radical alterations of demand or
supply, which perhaps there is no proper mode of eliminating. In
the balance of advantages and disadvantages, I think that the period.
1844-50, or 1845-50, will give the most reliable datum line, as sur-
veyors would say, that can be found.
See App. note C.
C
18
FALL OF THE VALUE OF GOLD,
XIII.—Compilation of the Tables of Prices.
Tables of the monthly prices of 39 articles of commerce were com-
piled from the price lists of the Economist, and from other sources,
as described in the following list. The quotations were usually taken,
as near as may be, to the middle of each month, from the Econo-
mist, dated between the 14th and 20th of the month. Though
it is a matter of indifference as regards the present subject, it seems
obvious that single monthly quotations should be taken at the middle
of the month rather than at the beginning, as is commonly done.
They thus belong more properly to the month, correspond more truly
with the monthly tables of the Board of Trade, and are less liable
to disturbance from the monthly settlements.
It is usual in all commercial quotations to state, not an average
price, but the highest and lowest prices, comprehending any varieties
of quality, as well as any variations of price in the period considered.
In this form, however, it is impossible to deduce any exact conclu-
sions from the numbers. To ascertain whether prices are rising or
falling, we must take the average of the highest and lowest, and
consider it as the average price of a medium quality. To treat the
higher and lower qualities as separate commodities, might be a more
rigorously correct method, but it would double the labour of an
inquiry, already sufficiently laborious, without any corresponding
gain. It is only in the case of a few commodities, such as indigo,
that the range of qualities is so great as to cause any uncertainty. In
the case of the metals, oils, and most important articles, there is
little or no range of price.
LIST OF THIRTY-NINE CHIEF COMMODITIES.
METALS.
1. Silver-Standard bars per ounce Troy
From the Economist,
with some quotations completed from the London Mercantile Price
Current, and the Banker's Magazine.
2. Tin-English blocks, per ton.
3. Copper-tough cake, per ton.
4. Lead-English pig, per ton.
AND ITS SOCIAL EFFECTS.
19
5. Bar Iron-British, per ton.
6. Pig Iron-No. 1. Wales, per ton.
7. Tin plates (Iron)-Charcoal, 1 C. per box.
Nos. 2-7 from the Economist.
VEGETABLE AND ANIMAL MATERIALS.
8. Palm oil-per ton.
9. Linseed oil—per ton.
10. Tallow-St. Petersburg, 1st yellow candle, per ton.
11. Hides Buenos Ayres and Monte Video, dry, per lb.
12. Leather-Crop hides, 30 to 45 lbs., per lb.
13. Timber-Dantzic and Memel fir, per load.
14. Logwood-Campeachy, per ton.
15. Indigo-Bengal, per lb.
Nos. 8-16 from the Economist.
FIBROUS MATERIALS,
16. Upland cotton—per lb.
17. Pernam. cotton-per lb.
18. Surat cotton-per lb.
Nos. 16-18. The yearly average prices of the three chief varieties
of cotton were taken from an excellent table and paper in the Ex-
change Magazine for October, 1862, reprinted in the Journal of the
Statistical Society, for December. The average price of fair quality
for 1862, has been added on p. 21, from the data in the Economist ;
but to avoid the exceptional disturbance of prices in 1861-2, the low
prices of 1860 have been repeated in those years, in making up the
averages.
19. Wool-English fleeces, Southdown hogs, per pack of 240 lbs.
20. Silk-Cossimbuzar, per lb.
21. Flax-Riga, W. F. P. K., per ton.
22. Hemp St. Petersburg, clean, per ton.
Nos. 19-22 from the Economist.
OORN.
23. Wheat. 24. Barley. 25. Oats. 26. Rye. 27. Beans. 28. Peas.
Nos. 23-28. The monthly Average Gazette prices, per Imperial quar-
ter, taken from the Statistical Abstract of the Board of Trade, or from
the Journal of the Statistical Society. These averages are deduced from
official returns from all the chief market towns in England and Wales,
c 2
'
20
FALL OF THE VALUE OF GOLD,
and, of course, afford most reliable data. The numbers for 1862
apply only to the first nine months of the year.
AGRICULTURAL PRODUCE, MEAT, ETO.
29. Hay.
30. Clover.
31. Straw.
Nos. 29-31, average of the highest and lowest prices per load, as
given in Dodsley's "Annual Register for the London Markets."
Prices for 1862 in Smithfield market added from the Times.
32. Beef.
33. Mutton.
34. Pork.
Nos. 32-34, average of the highest and lowest prices, per stone of
8lbs., in Smithfield, or the Metropolitan Cattle Market, as given in
the Annual Register. The numbers for 1862 were filled up from the
Times, and seem rather below what they would have been given in
the Register, the exact mode of quotation in which is not stated.
35. Butter-per cwt. Limerick, 1845-50; afterwards Waterford,
first quality new. In the earlier years Limerick and Waterford
butter were often confused together in the Economist, the price of
Limerick seeming, however, to be one or two shillings more than that
of Waterford, though afterwards Waterford became superior to
Limerick. To prevent any doubt, the rather higher prices of Lime-
rick butter were taken in the earlier period from the London Mer-
cantile Price Current, and joined with the higher prices of Waterford
butter from the Economist in the latter period.
FOREIGN ARTICLES OF FOOD.
36. Sugar, per cwt., Gazette average price of the week nearest the
middle of each month, of Muscovado sugar, being the average of West
India, East India, and Mauritius sugar. From the London Mer-
cantile Price Current, 1844-7, and the Economist afterwards.
37. Spirits Jamaica rum in bond, 15 to 25 O. P., per gallon. In
some of the earlier years the strength of spirit quoted in the Econo-
mist is 10 to 20 O. P. As spirits form an exception to the general
rise of prices, this discrepancy need not be further noticed.
38. Tea-Congou in bond, per lb. The lowest price quoted in the
Economist; but there is some little change in the description.
39. Pepper-Black Malabar in bond, per lb.

21
Of the Average Yearly Prices.
From the tables of monthly prices obtained as described in the above list, the simple arithmetical mean prices for cach year were
drawn. Double calculations were made to prevent error. The following table was thus prepared, and forms the basis of
my deductions :—
TABLE showing the Average Frice of each of 39 chief Commodities, during each of the Years 1845-62.
DESCRIPTION OF
COMMODITY.
1845. 1846. 1847. 1848. 1849. 1850. 1851. 1852. 1853. 1854. 1855. 1856. 187. 1858. 1859. 1860. 1861. 1862
1. Silver
2. Tin
3. Copper
4. Lead
5. "Bar Iron
6. Pig Iron
7. Tin Plates
8. Palm Oil
•
106 2 100.4
34.3
59.06 59.39 59.69 59.46 59 64 59.97 60.98 60.53 61.42 61.54 61.39 61.34 61.178 61.30 61.98 61.66 60.80 61.48
87.0 94.8 90.5 77.5 79.7 80.5 84.8 90.2 115.0 121.0 118.3 132.4 1361 118.8 131·4 136.2 122.1
87.8 91.5 96.8 85.2 83.6 85.1 84.9 96.7 116.0 126.0 126.0 118.3 123.3 108.2 109.5 106.8 99.4 96.5
18.5 19.0 18.7 16.9 15.8 17.7 17.3 17.8 23.9 23.9 23.4 25.1 24.B 22.3
22.5 22.0 20.5 20.7
185.0 191.5 194.5 144.0 1248 118.0 111.4 124.0 185.0 198.3 171.3 181.1 1684 143.7
143.7 140·2 131.4 125.0 124.8
95.8 82.5 74.7 70.6 66.5 72.6
96.7 116'0 100.8 114.2 106.5 90.2 76.2 75.0 68.3 65.0
31.6 30.2 29.5 32.0 32.4 32.0 29.1 35 6 33.1 33.4 37.3 39.
33.3 32.9 31.4 29.0 27.9
116.2
28.8 30.7
36.7 32'6
32.0
30.3
28.1
29.0
9. Linseed Oil
24.8 24.6 26.3 23.1 26.4 32.0
31.7
27.8
10. Tallow
40.4
43.7
48.6
46.8
38.9 37.5
38.2
39 1
50.4
11. Hides
6.4
6.6
6.0
4.8
4.6
4.9
5.7
5.4 6.4
7.5
37.5 47.5 44.0 42.5 44.3
29.5 35.9 39.5 37.0 38-0
64.2
57.0 54.4 58.6
13.6
8.5 10.5
12. Leather
11.7
11.0
10.4
10.3
9.6
9.5
10.0
9.6
12.2
13.5
13 5
14.5
19:3
13. Timber
14. Logwood
15. Indigo
86.0
85.0
85.3
73.3
67.3
61.5
60.0
59.6
78.2
82.0
80.5
72.1
71.8
8.70
8.08
7.46
6.69
6.28
6.69
6.73
6.42
7.26
8.23
7.71
8.89
8 71
39.6 45.2 46.1 45.0 42.5
31.2 28.6 28.9 31.3 38.8
52.0 55.3 56.3 53.8 46.9
11.1 11.2 11.3 10.1 9.2
15.1 15.6 17.3 14.9 14.5
64.2 68.4 66.9 69.4 64.4
8.75 7.15 6.64 7 83 104.6
4.1
4.0
4.0
3.4
3.4 3.9
4.6
4.9
6.4
6'0
4.1
4.4
48
5.0
4.6
5.1
5.4
5.9
16. Cotton, Upland
17. Cotton, Pernam.
18. Cotton, Surat
19. Wool
43/30
68
47
4/7/3
6 /
41
10
5/1/
co
7 ៖
7 S
6
5
་་
71
532100
7/1/1 7호
​cola Hla
3
3/2
4
31
3급
​5
4
573
5
09/00
67
5338
57
51
مدام
57
593108
939 19 3/ 31/1 3/1/1 4
674
71
61
7/1
83
81
5
42 20
—lea osko osk
(73)
(183)
81
(91)
(17급​)
34 8 4/1
(5급​)
(12층​)
15.6
15.3 13.5
10.5
11.6
13.3
13.9
15.0 17.8 13.9 13.8 17.6 20.2
15.3
18 6 19.7
17.4
18.0
•
20. Silk
12.8
11.9 10.1
10.2
10 5
11.8
13.0
21. Flax
46 2
49'3 49.7 39.1
36.9
41.5
44 5
(483) (57.5)|(54.8)
126 13.5 13.6 12.5 17.3 22.1
46.9
53.2
22. Hemp
28.8
32.5 38.2
32.0
30.1
30.8
29.2
31.7
37.4 58.5 47 0
35.7
16.4
54.9 55.4 70.8 64.8 67.0 65.6
34.1 29.5 29.2 30-1 31.9 36.0
15.8 18.4 17.0 16.6
23. Wheat
50.8
54.7 69.7
50.5 44.3
40.3
38.5 40.7 53.3
72.4
74.7
69.2
56 3
24. Barley
31.7
32.7
44.2 31.5 27.7
23.4
24.7
28.5 33.2 36.0
34.7
41.1
42.1
44.2 43.7 53.3
34.7 33.5 36.6
55.355 4
36.1 *35.2
25. Oats
26. Rye
32.3
22.5 23.7 28.7 20.5 17.5
35.0 49.0 30.4 26.2
16.4
18.6
19.1 21.0 27.9
27.4
23.3
25.5
29.8
27. Beans
28. Peas
29. Hay
39.0 38.9 50.5 36.7 30.6 26.8
38.7 49.0 51.4 39.2 31.5 27.2
28.6
32 3
27.2
30.6
25.0 24.5 23.2
35.0 45.8 45.7 45.0 38.3 32.3 32.3
40.1 47.3 46.5 43.9 43.0 41.9
38.5 45.6 43.3 41.6 41.3
25.2
24.4
23.7 23.0
36.3
42.3 44.7
42.9 39.7 40.5
35.737-2
42-4*40-3
41.2*39.9
30. Clover
92.3 69.4 61.0 64.0 62.0
106.5 94.5 81.5 85.5 79.5 73.5
61.1
68.0
76.0
31. Straw
32. Beef
38.4 32.7 30.8 26.6 27.9 25.0
40.7 40.6 47.3
24.3
43.4
33. Mutton
47.4 50.8
34. Pork
35. Butter
52.6
46.8 51.6 53.9
38.8
52 0 43.7
52.2 45.8 42.8
37.3 35.9
42.3 42.6
38.8 38.5 45.1 46.7
70.0 86.6 80.2 87.7 90.4
81.5 98.0 101.5 107.0 107.5
27.1 31.4 34.4 26.6 26.9
36.4 44.4 49.2 49.7
42.6 50.9 50.3 50.9
50.4
54 1
58.8
47.4
52.4
54.6
68.5 69.6 72.1 79.7
89.5 89.5 93.5 95.5
27+ 28.5 28.0 31.6
50 50.2 51.4 54.6 56.7 46.9
53.9 57.2 60.7 59.7 53.2
44.1 48.8 54.2 56.4 52.2
73.3 67.2
95.5
34.0 36.3
92.5
86.7 82.9 87.8
81.3 63.2 69.9 75.1 74.2 90.6 98.9
100 4
105 3
106
107.6
107.6 106·5
111.9 109.7 107.4
36. Sugar
32.5
34.2 28.5
23.7
25.7 26.0
25.4
22.8 24.7
22.9
26.3
29.3
37.3
27.7
26.5
27.6 24.4 24.0
37. Spirits
3.06
2.93 3.93
3.27
2.53
2.46
2.49 2.17 3.10
4.38
3.71
3.38
4.25
3.53
3.43
3.30
2.72 2.29
•
38. Tea
9.9
9.2 9.0
7.7
8 6
10.9
10.6
8.6
11.5
11.7
9.0
8.9
13.2
10.3
12.8
14.5
9.3
10.1
39. Pepper
3.4
3'0 3.0
2.8
3.1
3.6
3.3
3.9
4.3
4.8
5.0
5.2
5.2
5.0
4.5
4.9
4.8
4.3
* Average of first nine months.

22
Reduction of the Tables.
To obtain any accurate conclusions from the above table, it was necessary to reduce it in accordance with principles before considered.
The simple arithmetical average price of each commodity for the six years 1855-50 was first drawn, and will be found stated in the
tables on pp. 27, 28. This average being assumed as the true or natural average according to the undisturbed value of gold, was
divided (arithmetically) into the average price of each separate year 1845-62. The ratios or percentages thus got represent from
1845 to 1850 the proportional variation due to speculative or other ordinary fluctuations. Since 1850 the percentages express the
rise of prices above their former ordinary level, affected of course by any temporary fluctuations. In the following table these per-
centages are given in detail.
TABLE showing the ratio of the Average Price of each separate Year, 1845-62, to the Average of the Years 1845-50.
COMMODITY.
1845. 1846. 1847. 1848. 1849. 1850. 1851. 1852. 1853. 1854. 1855. 1856. 1857. 1858. 1859. 1860. 1861. 1862.
1. Silver
99
100 100 100 100 101 102 102 103
2. Tin
102 112
106
91
94
95
100 106 135
3. Copper
4. Lead
99 104
110
96
95
96
96
109
131
103 103 103 104 103 104 104 102 103
142 139 156 160 140 155 160 144 137
143 143 134 140 122 124 121
112
109
104
107
105
95
89
100
97
100
135
134 132
142 137
126 127 124
115
117
•
5. Bar Iron
116
120
122
90
78
74
70
78
116
124 107
113 106
90
88
82
78
78
•
6. Pig Iron
120
114
108
93
84
80
75
82
109 131
114
129 120 102
86
85
77
74
•
7. Tin Plates
108
100
95
93
101
102
101
92
113 104 105
118
124
105
104
99
92
88
8. Palm Oil
90
96
115
102
100
95
88
91
118 149
138
134
140
124
142 145 141
134
9. Linseed Oil
95
94
100
88
101
122
121
106
113 137 151
141
145
119
109 110
119 148
10. Tallow
95
102
114 110
91
88
90
92
118
11. Hides
115
120)
108
86
84
88 104
98
115
150 134
136 154
128 137 122 130 132
126
110
190 247 200
202 204
182
167
12. Leather
112
105
100
99
92
91
96
92
117
130 130
139
185 145 149
166
143
139
•
13. Timber
113
•
111 112
96
88
80
79
78
102
107 105
94
94
84
90
88
91
84
14. Logwood
118
111
102
92
86
91
92
88
99
113
105
122
119 120
98
15. Indigo
108
104
106
89
90 103
120 128
167
158
109
115
127
132 120
91 107
135
143
141 156
16. Upland Cotton
81
91
119
79
95
135
107
100
100
100
107
112 135
116 121
102 *144 *349
17. Pernam. Cotton
94
109
112
88
81 116
110 103 103 103
103
105 129
18. Surat Cotton
78
88
117
84
101
133
104
97
19. Wool
117 115
102
79
87
100 104
113
91
134
20. Silk
114 106
90
91
94
105
115 113
120
21. Flax
106 112
114
89
84
95
102
107
111
22. Hemp
90
101
119
100
94
96
95
121 *140 *263
91 101 114 140 123 123 107 *153 *315
105 104 132 152 115 140 148 131 135
121 111 154 199 116 140 164 151 148
114 118 121 125 127 162 148 153 150
99 102 105 108 111 106
92 91 94 100 112
121 123
23. Wheat
98
106
135
98
86
78
24. Barley
99
103
139
99
87
73
25. Oats
104
110
133
95
81
76
26. Rye
99 107 150
93
80
71
27. Beans
105
104 136
99
82
73
7787
400 ∞ ∞ 7
74
78
86
89
78
91
77
87
28, Peas
98
124
130
99
90
69
69
77
98 116 110 105
79 103 140 144 134 109 85 85 103 107 107
89 104 113 109 129 132 109 105 115 113 110
97 130 127 117 116 114 108 113 110 107
107 140 140 138 117 99 99 111 109 113
108 127 125 118 116 113 114 120 114 108
105
101 103 104 101
109
29. Hay
135
102
89
94
91
89
100
102
30. Clover
123
109
94
98
92
85
88
94
127 118 128 132 100
113 117 123 124
102
106 117 107
98
103 103
108 110 110 107
31. Straw
127
108
102
88
92
83
80
89
104 114
88
89
91
94
32. Beef
98
98
114 105
94
90
87
88
107 119 120 122
122
121
92 104 112 120
124 132 137 113
33. Mutton
99 106
109 108
91
88
88
88
106 105 106 112 122 112
34. Pork
96
106
110
107
94
88
79
79
92
96
97
35. Butter
36. Sugar
37. Spirits
38. Tea
39. Pepper
110
105
112
103
•
80
89
95
94
115
126
128
107 112
134 136
90
137
119 126 124 110
100 111 115
107
135 142 140
137
114
120 100
83
90
91
89
80
87
80
101
97 130
108
83
81
82
72 102
107 100
98
·
83
93
118
115
94
143
125 127
109
95
96
88
99
113
105 125 138 153
98
160
92 103 131
122 110 140 116
97 144 112
167
97
93
97
86
84
113 109
90
76
139 158 102
110
166 160 144 156
152
138
*Not further used.

23
To display more clearly the great variations in the above table, free from minor fluctuations, I have grouped together those
commodities which seemed to have anything in common, and calculated the average ratios or percentages as described in
Sec. II. I have lastly deduced the general average variation from year to year of the whole 39 commodities. The groups and
numbers are given in the following table, the contents of which are more easily seen in the diagram facing the title page. The
general course of the Bank miminum rate of discount is added in the diagram, as its comparison with the general average
course of prices is interesting, and will probably justify my assumptions in Sec. XII.
AVERAGE OF
TABLE showing the ratio of Prices each year, 1845-62, to the average prices of 1845-50.
1845. 1846. 1847. 1848. 1849. 1850. 1851. 1852. 1853. 1854. 1855. 1856. 1857. | 1858. 1859. 1860. 1861. 1862.
|
1. Silver
2-7. Metals
13. Timber
8 & 9. Oils
10-12. Tallow, &c.
16-18. Cotton
115.9
83.8
99.2 99.7 100.3 99.9 100.2 100.7 102.4 101.7 103.2
108.1 109.0 107.5 93.2 89.9 90.5 88.9 93.8 122.7
112.6 111.3 111.7 96.0 88.1 80.4 78.5 78.0 1024
92.6 95.1 107.6 94.9 100.6 107.9 103.4 98.4 115.1
106.8 109.0 107.1 97.6 88.9 89.0 96.4 93.8
84.1 95.3
127.7 107·0 100-1
103'4 103.1
129.2 122.5
107.3 105.3
142.8 144.2
138'4 138.6
92.0
127.7
19-21. Wool, &c.
112.0 111.0
101.2
86.4
88.4
100.0
100.0 106.9
97.8 103.5
113.1 110.8
23-28. Corn
100.6 108.8 137.0
97.1
82.7
73.3
76.9
29-31. Hay, &c.
32-35. Meat
128.2 106.1 94.8
93.3
91.6
85.5 88.8
•
100.6 103.6 111.4 105.8
36-39. Sugar, &c.
•
14&15. Dyes
107.8 102.6 105.1 90.2
113.0 107.5 103.8
103.0 103.8 103.0 104.1 103.6 102.2 103.3
131.2 130.1 113.0 111.4 108.8 100.5 98.0
94.3 93.9 84.0 89.6 87.5 90.8 84.3
137·4 | 142·8 121.8 124.5 128.8 88.5 83.7
116.7
150.0 184.5 152.5 157.6 164.8 148.7 136.8
97.8
1100134:3 120.3 122.5 110·0 (110·0)|(110·0)|
106.9 110·9 120.1
135.2 155.9 119.0 147·0 153.0 144.8 144.0
85.3 102.8 127.3125*2 123.0115.4 104.2 101.3 110.6 109.7 107.9
95.1 114.1 116.1 111.7 113.4 97.9 99.7 101.7 110.3
89.5 88.6 87.4 87.2 104.8 110.6 112.0 118.5 122.7 113.8 118.9 127.3
91.2 100'0 97.0 90.2 111.1 122.5 115.5 116·4 | 144'6 119.4 120.6 126.8 104.4 99.2
90.2 88.0 97.2 105.2 106.1 128.9 133'4 107.3 118.2 122.9 |125'6 108.3 110.8 122.8 149.4
109.8 108.0
128-7116.3
22. Hemp omitted
The whole 39
104'4 105.4 110.8
94.1 89.6 92.1
92.4 193.8
111·3
120.7 117.6 122.5 128.8 | 114·2 116 0117-9115-1 113.4
24
FALL OF THE VALUE OF GOLD,
XIV.-Remarks on the Variation of Prices since 1845.
The general average variation of the whole 39 commodities may
be taken as the nearest representation of the great fluctuations in
speculation and investment which we have before considered. All
the commodities, excepting perhaps silver, show in their separate
fluctuations some influence of speculation. In such natural products
as cotton, sugar, tea, logwood and indigo, the variations due to
speculative demand are much obscured by irregular fluctuations due
to accidents of supply. We see that fibrous materials such as wool,
silk, flax, and especially cotton, do not partake in any marked manner
of the sudden rise during the period of speculation and permanent
investment about 1853. It is in the metals, iron, copper, lead and
tin, that we find the variation of demand most perfectly marked, for
the curve of these metals is almost exactly that of the general average
somewhat exaggerated. Metals, as has been before said, are subject
only to variations of demand, or to very slow and occasional variations
of supply. Timber shows in the next degree the preponderance of
demand-variations over supply-variations. Thus its variations closely
resemble those of the metals, with a little more undulation and a
general tendency downwards. Oils are chiefly remarkable for the
great rise in 1853, more than compensated by the recent fall. The
animal materials, tallow, hides and leather, show a strong resemblance
to the speculative variations of metals joined with a great and excep-
tional rise since 1852, which must indicate that the increase of demand
tends to outrun a supply incapable of great increase. Butcher's
meat shows a great rise in the last ten years, partly no doubt from
the same cause. Its highest points usually follow those of hay,
clover and straw. The prices of the latter do not show the same
tendency to a progressive rise, but then we should remember that
the prices apply to London only. The prices of corn, meat and
fodder show so much relation to the speculative changes of metals,
to the general average variations, and to the rate of discount, that
it cannot be doubted there is a strong relation of cause and effect. The
bountiful or scarce supplies of food with which Providence favours
us in the several seasons, strongly contribute to hasten or retard the
several periods of abundant capital and investment, and again those
of scarcity and revulsion. The current of human business is ever
ready to break into a wave. A good or bad season marks it with a
crest or a trough, and the fluctuation multiplies and continues itself.
AND ITS SOCIAL EFFECTS.
25
Yet, according to a known principle, it insensibly tends to fall into
pace with the fluctuations of nature, which it may obey but cannot
rule.
But we must hasten to conclusions which more immediately
concern us.
XV.-Proof of a Depreciation of Gold pointed out.
It is hardly necessary to draw attention to the permanent elevation
of prices since 1853, which is shown in the curve of the general
average. Now it is impossible to account for this permanent change
by any excessive speculation, inflation of currency, or credit. For
to every extraordinary increase caused by such means at one period
there must be a corresponding revulsion soon following. Such a
revulsion took place in 1857, but though five years have since elapsed
prices are far from having fallen to their old level. In the last two
years especially the dearth of cotton has caused a depression of trade
of a formidable character. The lowest average range of prices
since 1851 has indeed happened in the last year, 1862; but prices
even then stood 13 per cent above the average level of 1845-50; and
it is most highly improbable that prices will long continue to fall;
yet prices have continually stood above the high average point they
reached in 1847! Examine the yearly average prices at any point of
their fluctuations since 1852, and they stand above any point of their
fluctuations before then! There is but one way of accounting for such
a fact, and that is by supposing a very considerable permanent depre-
ciation of gold.
XVI.-That Prices are now near a Minimum.
I think no one will doubt that during the last year, 1862, and at
present, we are at or near the lowest point, and at very low water of
the commercial tide. The low rate of discount in 1862, and the very
low price to which metals especially have fallen, testify this, apart
from more general facts. Numerous large foreign loans, and innu-
merable schemes for foreign or home banks, discount companies, hotel,
railway, and other undertakings, involving permanent investments,
show that we are in one of those periods which must be followed by
a rise of prices and of interest, unless extraordinary events should
interfere. The depression of the cotton trade, and the sad political
confusion in the United States, at present moderate the tendency to
26
FALL OF THE VALUE OF GOLD.
speculation. But when the end of the civil war, disastrous to the
Northern States, comes, as it certainly must, and when the cotton
trade begins to resume its wonted course, we may look forward, I
confidently believe, to such a period of prosperity as even England
has hardly yet experienced. The great danger is that the excess of
speculation may bring its usual punishment. But the consequence
that concerns us now is that prices cannot fall much further; that
they must be regarded as ready to rise rapidly upon the first signs of
a revival of trade; that the present minimum will be soon succeeded
by a maximum, doubtless surpassing that of 1857; and that the
permanent elevation of prices, due to gold depreciation, will then be
more apparent to all.
XVII.—An extended Proof that Prices are now raised above their
old level.
Having ascertained, as I think, beyond reasonable doubt, that prices
in the last few years, though comparatively low, and near the turn of
the tide, are yet greatly raised above their old natural level, I have
not restricted myself to the 39 commodities concerning which this
was proved. We may safely say that the prices of all minor commo-
dities are at the same point of their course, and in the same compara-
tive condition. A far more expeditious comparison of the recent
prices of such minor commodities, with their former prices, will thus
serve to confirm or refute the statement that there is a general rise
of prices, not due to any temporary fluctuations, but perhaps to a
permanent alteration in the value of gold. Again taking the lists
of the Economist, I selected 79 new commodities, mostly distinct from
any of the 39, and likely to vary independently of them and of each
other. Quotations of these were taken, as before described, in the
middle of the months of February and August, in each of the years
1845-50, and again in 1860-2. The arithmetical average of the
twelve quotations 1845-50 was then divided by logarithms into the
arithmetical average of the six quotations 1860-2. The ratio or per-
centage thus obtained represents the rise of price (during a specula-
tive minimum) due to any fall of gold, affected by any change of
value peculiar to the commodity. Adding the corresponding data
for the 39 chief articles from previous tables, we get the following
list of 118 articles, and the ratio of variation of their prices between
1845-50 and 1860-2.

DESCRIPTION OF COMMODITY.
(Numbers refer to list on p. 18—20.)
1. Silver
2. Tin
3. Copper
4. Lead
•
Red lead
White lead
Foreign spelter
Swedish steel
5. Bar Iron
6. Pig Iron
7. Tin Plates (iron)
8. Palm Oil
9. Linseed Oil
Sperm oil
•
Olive oil, Gallipoli
Average
Average Logarithm
Price, Price,
of
1845-50. 1860-2. Ratio.
Ratio,
or per-
centage.
std. oz.-d
ton-£
59.53
85.00 124.80
61.31
⚫0128 103
•1668 147
ton-£
88.30 100.9
*0578 114
ton-£
17.8
21.0
•0737 118
ton-£
19.44
23.10
⚫0749
119
ton-£
24.00
28.04
.0676 117
•
ton- £
18.56
18.73
⚫0039
101
ton-£
14.86
16.71
⚫0510
112
ton-s
159.6
127.1
9.9011
80
ton-s
88.4
69.4
9.8952
79
box-s
31.66
29.45
9.9685
93
ton-£
31.87
44.57
•1457 140
ton-£ 26.19
33.00
•1000 126
tun-£
80.94
96.33
⚫0756 119
tun-£
44.6
59.1
•1220
132
Cocoa-nut oil
ton-£
38.63
48.60
⚫0997
126
Rapeseed oil, pale
ton-£
37.20
45.12
⚫0839 121
Linseed cake, foreign
ton-£
7.84
10.20
•1086
128
10. Tallow
cwt.-s
42.67
52.37
*0889
123
11. Hides
lb.--d
5.53
10.20
•2656
184
Hides, Australian
lb.-d
2.00
4.19
•3212
210
12. Leather
lb.-d 10.42
15.58
•1749
150
Calf skins, 28-35 lbs.
lb.-d
14.83
20.34
•1373
137
Tar, Stockholm
barrel-s 16.7
27.1
•2103
162
Turpentine, American (1860-1)
cwt.-d 100.75
129.7
•1097
129
دو
English spirits
cwt.-s
38.10
35.56
9.9701
93
Foreign spirits
Nitrate of Soda
13. Timber
Quebec oak
Baltic oak
African oak
Indian teake
•
Deals, Canada, 1st Pine
22. Hemp, Russia
Manilla hemp
East Indian Sunn
Jute
16. Upland Cotton
cwt.-s 34.4
36.5
⚫0257
106
cwt.-s 14.27
16.10
•0524
113
load-s 76.40
66.89
9.9423
88
load-s
93.1
115.0
⚫0918
124
load -S 103.8
88.0
9.9283
35
load-s
180.0
228.3
•1032
127
load -S 230.0
288.3
⚫0981
125
stand-£
16.44
17.50
⚫0271
106
ton-£ 32.04
32.69
*0087
102
ton-£ 32.58
30.10
9.9656
92
ton-£ 16.0
17.5
⚫0389
109
ton-£
16.0
16.5
⚫0134
103
lb.-d 5.38
5.5
⚫0100 102
17. Pernam. Cotton
lb.-d
6.8
8.25
⚫0845 121
18. Surat Cotton
lb.-d
3.85
4.13
⚫0294 107
19. Wool, Southdown
pack-£
13.31
18.35
•1395 138
Wool, German, 1st and 2nd
lb.-d
41.54
46.67
·0505 112
Wool, German, tertia
lb.-d 19.0
17.3
9.9592
91
Wool, Sydney lambs
lb.-d 18.0
21.7
0812
121
Wool, V. D. L., Locks and Pieces
lb.-d
10.5
14.3
•1350 136
20. Silk, Cossimbuzar
lb.-s
11.22
17.32
•1883 154
Silk, China, Tsatlee
lb.-s 16.0
21.5
•1233 134
Silk, Raw, white Novi
lb.
S 23.65
39.00
•2173 164
Silk, Organzine, Piedm. 22-24
lb. S 26.8
38.5
•1574
144
21. Flax, Riga
ton-£
43.8
65.8
•1769 150
14. Logwood
ton-£
7.32
8.31
·0551 114
15. Indigo
lb.-s
3.796
5.465
Cochineal, Teneriffe
•1583 144
lb. S
5.27
3.18
9.7808
60
Turmeric, Bengal
cwt.-s 14.35
15.79
*0415 110
Terra Japonica, Cutch
cwt.-s 24.02
25.46
⚫0253
106
Brazil wood
ton-£ 34.0
80.0
•3716
Fustic, Cuba
235
ton-£ 8.083
8.926
⚫0431
Sapan wood
110
ton-£
11.63
7.86
9.8298
68

DESCRIPTION OF COMMODITY.
(Numbers refer to list on pp. 18-20.)
23. Wheat
24. Barley
25. Oats
26. Rye
27. Beans
28. Peas
Average
Average Logarithm
Ratio,
Price,
Price,
1845-50.
1860-2.
of
Ratio.
or per-
centage.
•
imp. qr.-s
51.7
54.7
⚫0244 106
imp. qr.-
31.87
35.90
•0518 113
imp. qr.-s
21.55
23.72
•0418 110
imp. qr.-
32.68
36.39
⚫0467 111
imp. qr.-s
37.11
42.44
⚫0584 114
imp. qr.-s
39.50
40.53
⚫0113 103
Rice, Bengal
Sago, pearl
cwt.-s
14.12
12.00
9.9294
85
cwt.-s
23.75
20.00
9.9253
84
29. Hay
30. Clover
load-s
68.3
73.4
⚫0313
107
load-s 86.8
94.0
⚫0346
108
31. Stran
load-s
30.2
34.0
*0515
112
32. Beef
stone-d
41.35
52.73
•1056
128
Beef, salt, American
tierce-s
86.04
118.67
•1396
138
33. Mutton
stone-d 48.13
57.85
*0799 120
34. Pork
stone-d 48.87
54.27
⚫0456
111
Pork, salt, American
tierce-s
67.71
91.00
•1283
134
35. Butter
cwt.-s
78.63
109'66
•1446
139
Cheese, American
cwt.-s 44·14
55.00
⚫0956 125
Lard, American
•
cwt.-s 45.68
59.00
•1112
129
36. Sugar, Gazette average
Sugar, Mauritius, yellow
Sugar, Havana, white
cwt.-s
28.45
25.33
9.9493
89
cwt.-s 42.3
27.0
9 8051
64
cwt.-s 44.33
32.46
9.8646
73
Sugar, Java, grey and white
cwt.-s 41.44
29.33
9.8499
71
Sugar, refined, 8-10 lbs.
Sugar, Bastards
cwt.-s
cwt.-s 36.3
67.63
55.70
9.9158
82
19.5
9.7301
54
38. Tea, Congou
lb.-d
9.19
11.30
⚫0898
123
Tea, Souchong
lb.-d 22.05
23.83
⚫0337
108
Tea, Orange Pekoe
lb.-d 17.08
17.00
9.9979
100
Tea, Hyson
lb.-d 19.08
20.75
*0364
109
Tea, Gunpowder
lb.-d 32.75
32.50
9.9967
99
Coffee, Ceylon, ordinary
cwt.-s
41.03
60.58
•1692
148
Cocoa, Guayaquil
cwt.-s 33.42
64.25
•2839
192
37. Spirits, Jamaica Rum
East Indian Rum
Spirits, Geneva, common
gallon-s 3.03
2.77
9.9610
91
gallon-d 22.06
18.50
9.9236
84
gallon-d
26.17
25.50
9.9887
97
39. Pepper, black
lb.-d
3.14
4.67
•1722
149
Pepper, white
lb.-d 5.56
9.33
•2248
168
Cinnamon, Ceylon
lb.-s
2.84
1.58
9.7454
56
Cassia Lignea
cwt.-s 70.55
89.10
•1014
126
Cloves, Amboyna
lb.-d
19.8
10.6
9.7286
547
Cloves, Bourbon
lb.-d
8.21
4.00
9.6878
49 S
Ginger, East Indian, common
cwt.-s
44.8
36'0
9.9050
80
Mace
lb.-d
35.6
19.3
9.7347
54
Nutmegs
lb.-d
29.7
29.5
9.9970
99
Tobacco, Maryland
lb.-d
6.2
6.5
⚫0198 105
Seeds, Caraway
cwt.-s
37.21
31.50
9.9276
85
Seeds, Canary
qr.-s
72.63
51.42
9.8500
71
Seeds, Clover, red
cwt.-s
45.60
51.33
·0514
113
Seeds, Coriander
cwt.-s
17.08
15.50
9.9578
91
Seeds, Mustard
bush.
S
12.92
15.00
⚫0648
116
Almonds, sweet Barbary
cwt.-s
44.73
45.92
⚫0114 103
Currants, Patras, new
Figs, Turkey
cwt.
Prunes
Raisins, Valentia, new
cwt.-s 44.00
-S 55.8 42.2
cwt.-s 27.6
29.4
cwt.-s 39.85 32.83
30.93
9.8469
70
9 8784
76
⚫0274
107
9.9159
82
Port wine
pipe-£ 34.5
52.6
•1832
152
Claret wine
hhead.-£ 26.5
36.5
.1391
138
Sherry wine
butt-£ 44.0
48.3
'0404 110
Madeira wine
pipe-£ 36.5
62.5
•2336 171
FALL OF THE VALUE OF GOLD.
29
The results of the above are displayed in the diagram following p. 34,
in which large dots for the 39 chief commodities and small dots for the
minor commodities, indicate the rise or fall in price of each upon a
logarithmic scale. The thin horizontal lines inserted at intervals
decreasing upwards show the percentage of rise or fall. The average
rise or fall of each group, and the average rise of the whole, are indi-
cated by dotted lines. At the left hand the chief and minor commo-
dities are represented in two groups, so as to point out more clearly
the preponderating rise of prices.
XVIII.—Remarks upon the average and individual changes of Price.
From the preceding lists we may deduce the average rise of the
whole 118 commodities, or varieties of commodity, by taking the
arithmetical mean of the logarithms, and turning it back into ordi-
nary numbers. Doing this separately for the 39 chief, and the 79
minor articles-I find that the prices of the former have on an
average risen between 1845-50 and 1860-2 in the ratio of 100 to
116.2, which is equivalent to a depreciation of gold in the ratio 100
to 86·0, or by 140 per cent.
The minor commodities, however, give a somewhat different result.
In taking the mean I have treated those which are bracketed to-
gether in the last column as having the importance only of a single
commodity, so that only the mean of the ratios bracketed entered
into the general average. We thus find there are 64 independent
minor articles of which the prices have on the average risen between
1845-50 and 1860-2 in the ratio 100 to 106 76, which would indicate
a depreciation of gold in the ratio 100 to 93 66 or by 6:34 per cent,
not half the change shown by the chief commodities.
If we take the average of the whole, the rise of prices is found to
be in the ratio 100 to 110-25 or by 10 per cent, corresponding to a
depreciation of gold in the ratio 100 to 90 70, or by about 91 per cent.
This result is one which must I think excite some surprise. Dur-
ing a period of depression, at low water of the commercial tide, the
prices of 118 commodities or varieties of commodity, comprising
nearly all the great staple articles, stand 10 per cent higher than
they did before the gold discoveries, according to the mean level of
prices during the preceding commercial tide. One naturally asks,
if this is the rise at low tide what will be the rise at high tide. Even
in 1857, only 5 or 6 years after the supplies of gold began to arrive,
30
FALL OF THE VALUE OF GOLD,
prices at high tide were 29 per cent above the average, and within
the next half dozen years it may be reasonably expected that they
will rise considerably higher still, probably from 40 to 50 per cent
above the old average of 1845-50.
The rise of the 39 chief commodities in 1860-2 has been stated at
about 16 per cent. If we deduce from the table on p. 23 the
average ratio of rise for the whole 12 years, 1851-62, we find that it
is 13 per cent. This is a correct average of a complete commercial
tide, but it of course shows only partially the influence of the gold
supplies which were constantly arriving during the period.
Nor is our surprise much decreased by considering merely the
numbers of commodities which have risen and fallen in price. Of
the 39 chief commodities, 33 have risen more or less between 1845-50
and 1860-62, and only 6 have fallen, that is, less than 1 in 6. Al-
though it is against the principle I have adopted in this inquiry to
refer to the individual circumstances of commodities, it hardly needs
to be pointed out that of these 6 exceptions, three, bar iron, pig iron
and tinned iron plates are only forms of one commodity, for which
there was an extraordinary demand during the period 1845-50, and
a very slack demand during 1860-2. Both iron and timber, another
exception, being articles subject to great demand-variations might
thus from their peculiar circumstances have been excluded from the
inquiry, had not the principle of the inquiry forbidden exclusion.
Sugar and spirits stand out as the only two obstinate and real ex-
ceptions to a general rise of prices; but, again, as Jamaica rum,
quoted for spirits, is made from sugar, they might be said to form
only a single exception.
It is somewhat otherwise with the minor articles. Of the 79
varieties of commodity, 29, or more than 1 in 3 have fallen in price.
If we do not count separately those varieties of commodity which
are bracketed together, we find that out of 64 articles, 19, or rather
less than 1 in 3, have fallen in price.
It is quite obvious that the exceptions consist almost entirely of
spices, fruit, and foreign articles of food, which are not employed in
the manufactures of the English people, but only applied to their
personal use. The distinction is so well marked and interesting, that
I give the following averages. Twelve groups of articles have risen
in price, and by the following amounts:
AND ITS SOCIAL EFFECTS.
31
Tallow, hides, etc.
58 per cent. | Dyes
Wines
41
Meat and butter
28
•
دو
Oils
27
""
Fibrous materials.
27
9 per cent.
Grain
9
Hay, clover & straw
9
Timber
8
""
Metals
6
Hemp, jute, etc.
2
""
Tar, turpentine, etc. 18
Six groups of articles have fallen in price, and by the following
amounts:
Sugar, tea & coffee. 5 per cent.
Seeds
Spirits.
7
""
9
>>
Fruit (foreign)
14 per cent.
Rice and sago
Spices, tobacco, etc.
15
""
15
وو
There can be no doubt that the groups which have risen in the
highest degree, such as hides, tallow, leather, wines, butchers' meat,
and oils, have so risen from preponderance of demand over supply.
They comprise articles of which the demand increases rapidly with
the wealth and population of the country, while the supply is
naturally limited; they comprise the principal animal materials. On
the other hand, all the groups which have fallen in price are of vege-
table origin, and chiefly of foreign growth. As a general rule, then,
animal and mineral substances have risen in price, and vegetable
substances fallen. But this does not prevent our asserting that, on
the whole, there is a great general rise. The groups of articles which
have risen are twice as numerous as those which have fallen, comprise
immensely more important articles of wealth, and have risen more than
the others have fallen. There can be no room to doubt then, the
great preponderance of the rising prices over the falling prices, as
will be more fully shown in the next section.
The marked distinction between the classes of materials which have
risen in price, and those of foreign articles of food which have fallen,
suggests its own explanation. It is English manufacturing skill
which invests the materials with such useful and attractive forms,
that they are desired all the world over. The great demand thus
arising for our manufactures, causes the demand for their materials
to increase generally, and the prices of most of the materials
must increase with their demand. On the other hand foreigners
can only purchase our manufactures by offering something in
return. When they can offer materials of manufacture, they share
the advantage of the rising prices; but often they can only offer
32
FALL OF THE VALUE OF GOLD,
foreign articles of food and luxury, for which there is a stationary,
or but slightly growing demand. To increase their purchases it is
necessary to increase their sales, which can only be done by forcing
their produce upon our markets at reduced prices. It is thus that
manufacturing skill, making our produce more desired and dearer,
turns the balance of purchases in our favour, and makes foreign
produce cheaper in our markets.
XIX. Of other Modes of Reduction.
It may yet seem to many absurd to take a mass of 118 commodi-
ties, and treat them as equally good measures of the value of gold, some
being so greatly more important and more free from fluctuations than
others. I have considered and tried many ways of reducing an
average which should more or less obviate this objection. I proposed
to give to each commodity a greater weight, as the range of the
highest and lowest prices during 1845-62, was less; but on applying
this notion to the thirty-nine chief articles, I found that, always ex-
cepting silver, the highest price of nearly every one was just about
double the lowest price, so that the method could give no result ap-
preciably different from the simple average.
If we were to assume that there is a certain interdependence
between the prices of different articles, it would follow that the
true mode of reducing an average would be to give each com-
modity a weight proportional to the quantity of it sold in the country
during a fixed period of time. The only result of such a method
would be to make our final estimate approximate to that of the 39
chief commodities. For the value of the total quantity of these
sold in a year must be several times as great as that of the minor
commodities. The superior importance too of some commodities
is allowed for by quoting several varieties.
Another method I tried was to exclude all commodities which have
undergone exceptionally great changes. Thus assuming the logarithm
·04202 to be a first approximation to a correct average, I would
take a fresh average of all those commodities whose ratios lay between
-·1000 and ·18402, or ·14202 on each side of the first average ·04204.
The new result, however, was not noticeably different from the old
one.
I conclude that the 10 per cent may be taken as the best approxi-
mation we can get to the rise of prices between 1845-50, and 1860-2.
AND ITS SOCIAL EFFECTS.
33
It corresponds to a depreciation of gold of about 9 per cent., that is
100: 110 :: 91: 100 nearly.
It may seem to some that the best and perhaps the only way to ascer-
tain whether and why prices have altered, is to examine the circum-
stances of demand and supply of each article. I do not hesitate to
say that the whole inquiry would be thrown into confusion by any
such attempt, and that for the particular purposes of our inquiry it
is better not to know any details concerning the articles. If you are
able to explain the rise or fall of one commodity by circumstances
unconnected with gold, and throw it out of the inquiry, you must do
the same with others, or else the impartial balance of the inquiry is
overthrown. Now there is not a single article but is affected by
many circumstances besides the alteration in gold. A searching in-
quiry into the circumstances of every article would result in every one
being thrown out as unworthy of reliance as a measure of the value
of gold. It is only by ignoring all those individual circumstances,
and trusting that in a wide average, such as that of 118 articles, all
individual discrepancies will be neutralized, that we can arrive at any
conclusion in this difficult question.
It should be clearly understood that all the preceding parts of this
inquiry are independent of any assumptions as to the cause of the
fall in the value of gold. I consider that I have simply established
the fact of an alteration in the usual rates at which gold was exchanged
against the great mass of other commodities. Any variation of de-
mand or of supply affecting most commodities, to the exclusion of
gold or in a greater degree than gold, or on the other hand affecting
gold to the exclusion of other commodities, or in a greater degree
than these commodities, may be the complete or partial cause of the
alteration. Numerous circumstances might be called in as contribu-
ting causes, but all facts that I am aware of are so inconsiderable
beside the great discoveries of gold, that it is impossible not to treat
these discoveries as the substantial cause of the depreciation. This
must be borne in mind in reading the following pages.
XX.-Of the Price of Silver.
It will probably be asked-if prices in general have risen 10 per
cent, or thereabouts, how is it with the price of Silver? This metal
is as good a standard of value as gold; by some it is thought to be
better. Ought we not to find every change in the value of gold
34
FALL OF THE VALUE OF GOLD,
exactly indicated in the price of silver? This question has at once
presented itself to every one who turned his attention to the subject.
It is, I conceive, because the question has not been in general
rightly answered, that the depreciation of gold has been so much
doubted.
In the first place, it is far from true that no change has taken place
in the price of silver. In tables or diagrams already given,
we see that a permanent rise of at least 3 per cent has taken
place. Before the year 1850, the price might be said to stand
permanently below 60 pence, or 5 shillings the standard ounce Troy.
During the year 1850 a sudden rise took place, and the change has
proved so permanent that only one monthly quotation (May, 1852)
has since been below 60 pence. It is true that the rise has not been
progressive; having attained an elevation of about 3 per cent in
1854 over the old level, the price has remained nearly stationary,
and even slightly fallen back since 1859. That the gold price of
silver should remain stationary has, however, been accounted for by
M. Chevalier, though I must point out a great oversight in that
writer's view of the matter.
By a French law of the 7 Germinal, year 11 of the Revolution, an
attempt was made to combine gold and silver in the French cur-
rency. It was enacted that silver or gold might be used at discretion
parts of silver for 1 part of
in any payment, in the proportion of 15
gold. The law adopted the proportion of values which silver and
gold had long possessed, and continued to possess for some 50 years
longer. But this proportion, as we have shown, was altered to the
extent of 3 per cent, about the year 1850, so that 15 ounces of
silver became more valuable than the ounce of gold for which they
were legally payable as money in France. Thus it became cheaper
to pay
in gold in France, and to pay the silver of France away in
foreign payments. And so long as there is much silver coin current
in France, and the law of the year 11 holds, it will be possible for
merchants, by importing gold against silver, to gain the difference of
the natural and the legal rates of value in France, minus charges of
carriage, insurance, etc. Very correctly M. Chevalier argues that
so long as this state of things lasts, it will be impossible at London,
Brussels, Hamburg, or even at New York, or any other great centre of
commerce, for gold to fall in value much below that of 15 times its
weight of silver. On these grounds he calls the French silver cur-

50
AVERAGE
RISE OF PRICES
DEPRECIATION
OF COLD
ما
60
Brazil Wood
Hides Australian)
LOGARITHM 30103
200
5
190
5
Hides
180
5
170
DOUBLE
-
PRICE
Сосса
100
90
80
Madeira
70
Pepper (White)
5
Raw Silk
Tar
LOCARITHM= 2000
160
5
"Silk
Flax
150
Leather
60
Port
Coffee
Pepper (Black)
Tou
1845-50.
ما
Organzine Silk
Fulige
Palm Oil
LO 140
Calf Skins
5
130
ст
Olive Oil
Wool/S.down.
Wool V.DL.)
Silk (China)
Butter
Beef(Salt/
50
AVERAGE
40
Claret
Pork Salt
OF
PRICES 1860-2 TO PRICES
LO
5
Linseed Cuke
AVER
Quebec Cak
Linseed Oil
Tallar
LOGARITHM
=
Lard
'1000 Beer
30 x
Cassia Lignea
120
Hed Lead
AVER
Lead
Rape Seed Cit
Sperm Oil
AVER
Cotton Pornon}
Wool Sydney)
Cheese Amer"
AVER Mutton
Tea (Congou)
20
White Lead
LO
5
Copper
Steel Swedish
Nitrate of Soda
Wool/German. 1st
Fustic
טור
•FI. Sunn
Legwood
Tumeric: AVER
Rye Cats
Beans
Barley
Mustard
Cover Seed
PRICES RISEN PER CENTUM
AVER
5
100
ما
AVERAGE
SILVER
Spelter
Deals/Canada)
Spirits Turpentine
Cotton (Surub)
Pork
Clover
Hay
--- Sherry
10
Lea Hyson
Tea Souchong!
Terra Japonica
Wheat
Tobacco
Jute
AVER
Prines
Abnonds
Hp
Патр
Cotton (Upland!
Peas
Straw
LOGARITHM
'0000
Tea Orange Phoe
•Tea (Gunpowder)
Spirits (Geneva:
Ο
Nutmegs
LO
5
Tinplates
90
RATIO
Tunber
10
5
Vak Baltic
Bar Fron
80
Pig Tron
Marilla Homp
Wool(German 3rd
り
​Rice
Sago
LOCARITHM
LO
70
AVERAGE
Jamaica Rion
Suger/Gray Aver!
Coriander Seeds
10
E.TRim
Sugar Refined!
AVERAGE
Caraway Seeds
Ginger
AVERAGE
Raisins
20
1000
Figs
Sugar (Hewane!
Sugar Jean
Canary Scells
Gorants
30
CENTUM
PER
10
39 Chief Articles.
79 Minor Articles.
Metals.
E. Stanford, lith: Charing Gross.
Oils etc.
HALF PRICE
Fibrous Materials.
Dves etc.
Sapan Wood
LOCARITHM
Cochineal
Corn
LOCARITHM =-30103
2000
Meat etc.
Tea Sugar etc.
Sugar (Mauritius)
Sugar (Bastards)
Spices.
Cinnamon.
Mace
Cloves
Cloves (Bourbon)
Frint
Wines.
50
PRICES
FALLEN
40
AND ITS SOCIAL EFFECTS.
35
1
1
Here
rency a parachute which retards the fall of the value of gold.
is the great oversight. The French currency may and does prevent
gold from falling much below its old relative value to silver, but it
cannot prevent either gold or silver from falling in value. The
inevitable conclusion drawn from my tables of prices is that gold has
fallen say 9 per cent; silver has risen in value compared with gold
3 per cent; the difference, 6 per cent, must necessarily represent the
depreciation of silver. Nor is it hard to see that, from the change of
the French currency, silver must participate temporarily in the fall of
gold.
The moment the abundance of the Australian and Californian
gold has altered the relative values of gold and silver by a certain
amount, it becomes profitable for French merchants to buy up with
silver all gold they can get at or below this new rate on the one con-
dition that other countries will take French silver in return. One
hundred millions of gold flowing into France cause an overflow of
one hundred millions of silver out of France. This vast supply of
silver is just as unusual, sudden, and superfluous, as the supplies of
gold from Australia and California. France, in absorbing the new
gold, pours out silver just as if it had come from newly-discovered
silver mines of extraordinary richness. There can be but one
result. The value of silver must fall before the new and unusual
supplies can be disposed of. Suppose it to fall so that silver and
gold nearly resume their old relative values. The substitution of
gold for silver in France is now no longer profitable. Gold accumu-
lates on the London and other markets, and therefore again begins
to fall in value. This cannot proceed far without it again becoming
profitable to substitute gold for silver in France. Gold is again
readily absorbed; silver again becomes superfluous and depreciated.
Gold and silver thus alternately accumulate upon the markets of the
world, and their values alternately fall down to the point at which it
becomes possible to dispose of the one or other metal in foreign
markets, especially in India. What is here described as taking place
by steps, may also take place continuously and simultaneously. The
superabundance of gold flowing into France, causes a superabund-
ance of silver to flow out, just as a stream flowing into one end of a
reservoir that is already full, causes an equal stream to flow out at
another part. Both metals are depreciated in company, and nearly
as much as gold alone would have fallen had the French currency
D
36
TALL OF THE VALUE OF GOLD,
law not existed. Not quite so low, indeed, because by that law it is
now possible to dispose of the new gold either by direct use, or
indirectly by disposing of French silver at its reduced value, and
putting gold in its place.
There is nothing new or strange in this sympathy between the
values of two articles. Any two articles which can be used more or
less one in the place of the other, vary in price together. A compa-
rative abundance of either article causes it to overflow into channels
of consumption usually filled by the other. When wheat is cheap, it
is lavishly used as fodder for horses, stock, for distilling, and a variety
of other uses to which inferior kinds of grain or other produce are
usually applied. Thus the cheapness of wheat causes most other
kinds of agricultural produce to be cheap, and similarly of other
groups of commodities.
These effects of the French currency law are far from being in-
dicated by theory only. The tables already given show by the force
of facts that the price of silver has not risen so much by some 6 per
cent as the prices of 117 other articles. This constitutes a deprecia-
tion of silver. On the other hand, statistics of undoubted accuracy
show that in 1859 about £100,000,000 of gold had been absorbed
by France, a large amount of silver being given out. Previously to
to the year 1852, the annual imports of silver into France had ex-
ceeded the exports. In that year which immediately succeeded
the change in the price of silver the stream turned, and the ex-
ports have since constantly exceeded the imports by a large amount.
These facts are shown by the following data in M. Chevalier's "Essay,"
P. 47.
1846 Excess of Imports of silver into France £1,870,868
1847
""
دو
وو
2,145,163
1848
""
""
""
8,557,338
1849
""
""
9,782,708
1850
2,615,378
""
وو
1851
3,117,959
""
""
1852 Excess of Exports of silver from France
108,690
1853
""
""
4,675,418
1854
6,547,751
>>
""
وو
1855
7,886,385
""
""
1856
""
""
""
11,342,932
1857
14,500,835
>>
""
1
AND ITS SOCIAL EFFECTS.
37
;
The large amount of silver thus thrown upon European markets
has been disposed of in Eastern markets, thus causing, as I think,
that remarkable drain of silver to the East which for eight or ten
years back has excited so much surprise in the commercial world.
Some excellent writers have attributed this drain to the balance of
trade between Europe and India, as disturbed by the transmission
of English capital to railway works in India. The drain of precious
metals, thus accounted for, then serves to explain the supposed fact
that the precious metals have not fallen in value here. It would be
extremely difficult, if not impossible, to prove or disprove anything
à priori, by the balance of trade between Europe and the East. But
having shown upon a wide basis of facts that both gold and silver are
depreciated here, I am much more inclined to regard this deprecia-
tion as the cause of the Eastern drain. The fall in the value of silver,
compared with most other goods, makes it more profitable to pay for
Eastern produce with silver bullion than with our manufactures, silver
being always acceptable among Asiatic nations.
CHAPTER III.
DEDUCTIONS ON OTHER GROUNDS, CONCERNING THE FUTURE
VALUE OF GOLD.
XXI.--Of the Rate of Fall of the Value of Gold.
WRITERS have usually treated the fall of the value of gold, as if it
is a remote event that will happen suddenly after the accumula-
tions have become great. M. Chevalier's theory about the para-
chute has contributed greatly to nourish and support this notion.
Nothing however can be more mistaken. The most sudden fall must
occur at the first, and the value of gold will fall more and more
slowly as time gets on, and the total accumulations of gold grow.
This is a simple consequence of the fact that gold is chiefly used as
currency, so that its value varies nearly inversely as the total quantity
in use.
Let us take the Estimate of Tooke and Newmarch, and
suppose that the quantity of gold in use at the end of 1848 was 560
million pounds sterling; let us further suppose 20 millions to be the
subsequent annual excess of supply over consumption. Then, at the
D 2
38
FALL OF THE VALUE OF GOLD,
end of a year 580 millions were in use, and the value of gold was
reduced in the ratio
in use, and
and so on.
End of
year.
560
580
the value of gold was reduced in the ratio 600 : 560,
Thus we get the following:-
; at the end of two years 600 millions were
Quantity of gold
Total fall in
in use.
value of gold
Million £.
per cent.
Total fall per
cent, during
each year.
*
1848
560
0
0
1849
580
3.4
3.4
1850
600
6.7
3.3
1851
620
9.7
3.2
1
1852
640
12.5
3.1
1853
660
15.1
3.0
1854
•
680
17.6
2.9
1855
700
20.0
2.9
1856
720
22.2
2.8
1857
740
24.3
2.7
1858
760
26.3
2.6
1859
780
28.2
2.6
1860
800
30.0
2.5
Of course the above numbers are not supposed to represent the
real course of the fall, but they show sufficiently, that the rate of
falling must be most rapid at first, and decreases by nearly a third
within the first 12 years.
In a more general form-if a be the quantity of gold in the
world at any time, and b the quantity added in each succeeding year,
then at the end of n years, the value of gold is reduced as 1 to
α which is always growing less as n increases, but at a con-
stantly less rate. Thus the fall during the nth year is as 1 to
a + (n − 1) b
which as n increases constantly approaches unity.
a + n b
a + n b
XXII. Of the ultimate equilibrium of the Supply and Consumption
of Gold.
It is obvious that the fall in the value of gold will become less and
less rapid, even on the supposition that the annual supply of new
*Not found from the preceding column by substraction, but by dividing the
quantity of gold each year into the quantity of the preceding year.
AND ITS SOCIAL EFFECTS.
39
gold remains constant. But this is a very wrong supposition. Even
supposing the mines not to become exhausted, there are large num-
bers of diggers, whose earnings are so small, that any fall in the
value of gold will render their labour incapable of supporting them.
They will desert gold digging for other more profitable occupations
which the colonies offer. The more the value of gold falls the
greater the number who will desert gold digging, and the greater
the decrease in the produce of gold. Again, as the total quantity of
gold in use increases so must the consumption by wear and loss in-
crease. In proportion as the value falls the consumption increases
and the supply decreases. The consumption then must at last
become equal to the supply, and thenceforth the value will be
stationary, or nearly so.
Two assumptions, which are not far from the truth, will enable
us to put this result in a simple form. Let us suppose that the
consumption of gold increases in the same proportion as the whole
mass in use; and since the value falls inversely as that whole
quantity, let us further suppose that the supply decreases in the
same proportion as the whole mass in use increases.
Let A be the quantity of gold in use at any time, c the annual
consumption then, and p which is greater than c, the annual supply
at the time. Let d be the total addition up to the time when
equilibrium of supply and demand is attained, and the value of gold
is stationary. At that time then the value of gold is reduced as 1 to
A
The annual supply at that time, according to our sup-
A+ d
positions, is p.
A
A + d.
The consumption at that time is c.
A+ d
A
C
A + d
A
A
and the supply is equal to the consumption, or p. A + d
The solution of this equation gives us d
Ρ
(√2 − 1 ) A,
C
so that the greatest amount which the accumulation of gold will reach
P
is √2. A, and the greatest possible depreciation of gold is as
1 to
C
Ꮳ
√, which is independent of the amount of gold in use at any
Ρ
one time.
40
FALL OF THE VALUE OF GOLD,
M. Chevalier's estimate of the probable annual consumption of gold
(according to the old value ?), is as follows:
For the extension of currency.
1. Of certain countries
2. From increase of population, and well-
being generally
3. From commercial extension
•
For wear and tear of currency
For hoarding and accidental losses
For use in the arts
Total annual consumption
£4,200,000
3,080,000
3,080,000
490,000
2,100,000
4,900,000
£17,850,000
Joining to this his estimate of the annual production at
£35,000,000, we have an ultimate fall of the value of gold in the
17,85
ratio of 1 to N
35,00
or nearly as 1 to or as 1 to 714. Thus
gold would fall in value by less than 30 per cent.
But though M. Chevalier takes the annual production at
£35,000,000, he thinks it may rise shortly to £42,000,000. In that
case the ultimate fall of value will be as 1 to 65, or by 35 per cent.
The estimated consumption adopted by M. Chavalier is in his opinion
a great exaggeration, and only adopted to render his argument an
à fortiori one. Mr. Macculloch,* however, would by no means be
satisfied with even a consumption of £17,850,000 per annum, for he
adopts the following large estimate of the annual consumption of
the precious metals, merging the amounts of value of gold and silver
together:-
Wear and tear and loss of coin
Increase in currency
Used in the arts.
£7,500,000
10,000,000
12,000,000
£29,500,000
5
As he estimates the annual production of the mines at £39,050,000,
he finds there is only a surplus of £9,550,000, both of gold and silver,
to be boarded, exported to the East, or pressed upon the market.
Under these circumstances, the maximum fall of value would be only
cent!
13 per
For my part, I cannot but agree with M. Chevalier, that even his
estimate of the consumption of gold is greatly exaggerated, especially
Encyc. Brit. Art. Precious Metals, p. 466.
1
AND ITS SOCIAL EFFECTS.
41
as regards the extension of currency. A more moderate estimate
would indicate a greater surplus produce of gold and a greater pro-
bable depreciation, say 50 per cent; but all such estimates are so
uncertain that I care not to dwell upon them.
It remains to be remarked, that any conclusion drawn from the
preceding calculations is based upon arbitrary assumptions, each of
which is more favourable to the fall of gold than by right it ought
to be; and that, for simplicity, I have also made an omission in the
calculation which similarly tends to exaggerate the conclusion.
This is the
In the first place, I make no doubt that the consumption of gold
will increase rather more rapidly than its value falls. That large
part, indeed, which swells the currency of various countries will
follow this simple law pretty exactly; but were gold to fall to
anything like half its old value, there could not fail to be a new de-
mand for the purposes of ornament, luxury, and use.
first thing that would tend to diminish the fall of value.
Secondly, the mines are far from maintaining their original rich-
The alluvial deposits, even in the first ten years, show signs of
exhaustion, and the deficiency cannot be fully supplied by quartz-
mining. This decreasing fertility of the mines will so strongly tend
to arrest the fall of value that we must consider it more fully in
another section.
ness.
Thirdly, we have treated the £10,000,000 or more of gold annually
added to the currency, owing to the increasing requirements of trade,
as if it were consumed and destroyed, which is not the case. Being
retained in use as currency, it is not only subject to wear and tear,
but also requires an increase every year, as its value is depreciated.
The result is, that though the mass of gold eventually in use will
exceed our estimate (A+d), the annual consumption will also be
greater-so that it will sooner balance the annual supply. The value
of gold will be arrested before it falls to of its old amount. To
N
p
correct this omission would require calculations of a complexity un-
suited to this inquiry, and to obtain any mathematical conclusion,
proceeding on other than simple and arbitrary, but approximately
correct laws, would, of course, be impossible.
The extension of the currency of the world, caused by the spread
of commerce, tends to retard the fall of gold. It must not be
confused with that increase or swelling of the currency which is an
FALL OF THE VALUE OF GOLD,
42
effect of its depreciation. It seems to me that most writers have
over-estimated the consumption of gold by the first cause, perhaps by
not keeping it perfectly distinct from the latter effect.
XXIII.—Of the future Supplies of Gold from the Mines.
The amount of gold which may be procured from almost any
quarter of the globe is, so to say, unlimited; but the critical question
is, Will it pay to extract it? If the gold-fields of Victoria offered to
every labourer who chose to resort there the reward of 15s
per day, the country would soon be densely populated, its pros-
perity ever increasing, its produce of gold ever growing, and gold
would soon be reduced in value to a half or a third of its present
value. Thus M. Chevalier, quoting some statements of the year
1854, when the gold-fever was at its beight, takes the ordinary earn-
ings of a miner, whether in Australia or California, to be at least
19 francs per day. "If, then,"* he adds, "the auriferous regions
preserved indefinitely the same richness, the value of gold might fall
until the sum of 19 of our present francs in gold was only equal
to the ordinary price of a day's labour in California and Australia,
after the cost of subsistence and the rate of wages should have found
their permanent level.”
Such would, no doubt, be the conclusion from the data; but any-
thing more erroneous than those data cannot be easily found. I
speak with the advantage of having resided in a gold-producing
colony, and travelled over nearly all the chief diggings of Australia,
when I say that the greater number of gold diggers earn small and
precarious wages. It has been said, that all mining industry, like
speculation in lotteries, is carried on at a loss. This is especially
true of gold-digging. From the first, the great attraction of the
diggings was in the freedom and novelty of the life, and the exciting
chance, however small, of a sudden fortune, than in the reasonable
prospect of good steady earnings.
The greater number of the diggers pass a most laborious life, to
gain average returns of only a few shillings a day. They continue
the occupation more from love of independence than of the gold it
produces. They strive to keep up the pleasure of the chase by
frequent removals from one digging to another, on the slightest report
of new discoveries. There has, in fact, arisen a large class of ex-
* Cobden's translation, p. 43.
AND ITS SOCIAL EFFECTS.
43
perienced but nomadic diggers, who are constantly making what are
called 'rushes,' and who often, on the most unreasonable grounds,
make journeys from one colony to another, 1000 miles or more away.
I have seen 10,000 diggers and others assembled in a 'rush' during
two or three weeks, on a plot of ground where a rich discovery was
'reported' to have been made, and where a town of wood and canvass
was already risen, or quickly rising, with its shops for butchers, bakers,
clothiers, jewellers, and with even hotels, banks, and newspaper offices.
The excitement of the occupation draws crowds to dig for gold who
would make far better profits at their proper trades. The production
of gold during past years has thus been altogether beyond the go-
vernance of economical laws; it has not been requisite that the
produce should pay the cost of production, and remunerate labour as
well as other occupations which are open to the labourer.
I cannot think that this present state of gold digging industry will
endure. The nomadic class of skilful 'prospectors,' or gold seekers,
will die out in some ten or fifteen years more, and gold digging
will become a more steady and ordinary occupation. Having less
of the attraction of a lottery, the total produce cannot fail to be
reduced. Those who have hitherto formed the poorer classes of
diggers, will be attracted from the occupation by wages offered in
other occupations, and any fall of the value of gold must accelerate
this change. I believe it has already done so.
In opposition to M. Chevalier's quotation of a gold miner's
earnings in 1854, I will state that in a Parliamentary Paper* the
wages of a farm labourer in 1858, in New South Wales, are quoted at
4s per day, and the wages of a shepherd at 5s 6d. It is well
known, too, that for some years back there have often been in Mel-
bourne and Sydney crowds of strong labourers, chiefly unsuccessful
diggers, clamouring for employment from the Government at some
4s per day. Owing to the high cost of subsistence in the Colonies,
such wages were regarded, and were in fact scarcely more than a
pauper's allowance. These facts prove that there is a wide margin
of gold production which must be given up as the falling value of
gold still further reduces the profits.
* Statistical Papers relating to the Colonial Possessions of the United Kingdom,
Part V. 1858, p. 277. A statement more to the point is in Appendix, Note D, of
this tract.
44
FALL OF THE VALUE OF GOLD,
What has been said does not apply so fully to those men, or com-
panies of men, who are furnished with capital and enabled to under-
take large sluicing works, deep sinking, or quartz-mining and crush-
ing. That there is a wide area open for such works is beyond
doubt. It is equally beyond doubt that certain quartz mines, and
certain beds of alluvium, will yield gold for ages to come.
But gold-
mining will more and more become submitted to the principles of
ordinary industry, by which both capital and labour seek the occupa-
tion which gives the largest returns. The falling value of gold can-
not fail, therefore, seriously to retard such steady gold-mining. And
these operations, however well conducted, will not yield the lottery-
like returns that were got at the first scramble from the newly
discovered alluvium of Ballaarat and Bendigo. The gold produce of
Victoria has long reached its maximum, and is declining, partly
perhaps owing to the rushes' of diggers to New South Wales
and New Zealand, but partly, as I think, to the failing richness
of the deposits, and the falling value of gold.*
The only way in which the gold produce could be kept at the high
amount of past years, would be by a succession of discoveries of rich
gold alluvium. But it seems to be the nature of these alluvial
deposits to be easily discovered when once attention is drawn to their
existence, and to be quickly rifled of their thickest riches. It is a
most singular fact, that in Australia at least, all the richest deposits
were found in the first year or two. Ballaarat and Bendigo seem as
if they would always maintain the leading position they took at the
first. Though nearly the first spots worked in Victoria, they are
likely also to be the last. And so of other gold fields; the first coup
has generally been followed by a great many lesser ones, but anything
like a progressive discovery of gold alluvium seems to be against the
nature of things.
very
The supposition, then, that the gold produce will decrease in the
same proportion as the value of gold, is probably less than the truth.
The failing richness of the gold deposits will occasion, in my opinion,
a still greater decrease; so that the value of gold will be arrested
earlier, and at a higher point than according to my assumptions in
the last Section.
1
די
* See App. Note E.
AND ITS SOCIAL EFFECTS.
45
XXIV. Of the probable ultimate Fall of Value.
M. Chevalier suggests that the value of gold may fall to half its for-
mer level, or by 50 per cent. From a general view of the facts and
arguments already presented, I am inclined to think the fall will be
arrested at, perhaps, 30 per cent. As I think it not improbable that
a depreciation of some 15 per cent has already occurred (though I
do not positively assert it), it will follow that the more serious and
sudden part of the fall is already felt. As shown in Section XXI.,
the fall is most sudden at the first.
Having arrived near the limiting value at a rate ever decreasing,
the value of gold will probably long remain very steady, because its
area of production has been so much extended. Before the recent
discoveries, no gold mines of value have been in the possession of any
Anglo-Saxon nation. They have been chiefly in the hold of the
Spanish and Russian Governments, subject to arbitrary restrictions
and taxes. In English or American hands the production of gold
becomes a matter of free industry and skill. It must follow, that the
produce will conform more closely to commercial principles; a rise
or fall in the value of gold will be followed more exactly by an exten-
sion or cessation of the production. At the same time, the greater
area of production, offering scope for more various competition and
equalization of local fluctuations, and the greater and more various
modes of consumption, will all tend to render the demand and supply
of gold more equable and its value more constant.
XXV.-That the Values of Gold and Silver will probably return to
their ancient proportion.
It is curious, that the utmost depreciation of gold which can be
considered likely, will be just about sufficient to restore gold and
silver to the proportional values which they usually held in the middle
and older historical ages of the world.
According to the earliest authentic statement which occurs in
Herodotus, gold was, in the reign of Darius, 13 times more valuable,
weight for weight, than silver.
About 50 years later, the proportion in Greece, according to a
statement in the Hipparchus of Plato, seems to have been 12 to 1.
The pillage of the temple of Delphi, in в.c. 357, throwing more
46
FALL OF THE VALUE OF GOLD,
than 10,000 talents of gold into circulation, reduced its value to
about 10 times that of silver. This rate, there is reason to suppose,
continued until about 170 years after the death of Alexander.
In the Roman world, the value of gold is said at one time to
have risen as high as 17 times that of silver. When Cæsar re-
turned from Gaul, with much spoil of gold, its value fell to 9
times that of silver; but these fluctuations were probably temporary.
From the time of the Emperor Galba to that of Alexander Severus,
the ratio of values was that of 12 to 1. Under Constantine, it was
10 to 1; after his reign, however, gold became 143 times as valuable
as silver. During the middle ages the ratio varied between about
10 and 12 to 1,* but soon after 1600 it began to rise gradually, in
consequence of the supplies of silver from the new American mines
predominating over the supplies of gold. In 1717 the weights of the
English silver and gold coins were adjusted in the ratio of 15-209
to 1, and only changed in 1816, when silver coins were reduced to
the subordinate rank of tokens.
Thus, from the time of the earliest historical notice down to the
discovery of America, gold was not on an average worth more than
10 or 12 times as much as silver. The superior abundance of
silver in America appeared permanently to alter the proportional
values, so that for some two centuries last past, gold has been as much
as 15 times as valuable as silver. And the proportion has been very
steadily maintained.
The Australian and Californian discoveries have now come as the
great counterpoise to the Peruvian and Mexican discoveries of the
16th century. Gold, in falling in value 30 per cent, will perhaps
return to its old relation to silver-that of 10 or 12 to 1.
It is not at all unlikely, however, that silver is now suffering, or
will soon suffer, a certain depreciation, independently of gold. The
discovery of the Pattinson process for separating silver from lead,
has been equivalent to the discovery of new mines. And were the
Spanish American States to be redeemed from anarchy by again
falling into the possession of any European government, it is certain,
as M. Chevalier has remarked, that they would throw largely in-
creased supplies of silver upon the market. This possible permanent
depreciation is, of course, quite distinct from the temporary deprecia-
*See a table of the English Coinage, Tooke's Hist. Prices vi, 11-
AND ITS SOCIAL EFFECTS.
47
tion of, say 6 per cent, caused by the pouring out of the French silver
currency. When the silver currency is nearly exchanged for a gold
one, as will soon have happened, this supply of silver will of course
suddenly cease, and the price of silver will quickly rise to between
65 and 70 pence per ounce Troy. When the price rises above
66 pence per ounce, it will be necessary to diminish the weight of
the English silver coins, in order to prevent their being exported
like the French coins.
CHAPTER IV.
SOCIAL EFFECTS OF THE DEPRECIATION OF GOLD SET FORTH.
XXVI.-How the Effects will be apparent.
It is worth while to consider what social effect the present depre-
ciation of gold must have, through the virtual alteration of all fixed
money payments. The ordinary dealings of manufacturers, merchants,
and traders, being terminated in the course of a few months, or, at the
most, of several years, will be comparatively unaffected by an alteration
of the standard which merely increases the figures in their cash-books
and ledgers without altering the balance. It is otherwise with the
accounts of any person who, by virtue of a contract, has a fixed sum
of gold money to receive or pay on one side of his account, while the
sums on the other side, depending on the prices of the chief articles
of subsistence or commerce, increase as gold falls in value. The
balance of his accounts is deranged in a very serious manner, as dis-
advantageous to the receiver of the fixed sum of money as it is
advantageous to the payer. A fall in the value of gold virtually
violates every contract expressed in gold money, and benefits the
debtor at the expense of the creditor. Exactly the same effects will
follow wherever a payment remains fixed at its former amount by
the force of custom and habit. It may, perhaps, be said that there
is hardly a person among the 30,000,000 in the kingdom but is
`affected more or less, for better or for worse, by the change which is
taking place. The same may be said of every other country where
contracts are performed, and payments made in gold.
48
FALL OF THE VALUE OF GOLD,
There have not been wanting alarming predictions of the social
effects which must thus follow the alteration of the standard of
value. M. Chevalier says* of the period of change :-
“This transition will be an interval painful to pass, and will be
marked by innumerable shocks and sufferings.
“The value of all properties will be subjected to a painful uncertainty,
and to injurious fluctuations. It will be still worse for those persons
to whom I have already alluded, whose incomes consist of a sum of
money (Napoleons or sovereigns) fixed in advance. They will live in
a perpetual state of trouble, anxiety, and uneasiness. They will sink
by whole sections from their present state to another, in which they
will enjoy only the half of their previous comforts; reasoning, as
I always do, upon the assumption that gold falls to the half of its
present value. They will be flung headlong, without rule or measure,
down to a lower station, and without ever having the chance of
preparation, for it is the very essence of changes of this kind, sub-
jected as they are to many opposing influences, to pursue an irregular
and disorderly course."
Mr. Cobden, in the preface to his translation of Chevalier's well-
known Essay (p. ix.), expresses a similar opinion:-
"Wages and salaries of all kinds would eventually rise in propor-
tion to the enhanced price of commodities, but the transition would,
I fear, be accompanied with much inconvenience and suffering. The
rise would not be steady and continuous, but would be effected by
leaps, and after struggles which would tend to derange and convulse
the relations of capital and labour."
I think, on the contrary, that the alteration of the value of gold
must, especially for the future, be most gradual and gentle in its
effects. Far from taking place with sudden and painful starts,
flinging the rich headlong down to a lower station, and shaking the
groundwork of society, nothing is more insidious, slow, and imper-
ceptible. It is insidious, because we are accustomed to use the
standard as invariable, and to measure the changes of other things
by it, and a rise in the price of any article, when observed, is natu-
It is
rally attributed to a hundred other causes than the true one.
slow, because the total accumulations of gold in use are but little
* Cobden's translation, p. 114.
AND ITS SOCIAL EFFECTS.
49
increased by the additions of any one or of several years. It is im-
perceptible, because the slow rise of prices due to gold depreciation
is disturbed by much more sudden and considerable, but temporary
fluctuations which are due to commercial causes, and are by no means
a novelty.
It is almost impossible, too, for any person to detect the effects of
the change of standard in his own personal affairs. Besides the
interference of changes in prices and profits and activity of trade,
which affect most persons, each person has his own fluctuations
of prosperity and adversity. If his income is not variable, at least
his expenditure is more or less so. There are a hundred items
of expenditure, some increased, some diminished, and among the
variety of unmeasured circumstances, it is impossible for him to feel
the very slow and measured change of 20 or 30 per cent, spread.
over 20 or 30 years. If his receipts are variable and increasing, he
enjoys the consciousness of prosperity, and probably attributes it
complacently to his own abilities and deserts. If his income consists
of fixed dividends or rents, he receives the same pieces of money
as before, and has no thought that they are not what they were. It
is when he comes to pay his household bills that he can alone feel
the difference. And then the difference seems to arise from the
deficient harvest, from the growth of population, from the extortion
of tradesmen, from anything rather than the change of a British
sovereign fresh from the Mint. Value is the most invisible and
impalpable of ghosts, and comes and goes unthought of while the
visible and dense matter remains as it was.
So it certainly has been, I think, in the last 15 years. Prices rose
about 1853 so much, that no trader or housekeeper could be igno-
rant of the change in the case of several articles at least. But
then the rise of prices is diversified by occasional falls until the
original state of things fades from the memory. The fluctuations
noticed are rightly attributed to the prosperity or stagnation of
trade, to an increase of demand, or to a war which happens to be
waging in some part of the world. It is, in fact, impossible by
ordinary observation of two or three articles to separate and detect
the change of prices due to gold. Only a laborious inquiry extending
over many years, and over most of the articles of commerce, can
enable us surely to separate the gradual but permanent effects of
gold depreciation from more noticeable but temporary changes. It
50
FALL OF THE VALUE OF GOLD,
is needless to add that the working out of long tables and calculations
is not a popular occupation. Thus it is that a considerable fall in
gold, and I believe the most sudden and serious part of the fall that
can be expected to occur, has occurred while almost all the world were
either without thought of such an event, or altogether in doubt
about it.
XXVII.-Classification of Incomes according as they suffer from
depreciation.
It will be well to examine rather more closely the effect of the
depreciation of gold upon individuals in different circumstances. We
can always arrive at the effect by separating those items in their
accounts which are fixed money payments, from those which depend
on the variable prices of other commodities, or on the rate of wages.
So far as fixed receipts are balanced by fixed payments, or variable
receipts by variable payments, there is neither loss nor gain. But
so far as fixed receipts are balanced by variable payments, and
variable receipts by fixed payments, there is respectively loss and
gain to the whole extent of the depreciation of gold occurring since
the receipts or payments were fixed by contract or otherwise. A
further distinction, however, will have to be drawn between receipts
altogether fixed, and those depending on fixed charges. The charges
of a lawyer are fixed by law, but his income chiefly depends on the
number of his clients. The tolls of a bridge are usually fixed by
Act of Parliament, but the receipts of its owners depend on the
amount of traffic. In every such case we shall have to consider
separately in what degree the lowering of the charges effected by
the depreciation of the standard, will occasion so much more custom
or traffic as to prevent loss of income.
First, taking the receipt side of the account, I will attempt to
classify the various kinds and sources of income, according as they
are more or less affected by gold-depreciation :
The incomes and property of the following are perfectly fixed in
money amount and suffer to the whole extent of the depreciation of
gold, it being understood that the payments of contracts are ex-
pressed in British or gold money.
British fundholders, stockholders, or annuitants, and holders of
exchequer bonds or bills.
AND ITS SOCIAL EFFECTS.
51
!
Holders of bonds, annuities, or any kind of debt (in gold money),
due from Foreign Governments.
Holders of bonds, debentures, &c., with fixed interest on money
advanced for roads, docks, or other public works.
Holders of preference shares or debentures of fixed interest (and
to some extent all shares with guaranteed interest).
All creditors, the payment of whose claims is deferred any con-
siderable period.
Mortgagees.
Owners of leasehold property, as regards the period of the lease.
Holders of policies of insurance, whether upon life or other risks.
Depositors in banks, savings banks, or in private institutions, firms,
or in the hands of private individuals.
Owners of any contingent claims, definable in money, upon
friendly societies, or other institutions, or upon individuals.
Bank stock proprietors, shareholders of joint stock banks, discount
companies, bankers, capitalists, bill discounters and dealers, money-
lenders, and all who hold or own capital in the form of money. (It
very difficult in these cases to separate the effect of a variation in
the value of gold, in which their capital really consists, from the
variation of the value or interest of money, and the varying success
of the business.)
is
Goldsmiths, bullion dealers, misers, or others who hold any con-
siderable quantities of gold.
The Royal Family, officers of state, judges, government employés
and others upon the civil list, and with fixed salaries or pensions.
Officers and men in the army and navy.
Half-pay officers, and pensioners not receiving subsistence in kind.
Holders of endowed offices of any kind, fellowships, etc., where the
receipts are defined in money.
All persons receiving pensions, alms, or allowances of fixed money
amount.
Each of the above classes suffers the loss accruing from the de-
preciation of gold between the moment when the payment is defined
in money, and the payment or series of payments is made (or rather
expended). Of course, the loss is inappreciable unless this period
of time concerned be several years at least. But a person may
suffer the whole effect of the depreciation, although frequently
changing the form of his property so long as it is held continuously
E
52
FALL OF THE VALUE OF GOLD,
in any of the forms above described. Thus, if a person holds his
fortune in gold or bank notes, for a time, then as a bank deposit, in
consols, in bank stock, finally perhaps lending it on mortgage, he will
still suffer the depreciation of the whole period.
2. The next class of incomes contains those depending on fixed
charges, established by law, custom, or convenience. It is impossible
to form more than a rude conjecture as to how far the lowering of
the charge will increase the traffic, custom, or activity of business,
but I will begin with those that seem likely to have least compen-
sation from this source.
Solicitors, attorneys, and other lawyers whose charges are fixed;
their business can only in a very indirect and partial manner receive
any increase.
Physicians, with their customary fee of a guinea, will scarcely
receive full compensation.
A great variety of payments at exhibitions, theatres, and enter-
tainments, fixed by custom at one shilling, of subscriptions to
societies, clubs, charities, &c., school or college fees, pew rents,
mostly fixed at customary amounts, are not likely to be wholly com-
pensated.
Fees to registrars, clergymen, public officers, &c., will yield little
or no compensation.
Tolls of roads, bridges, and ferries are usually fixed by law, but
increased traffic will usually give ample compensation.
Tolls on railways, canals, telegraphs, steam-boats may be raised,
or a lowering deferred by the fall of the value of gold; it will depend
upon the skill with which the tolls were originally adjusted whether
the revenue is increased or diminished by the slight alteration due to
gold. In any case, it may be said, that there are few kinds of pro-
perty that will suffer less from a depreciation of gold. The same
may be said of water and gas companies.
Charges of cab-drivers, postmasters, carriers, licensed porters are
usually fixed by law or custom, but will be fully compensated.
Post-office charges, especially the penny stamp, will certainly not
be raised in consequence of gold depreciation, but the continuous
increase of the revenue more than covers any depreciation.
3. Although both the preceding classes of income include a great
aggregate amount, the third class is still greatly more comprehensive
and important. Among those variable incomes which are entirely
AND ITS SOCIAL EFFECTS.
53
independent of the value of gold, and therefore suffer no loss by its
depreciation, are those of manufacturers, farmers, contractors, mine-
owners, shipowners, who depend chiefly on their skill and good
fortune; of merchants, brokers, agents, tradesmen, commercial
travellers, hawkers, and dealers generally, whose profits usually con-
sist of a percentage on the value of the articles turned over; of
artizans, skilled workers, labourers, porters, domestic servants, and
others receiving variable wages.
I may add innkeepers, lodging-house keepers; medical men, apothe-
caries, and others of uncertain charges, performers, of various kinds,
and a host of others whose charges and earnings are equally un-
certain.
Soldiers, sailors, pensioners, paupers, and others receiving support
in kind will not suffer so far. All persons owning land, houses, or
other property not in money, will not suffer so far, as they either
occupy or use the property or let it for short periods; in leasing it
for long periods, and for money rents, they will lose. Clergymen, in
receiving tithes and variable rents, will suffer no loss.
There is, however, a very large class of incomes, including wages
or salaries, which must be considered of quite uncertain position.
In a large proportion of cases the salaries of clerks, officials, and
other employés, or the wages of servants and labourers will remain
unchanged for long periods of time by want of attention to the
changed value of gold, or the general dislike to altering or discussing
an agreement once made. In those cases, where the salary or wages
remains unchanged, the office or employment must usually be reduced
to a lower rank, and command less efficient services. This will often
be the case where the income from which the salaries are paid is also
fixed, and liable to loss from depreciation. In other and the majority
of cases the salary or wages will be raised after the lapse of a
certain time. Artizans, mill-hands, and other skilled labourers will
obtain the increased wages by strike, if not by the free acquiescence
of their employers. It is not unlikely that the great strikes which
occurred a few years ago were partly caused by the depreciation of
gold.
XXVIII.-Of Expenditure as affected by Depreciation.
For every person who suffers loss in a fixed income or claim from
depreciation of the money in which it is paid there must be some
person or persons who gain. But, with few exceptions, the corres-
E 2
54
FALL OF THE VALUE OF GOLD,
ponding benefit is very much diffused. There are but few individuals
subject to fixed payments of long endurance. The fixed payments
enumerated in the first class of incomes are chiefly due from the
Government, or from public or private companies, or institutions.
It will be shown that, as regards the Government annuities and other
fixed payments, the whole community gains in the unintentional re-
mission of taxation which gold depreciation has effected. Foreign
Governments and peoples equally gain as regards debts in gold due
from them. All public companies, corporations, or their members
and shareholders, gain in the partial remission of their debts, the
effect being a slight improvement of the dividends. In the case of
banks, insurance companies, capitalists, goldsmiths, or others holding
any part of their capital as money or gold, their loss, or that of their
depositors or claimants, is not productive of any corresponding gain
to other persons. They suffer from the actual depreciation of money
in their hands. The occupiers or lessees and mortgagors of property
gain to the full extent of what lessors and mortgagees lose.
The lowering of fixed charges considered in the second class of
incomes, was found to inflict a very partial loss on their receivers,
but it occasions a great benefit to the public at large. The payments
for conveyance, for amusements, and for a great variety of services,
being virtually lowered, persons either spend less upon them than
before, or else by availing themselves more freely of such services,
they gain in comfort or amusement. The effect is a general in-
crease of business, inducing increased industry and energy, with very
slight exceptions, of a most beneficial character to all classes.
As incomes in the third class suffer no loss, there is, of course, no
corresponding gain.
The greater part of the expenditure of all individuals consists of
payments for food, clothing, variable rent, and innumerable charges
which increase pari passu with the depreciation of gold. If these
charges are defrayed out of a fixed income, the increase of expenditure
must either be met by cutting off former savings, by relinquishing
former enjoyments, or by exertion in providing new sources of
income.
XXIX.—Effects of Depreciation upon the Revenue and Expenditure
of the Country.
It is a principle, and a very right one, of the English tariff, to
define all charges as much as possible by reference to fixed weights
AND ITS SOCIAL EFFECTS.
55
or measures of commodity. Ad valorem duties are imposed only
upon such rich articles as lace, silks, and precious stones, of which
the weight or measure bears no constant relation to the value. Thus
the tendency to fraudulent misrepresentations concerning the value
of goods, is, as far as possible, removed. Similarly all the excise
charges and assessed taxes are defined by quantities-pounds of malt,
gallons of spirit, number of horses, and so forth. The stamp charges
are partly fixed, such as those on most kinds of legal documents.
But when a legal document expresses a money claim, the stamp
charge is regulated in some proportion to the amount of the money,
as there can be but little misrepresentation for the purpose of evad-
ing the tax. Among these ad valorem stamp duties fall the whole of
the duties on legacies, letters of administration, and probates. The
larger part of the income tax, and the miscellaneous sources of
revenue, are also ad valorem, increasing with the prices of articles.
It would not be possible to determine with exactness how much
the revenue suffers by the depreciation of gold, without going
through the whole of the National accounts in detail.
But separat-
ing en masse, and when necessary by conjecture, the part depending
on fixed charges from that which is ad valorem, and therefore
increases with the increase of prices, we have the following rude esti-
mate for the year 1860: -
Customs
Excise
Stamps (say)
Income and property
tax.
Assessed taxes
Independent of
the value of gold.
£24,391,084
20,240,467
2,040,091
Comp. Inconsid.
2,100,539
•
Variable with the
value of gold,
Inconsiderable
None
say £6,000,000
9,666,142
None
Land tax
1,137,034
Post Office
3,310,655
Woods, Forests, &c.
Inconsiderable
Miscellaneous
416,531
1,801,584
Total Independent
£53,219,870
75 per cent
Total variable
17,884,257
25
Total revenue (1860) £71,104,127
100
56
FALL OF THE VALUE OF GOLD,
Turning to the public expenditure of the country, we find it still
more impossible to separate the fixed and variable payments with any
accuracy. The following estimate is therefore founded on little
more than conjecture. It is made also on the assumption that no
salaries or pensions had received any increase in 1860, on account of
the diminished value of gold:
PURLIC EXPENDITURE OF 1860 FOR THE UNITED KINGDOM.
Variable payments,
Fixed payments.
Public Debt,
£28,638,726
Civil List
515,588
Civil Government (say). 1,435,116
Justice (say)
1,833,078
Diplomatic (say)
374,336 .
War in China
None
Army and Ordnance
7,300,000
Navy
5,000,000
•
Public Works
None
•
Education (say)
844,334
Colonial charges (say) .
142,625
Miscellaneous (say)
477,685
None.
None.
£ 497,111
1,620,681
50,000
858,057
6,757,186
6,823,859
945,860
446,297
100,000
400,000
Collection of Revenue (say) 3,321,132
Total fixed payment
1,280,568
•
•
£49,882,620
72
Total variable payment
. £19,779,619
28
Total real expenditure
£69,662,239
100
Redemption of Exchequer
bonds
2,000,000
Total expenditure
•
£71,662,239
$
From these estimates it would appear probable that the national
balance sheet is scarcely affected in a direct manner by the depre-
ciation of gold. The increase of the variable charges dependent on
prices, and forming one fourth part of the expenditure, seems to be
just balanced by a corresponding increase on one fourth part of the
revenue which happens to be levied ad valorem. This is on the
assumption that Government salaries in general, and the pay of the
army and navy have not been increased. How far these Government
employés can be said to suffer, in common with other classes of the
AND ITS SOCIAL EFFECTS.
57
community, by the retention of old rates of salary and pay, will be
shortly considered.
We must not forget, however, that even the three-fourths of
the revenue which proceed from fixed duties is of the same nature
for the most part as incomes included in the second class. Though
the charge on each gallon of spirits or each pound of tea be virtually
lowered, the usual effect follows, an increase of trade and consump-
tion. The breach in the real value or efficiency of the revenue,
even when derived from fixed charges, is soon repaired by the lower-
ing of the charges. And the community derive nearly as much
benefit from this unintentional remission of taxation as from
any of
the great remissions effected by Peel or Gladstone. I am thus un-
able to agree with the opinion of M. Chevalier, who, with the instincts
of a French writer, thinks the results of the depreciation of gold
will be a revolution at least.
"There are grounds," he says,* "for apprehending many other
difficulties, political or administrative. It would be necessary to en-
large the budget, for whenever the State appeared as a customer, it
would have to pay dearer than formerly.
The
augmentation of the budget, assuming it to be considerable, means
an aggravation of the public burdens, which excites, even when
justifiable, the popular discontent, just in proportion to the de-
gree in which taxation is increased. I believe I run no risk of con-
tradiction, by any politician, in saying that a Government which
should have to double the taxes in the course of a few years would
thereby incur very great peril."”
The revenue naturally increases more than pari passu with the ex-
penditure during a depreciation of gold, so that unless warlike pre-
parations, or the demands of the people for lower taxes absorb the
surplus, there will be enough to give a fair increase to the lower
classes of Government employés. But of late years the English
people have seemed to think the first duty of their Government is to
take off taxes. The rise of the nominal amount of the revenue and
expenditure no doubt contributes to the impression that the amount
is excessive.
XXX.-Influence of Depreciation on the National Debt.
The most remarkable effect of the depreciation of gold is a con-
siderable reduction of the National Debt. This, it is needless to say,
is an event which few of us could have hoped to live and see.
* Cobden's translation, p. 120.
58
FALL OF THE VALUE OF GOLD,
The National Debt of this country was in 1860 represented by a
capital of £819,079,305. The annual charge was then £26,176,275.
A gold depreciation of 9 per cent., which is quite the least I can
believe to have occurred, must therefore have effected a reduction in
the capital of about £75,000,000, and in the annual charge of nearly
£2,500,000. The gain from this reduction is shared in by all tax-
payers in the kingdom, nearly proportionally to the amount of taxes
they pay. Let us consider how the loss is distributed.
The dividends of the National Debt were in 1860 distributed
among 268,342 persons, as follows:---
Number of persons en-
titled to such dividends.
Dividends not exceeding
£5
94,560
£10
دو
43,845
£50
"
""
86,809
""
£100
"">
22,516
£200
29
""
12,787
£300
>"
3,646
£500
2,417
£1000
•
1,091
£2000
361
>>
""
Exceeding
£2000
210
268,242
Nearly a quarter of a million of persons (247,730) receive less sums
yearly than £100. As several children or other dependents on an aver-
age must share in the benefit of each annuity, it is probable that about
one million persons, or about one in every thirty of the total popu-
lation of the kingdom, depend more or less for support upon the
public annuities. Of the larger sums too a considerable portion
consists of the incomes of hospitals, schools, and other endowed in-
stitutions of public benefit. Some portion of the debt forms the
reserve of securities of banks, insurance companies and other mone-
tary institutions. Nearly the whole sum of money in the Govern-
ment and Post Office savings banks is invested in the public funds.
We should never forget, then, that the National Debt represents the
savings of the poorer classes, rather than the money bags and coffers
of the rich and luxurious.
Should gold, in the course of years, fall in value some 30 per
AND ITS SOCIAL EFFECTS.
59
cent, as I think possible, the pressure of the National Debt will
be no greater than if it were about 550 millions sterling, instead of
800 millions according to the old value of gold. Annuitants will
suffer and taxpayers in general gain in simple proportion to the fall.
CHAPTER V.
IS A REMEDY NEEDFUL OR POSSIBLE?
XXXI.—How far is positive hardship inflicted on Annuitants and
Creditors by Depreciation?
No one can feel much commiseration for the richer classes of the
community even when their expenditure presses distressingly close
upon their income. A footman, a horse, a ball, or a shooting excur-
sion retrenched during the year, will restore the balance without
inflicting any very great hardship. How is it with the large mass of
persons whose incomes of £50 to £150 a year afford them little more
than the necessaries and decencies of modern life? A reduction of
real income by 10, 15, or ultimately by 30 per cent, would sorely
press upon their comforts, and even reduce them in the social scale,
unless there were some compensating tendencies. But no one, I
think, can look at the real progress of affairs in this country, during
the period under consideration, without concluding that an alteration
of 10, 15, or even 30 per cent, is almost swallowed up and rendered in-
considerable among the many improvements and ameliorations, and
the general increase of industry, profit, and general prosperity which
is taking place.
It must be distinctly understood that the general rise of prices
which I have proved refers to raw materials, and especially to those
raised by the same processes now as 20 years ago. Manufactures in
general have certainly not risen so much as the materials from which
they are made; very possibly they have fallen. They fall in price,
or do not rise, because new and cheaper modes are constantly in-
vented for making them. Thus, to a great extent, we can scarcely
be said to use the same articles now as we did 20 years ago, or as
60
FALL OF THE VALUE OF GOLD,
our fathers before us. Railways are radically different things from
stage coaches-telegraphs from postmen or private messengers; and
similarly half the woven fabrics, hardwares, and other articles we
use, though serving the same purposes, are different from what we
used 20 or 30 years ago. It would be impossible to trace the effects
of mechanical skill, of improved and more rapid conveyances, and of
the removal of legislative restrictions in cheapening and advancing
all processes of manufacture.
That manufactured articles grow cheaper rather than dearer is no
contradiction to our conclusion concerning a rise of prices. New
manufactures must be regarded as new articles altogether-new gifts
of science and patient industry. It is the old materials which have
risen in price, and contribute, indeed, to maintain even manufactures
at a higher rate.
And then the removal of customs duties from some hundreds of
minor articles, and its reduction on most of the chief articles tends
to counteract the rise of prices. For the prices quoted in lists, and
used in my tables, are mostly for articles in bond, duty unpaid.
Then, we must remember, that charges enumerated in the second
class of sources of income, as well as three-fourths of the whole taxa-
tion of the country, have not increased with the increased prices of
materials. The very discovery of the American and Australian dig-
gings, by creating two or three new colonies, drawing off part of our
population, and opening new branches of trade of the most profitable
kind, has contributed to the general prosperity.
The repeal of the Corn Laws alone, leading to an enormously in-
creasing yearly importation of food, to a positive decrease of the
agricultural population, and a great increase of our town population,
is a concession to the tendencies of our country, beneficially affecting
(for the present at least) the position of certainly all save land-
owners, and them too as many persons think.
The effects of such and of many more changes effected during the
last twenty years or so, is seen in a general increase of wealth and of
mercantile industry and profits. Thus only can be explained the
extraordinary high rate at which the interest of money has in the last
ten years often stood. During 1854-7 the rate of interest was only
for a few months below 5 per cent, but for many months above it.
For more than half a year it stood at 6 and 7 per cent, and, in the
AND ITS SOCIAL EFFECTS.
61
1
end of 1857, stood for nearly two months at 10 per cent. Again, in
1861, interest rose to 6 and 8 per cent, and all this, to the surprise
of the elder generation, without the general stoppage of trade, the
breach of credit, and the flood of bankruptcy, which has hitherto
attended such rates of interest. And it is certainly not to an in-
creasing scarcity of capital we should attribute such rates, but rather
to a greatly increasing profitable field for its employment.
All these great changes beneficially affecting every individual in a
hundred ways forbid us to assert that any person has suffered posi-
tive loss of the necessaries and comforts of life by the depreciation of
his income in the last twenty years. The expenditure on the prin-
cipal kinds of food must certainly be greater than it was, but there
may easily be at least a corresponding decrease of expenditure on
clothes and innumerable other articles. Thus, I think it cannot be
asserted or proved that positive hardship, that is, loss of comfortable
subsistence, is inflicted upon any person by the present or even a
greater depreciation of gold.
XXXII.—Of Comparative Hardship inflicted on Owners of
fixed Incomes.
There may be comparative if there is not positive hardship inflicted
upon persons of fixed income. Half the expenditure of all classes,
down to the artizan at least, is required to keep up a certain style of
living, dressing, and appearing before the public eye, which is con-
sidered decent and necessary for each person's position, or, at least,
which he considers necessary and desirable for himself and his
family. The great general increase of incomes in the third, and even
in the second class, enables a large part of the community to improve
their appearance and style of living. This is more especially apparent
in the wealthier classes, as, for instance, the altogether extraordinary
extension of the West-End of London over Pimlico, Brompton, and
Kensington, testifies in some faint degree. Now, every wealthy
merchant, banker, builder, manufacturer, or landowner, who, by
virtue of his increasing wealth, sets up a more handsome establish-
ment than of old, commits a perfect wrong upon his poorer relations
and friends, who, with their fixed incomes and growing tradesmen's
bills, can hardly make the two ends meet on the old footing.
Whatever we may conclude as to the positive hardship it is impos-
62
FALL OF THE VALUE OF GOLD,
sible that any social improvement, or anything in short but restora-
tion of the value of gold can prevent comparative hardship. Those
merchants, manufacturers, and artizans, whose profits or wages are
growing by the new activity and efficiency of industry, have all the
benefits of improved manufactures, and rapid communication as
consumers. They gain at both ends.
XXXIII.-Of the Influence of Depreciation on the Community
as a whole.
I cannot but agree with Mr. Macculloch,* that, putting out of
sight individual cases of hardship, if such exist, a fall in the value of
gold must have, and, as I should say, has already, a most powerfully
beneficial effect. It loosens the country, as nothing else could, from
its old bonds of debt and habit. It throws increased rewards before
all who are making and acquiring wealth, somewhat at the expense
of those who are enjoying acquired wealth. It excites the active and
skilful classes of the community to new exertions, and is, to some
extent, like a discharge of his debts is to the bankrupt or insolvent
long struggling against his burdens. All this is effected without the
breach of national good faith, which nothing could compensate.
XXXIV.-That Creditors have no Equitable Claim to Compensation.
That there is no legal breach of money contracts by the accidental
and unforeseen depreciation of the money in which they are expressed,
is obvious. But it will be worth considering how far creditors, espe-
cially public creditors, can have an equitable claim to consideration
because the community or its government, provides the money and
standard of value in which contracts are expressed, and seems per-
haps to guarantee it as a standard of value.
All such claim, I think, except perhaps one for mere charity's
sake, seems to be done away with by the fact that, generally speaking,
the Legislature never obliged contracts to be made in gold money.
Though very rightly selecting gold as the best obtainable standard
and providing a gold currency as a public convenience, it never pro-
fessed to make gold an invariable measure of value, and accordingly
never prevented any persons from selecting other standards if they
*
Encyc. Brit. Art. Precious Metals.
AND ITS SOCIAL EFFECTS.
63
desired. On the contrary, from the earliest feudal times, contracts,
especially of rents, have been made in corn and other commodities,
as well as in personal services.
In the reign of Elizabeth, when the values of gold and silver were
threatened, and actually affected by the discovery of America, as is
gold now by the recent discoveries, it was actually provided by Act
of Parliament (18 Elizabeth), on the advice of the Lord Treasurer
Burleigh, and of Sir Thomas Smith, Secretary of State,-
“That in all future leases for life, or for a term of years, made by
the several Colleges in Oxford or Cambridge, and by those of Win-
chester and Etou, one-third at least of the old rent should be reserved
in corn, according to the value of good wheat and good corn, to be
táken after the rate at which they should be sold at their respective
markets, on the next market day before such rents should be due."
And in quite late years, when the new imperial standard weights and
measures were brought into use, Acts were passed (5 Geo. IV. cap.
74, sec. 17, and 5 and 6 Will. IV. cap. 63, sec. 14) recognising these
corn-rents and ascertaining their quantity according to the new mea-
sures. And we find, in fact, that the only legal condition of the
validity of any rents, according to the Common Law of England, is
"that the quantum must be either certainly mentioned, or be such
as by a reference to something else may be reduced to a certainty."*
The rule was further shown by the exception made by Acts of
Parliament in the case of the Truck System-that of paying labourers
wages in kind. This system having given rise to many abuses, it
was provided that in certain defined trades, wages must be paid in
money, clearly showing the perfect freedom to contract in money,
or in other commodities which existed and still exists in com-
mercial transactions generally. It is true, sovereigns and bank
of England notes are a legal tender; but this only means that any
claim expressed in pounds sterling is satisfied and discharged by the
tender of good sovereigns or bank notes. Just as the Government
provides certain measures and weights convenient for public use, and
takes care that contracts made according to these shall be inviolate,
so it provides money, which is nothing but a system of gold weights.
But no one is obliged to use weights of gold rather than weights of
any other commodities. All that is necessary to make a good con-
* Bacon's Abridgement, 7th Ed. vol. vii. p. 4.
64
FALL OF THE VALUE OF GOLD,
tract is that the quantities of commodity mentioned therein may be
certainly and accurately known.
Thus it seems obvious, that the law of England has always care-
fully avoided guaranteeing gold or any other commodity as a real
standard of value. It has never guaranteed amounts of value at all,
but only amounts of commodity. And no claim for compensation
can consequently be founded on the fact that the value of gold is now
varying. There is no violation of justice whether in letter or in
spirit.
XXXV.—Have Creditors any claim to Charitable Relief?
It is altogether another question, as to whether any public annui-
tants, pensioners or other creditors have any claim upon the chari-
table consideration of the community. Public annuitants and
creditors, I think, have no more claim to consideration than private
annuitants and creditors, the guarantee offered by the law being the
same in both cases. Though the public, as debtors, might consent
to compensate its creditors in some degree, it could not oblige the
private debtor who gains by the depreciation of gold, to give up this
gain, or any part of it, to compensate his creditor. Thus it would
follow, that if the public undertook to compensate any annuitants or
creditors, it would in mere justice have to undertake the whole cost
of compensating all private annuitants and creditors as well. This
may be regarded as a simple impossibility. The consequence of any
such attempt would be to greatly increase the public burdens, which
otherwise are being decreased by the depreciation of gold. And if it
be true that the reduction of income, even of the poorer annuitants, is
compensated by the ameliorations of the age, so that no positive loss
of comforts is inflicted, there cannot be any sufficient grounds for in-
terfering with the natural course of events.
And, secondly, we should remember that if there were posi-
tive hardship from the lowering of the value of gold, it is only
one case of hardship out of hundreds which natural fluctuations in-
flict. No society could subsist under the condition that all hardships
were to be relieved. The hardship in question is, at the worst, much
slighter than what a commercial revulsion like those of 1825 and
1847, or a failure of harvest such as usually occurs in every decade,
or a great war and blockade, inflicts. The loss and suffering inflicted
by the present scarcity of cotton is many times more serious than
AND ITS SOCIAL EFFECTS.
65
any that the probable fall in the value of gold will cause. Yet the
Government and Parliament too have very rightly not admitted any
claim for unusual compensation or relief. By the poor law, indeed,
the community saves all from positive starvation, but no government
ever could pretend to save any portion of the people from losses and
minor hardships entailed by natural, unforeseen, and inevitable
fluctuations. A government which attempted to turn itself into an
universal assurance company, superseding all individual forethought
and individual disaster would soon come to grief, like all other social-
istic enterprises.
XXXVI.—Ought Gold as a Standard of Value to be abandoned?
This accordingly is what M.
There is no doubt much to
It has always been a mere
It may seem that there is one very simple way of avoiding all the
evils and apparent injustice of gold depreciation, viz:-to change
the standard of value to silver.
Chevalier would advise us to do.
be said in favour of the proposal.
question of opinion whether silver or gold were the better standard.
Now that gold has actually lost its stability, all pretence for retaining
it as the standard might seem to be gone. The country may seem
to be calmly looking on while every contract, including that of the
National Debt, is being violated against the intention of the con-
tracting parties.
Had gold indeed utterly lost its ancient stability of value there
would be no other course than to abandon it in favour of silver.
But I think that the ultimate effect of the late gold discoveries will
be to render gold more than ever the pre-eminent and natural stan-
dard of value. The greatly multiplied mass of gold in use, the in-
creased area of production, and the greater variety of nations which
share in its production, will finally render it far more steady in value
even than it has been. In becoming more abundant gold will become
more than ever the natural international currency, by the flow of
which the balances of the exchanges of nations are adjusted. It
will become more generally the money of the world. So far from
our changing from gold to silver as a standard, many years will
probably not pass before several countries, which still cling to
silver, will be contrained to change to gold. Gold will form the
mass of the currency as regards value, even if it do not fur-
nish the standard, and the inconveniences are very great of using
Dor M
66
FALL OF THE VALUE OF GOLD,
coins varying in denomination, as was the case in England in the
early part of the last century.
Gold has not lost its character of a standard by the late gold dis-
coveries. These must be regarded as one of those runs of luck, one
of those events of extreme improbability which will in all likelihood
not recur in the course of ages. According to the doctrine of chances
a person may play whist until he gets a complete hand of trumps, or
any other particular hand he likes to name; or he may throw dice
until at last sixes are thrown without fail for a whole day. He
might have to play for years or for centuries before such events
happened and equal periods before they should again. So it is with
gold discovery. The great extension of the English race of late
years had prepared the way for such discoveries, and when once the
gold was accidentally found in California, the attention drawn to the
subject led to the even greater discoveries in Australia, and to a tail of
minor discoveries in New Zealand, Nova Scotia, and British Columbia.
But the present gold fever at an end, centuries will probably pass
without such another run of luck. The character of gold as a stan-
dard is not much damaged by a variation such as has not occurred
more than two or three times in the history of the world; of which
the last occurrence was in the 16th century, and of which the next
occurrence may be as far in the future as that is in the past. The
character of gold is no more changed by these discoveries than is the
game of whist by the occurrence of an extraordinary hand of cards,
or the climate of the British Islands by one of those cyclones which
at long intervals reach our shores.
It is worthy of remark, that gold and many other things will as-
sume an altogether new condition of stability and sameness when there
are no longer new lands to explore. The centre of Africa, Borneo,
New Guinea, some parts perhaps of Asia, and tracts at the north
and south poles alone offer new ground at present. After these parts
have been examined as well as they may be, the chances will grow
still less of any recurrence of such gold discoveries.
But whether gold be a good or bad standard, it is also to be ques-
tioned whether silver is a better one. A change of standard to silver
at présent would bring no relief, because silver, as I have shown, is
depreciated as much as gold, save 3 per cent, which is inconsiderable.
And when the French silver currency has ceased to overflow, as it
soon must, and the value and price of silver rise, this restoration to
Mao!!
AND ITS SOCIAL EFFECTS.
67
the old value would not, for the most part, benefit creditors, who
have suffered or are suffering, but a new set of creditors, including
many who may have succeeded to or bought up the claims of former
annuitants and creditors at their reduced value, and who have no
claim whatever to the benefit.
It is also by no means clear that silver will be more free than gold
from future variations of importance.
XXXVII.—Have the Gold Discoveries added to the Wealth of the
World?
If we take wealth to be that which is agreeable and useful to
mankind, it may be safely said that the mere gold produced by
Australia and California represents a great and almost dead loss of
labour.
A century or more ago it was the fashion to consider gold and
silver as the only wealth, because they happened to be the measures
and vehicles of gold. Now it is more correctly seen that gold is
one of the last things which can be considered wealth in itself, and
that in its most useful employment as money, the very scarcity of
gold is its recommendation, rendering the value greater, and the
weight or quantity to be carried as money less. It is only so far as
the cheapening of gold renders it more available for gilding and for
plate, for purposes of ornament, and use other than as money, that
we can be said to gain directly from the gold discoveries. To over-
estimate the indirect effects of these discoveries, in creating new
colonies, spreading the English people and language, and newly
animating commerce, is not easy. But in itself gold-digging has ever
seemed to me almost a dead loss of labour as regards the world in
general-a wrong against the human race, just such as is that of a
Government against its people, in over-issuing and depreciating its
own currency.
F
68
APPENDIX.
NOTE A.-The sentence on the back of the title page is from
certain brief dialogues 'Imprinted at London, in Fleet-streate, neere
Saincte Dunstone's Church, by Thomas Marshe,' in 1581.
They have been attributed to Shakespeare, and were reprinted with
his name in 1751.
unto
The real writer, however, was William Stafford. The dialogues
attack certain common prejudices against learning, trade, enclosure
of land, &c. in a very able and enlightened manner. They are
creditable even to the age of Shakespeare, and are interesting and
worthy of perusal for many reasons. They are to be noticed here,
and have before been noticed in Jacob's History of the Precious
Metals, with regard to the great rise of prices occurring at the time,
chiefly in consequence of the American discoveries of gold and
silver mines. The rise of prices was indeed attributed by W. S. to
the debasement of the coin, against which he argued as clearly and
His mistake was not
successfully as has ever since been done.
without excuse considering that the coin had been debased under
Henry VIII. and Edward VI. not long before. But the effects of
any alteration of the standard are most clearly stated, and the dis-
tribution of loss and gain is thus explained :-
(C
And
'Knight.-I pray you what be those sorts that yee meane.
first of those that yee thinke should have no losse hereby?
"Doctor.-I meane all these that lives by buying and selling, for as
they buy deare they sell thereafter.
66
Knight.—What is the next sorte that yee say would win by it?
“Doctor.—Mary, all such as have takinges, or fearmes in their owne
manurance* at the olde rent, for where they pay after the olde
rate, they sell after the newe: that is they pay for theyr lande
good cheape, and sell all things growing thereof deare.
Knight.—What sorte is that which yee sayde should have greater
losse hereby, then these men had profit ?

66
"Doctor.-It is all noblemen, gentlemen, and all other that live
either by a stented rent or stypend, or doe not mannure the
ground, or doe occupy no buying or selling."
And elsewhere the Knight says:
"You my neighbour the husbandman, you Maister Mercer, and
you Goodman Capper, with other artificers may save yourselves
*Manœuvre, cultivation.
APPENDIX.
69
metely well. Forasmuch as all thinges are deerer then they were,
so much doe you arise in the pryce of your wares and occupations
that yee sell agayne. But we have nothing to sell whereby we
might advaunce ye price thereof, to countervaile those things that
we must buy againe.
NOTE B.-(See p. 14.)
It was the mistaken notion of some few persons that convertible
Bank notes might have a peculiar efficacy in regulating prices and
sowing the seeds of fluctuations. In the reaction from this error
others have gone so far as to assert that there is no obvious relation
between the fluctuations of the note currency and the course of
prices. The comparison of the general curve of prices in the
diagram facing the title, with the corresponding curve of the note
circulation, as shown for instance in full detail in my Diagram of the
Bank Accounts, will prove a striking relation, viz., that an expansion
of the currency occurs one or two years previous to a rise of prices.
The rise of prices once started proceeds, however, independently of
the currency for a time. This is shown in the following table, from
which it also appears that the chief additions to the metallic
currency are made at periods of rising prices.

Bank of England Note Circulation.
Years.
Average of March,
June, Sept., Dec.
Ratio to average
of 1845-50.
Variation of
Prices.
See p. 23.
Gold and Silver Coin
issued from the Mint.
1843
£19,168,000
95 7
£6,895,000
1844
21,094,000
105.3
4,198,000
1845
21,576,000
107.7
104.4
4,899,000
1846
20,787,000
103.7
105'4
4,901,000
1847
19,561,000
97.6
110.8
5,293,000
1848
18,790,000
93.8
94.1
2,490,000
1849
19,265,000
96.1
89.6
2,299,000
1850
20,261,000
101.1
92.1
1,621,000
1851
20,245,000
101.0
92.4
4,492,000
1852
23,028,000
115.0
93.8
8,936,000
1853
23,471,000
117.1
111.3
12,664,000
1854
21,329,000
106.4
120.7
4,354,000
1855
20,330,000
101.4
117.6
9,245,000
1856
20,083,000
100*2
122.5
6,476,000
1857
20,081,000
100.2
128.8
5,240,000
1858
20,860,000
104.0
114.2
1,690,000
1859
21,855,000
109 1
116.0
3,305,000
1860
21,572,000
107.6
117.9
3,378,000
1861
19,554,000
97.6
115.1
1862
20,303,000
101.3
113.4
It must be allowed that these facts are the very ones with which
the currency theorists would support their notions. But they are
not less mistaken in supposing that the notes have any peculiar
effect; it is a superabundance of gold bullion that first turns prices
70
APPENDIX.
upwards by a real but temporary lowering of the value of gold in
the country. All the gold coin and bullion in the country must be
considered as constantly on sale. The issue department of the Bank
is the national gold warehouse, and notes are but the warrants,
exactly resembling dock-warrants, entitling the holder to certain
portions of the gold stored up. Thus I apprehend that a super-
- abundance of gold in the Bank reduces its value and raises prices,
just as would a superabundant supply of sugar or tea in the London
Docks reduce the value of sugar or tea. It is credit, or the creation
of prospective gold, which allows prices to continue rising for a time
while gold is decreasing. But the really knotty point remains
unexplained, that is the exact relation of gold as a commodity on sale
to gold as the most perfect form of free capital on hire.
NOTE C.-(See p. 17.)
Although the comparison of periods just before and after the gold
discoveries will exhibit the effects of the new gold most free from other
influences, there is an obvious advantage in extending the inquiry
further back. By comparing the period 1851-62 with that of
1844-50, and then the latter with the previous period of 1833-43,
we shall ascertain, not only whether prices have altered since the
gold discoveries, but also, whether the alteration is of an unusual cha-
racter. The gold discoveries being a new event intervening between
1844-50 and 1851-62, it is not the simple change of price then which
is due to the gold, but the difference of the change between the
two second periods from the change between the two first periods.
I have formed, from Tooke's History of Prices, the Annual Register,
and other sources, hasty averages of 24 of the 39 chief commodities
for the period of 1833-43, which seems to have formed the preceding
rather broken fluctuation of investment.
It thus seems that silver was slightly dearer in 1833-43 than in
1845-50, but was still distinctly cheaper than since 1851. The
metals in general did not vary much in price between 1833-43 and
1845-50, but the majority of other commodities fell in price by some
12 per cent.
This considerable change suggested the notion that the average of
1845-50, might be too restricted, and erroneously low. The true
period, as shown on p. 16, would be 1844-50, and the year 1843
might also be included without impropriety. Though complete and
accurate data for 1843 and 1844 were not available, I carefully
examined such as I could readily get, and thus satisfied myself that
the inclusion of these two years would have slightly lowered the
average (1845-50) adopted, instead of raising it, so that it is, if any-
thing, a little too high. The extension of the period in the other
direction into 1851 and 1852 would also have considerably lowered
the average.
It is therefore certain that prices did truly fall between 1833-43,
It
and 1844-50, but rose between the last period and 1851-62.
must, indeed, be generally known to all who concern themselves
APPENDIX.
71
with these matters that the prices of materials of manufacture, and
of most other articles, had been continually falling since the great
wars. I am the more sure of the fact, because I have by me diagrams
constructed from data in Tooke's History of Prices, and from other
sources, representing the course of prices from various periods in the
last century. Overlooking fluctuations due to variations of supply,
and the greater fluctuations due to variations of demand, it may be
confidently stated that prices pursued a downward course from 1820,
about the time when the currency was re-established on a gold basis,
to 1850. The fall, it is true, was most rapid at first. Silver, too,
does not share in the fall. We can only explain these facts, so far
as I am aware, by supposing that the supply of the precious metals
did not keep pace with the demand, or that while modes of procuring,
raising, and making other articles more easily and cheaply were con-
stantly being discovered, no such great improvements took place in
the procuring of the precious metals. It should be remembered, too,
that the supplies of Russian gold were failing, and the Spanish-
American colonies were falling into anarchy.
Thus, while industry, trade, and property were rapidly advancing
in Great Britain, America, and most other parts of the world, there
was no corresponding advance in the production of the precious
metals. Prices, both in gold and silver, continually receded. Now
if, while the introduction of free trade, railways, telegraphs, and
innumerable other improvements accelerated the extension of trade,
and the consequent demand for the precious metals, no new disco-
veries of gold and silver had been made, what must have ensued?
Prices must have continued in the downward course they had pursued
for 30 or 40 years before. But they did not continue this course—on
the contrary, they turned upwards in a sudden and decided manner, as
shown in the body of this tract. And this change was simultaneous
with the discovery of the new gold fields. Half the Prerogative
Instances of Bacon are exemplified in this instance, and if the philo-
sophy of observation and common sense may be applied to statistical
matters, we can draw but one conclusion that prices have risen in
consequence of the gold discoveries.
But we may now draw another speculative conclusion. The gold
discoveries have had the double effect of arresting the fall of prices
and then raising them. The total effect is not merely the rise that
has occurred, but that rise plus the fall that would have occurred.
This goes a considerable way to explain why prices have not risen so
high as the vast supplies of gold might have led us to expect. It is
true we touch upon the argument of several distinguished writers,
that the rapid extension of trade would absorb the new supplies of
gold and prevent them from pressing upon the markets and raising
prices. But an argument that a rise of prices is not to be expected
does not weigh much against the fact that a rise of prices has occurred.
And when to explain away this rise of prices without reference to
gold, we are told that the extension of trade and manufacture has
72
APPENDIX.
caused a great demand for many materials, and this has raised prices,
I can only answer that to a similar extension of trade and manufac-
tures generally must be attributed the fall of prices between 1820
and 1850. Similar causes have similar effects. He who allows prices
to have risen since 1850, but denies it to be the effect of the gold dis-
coveries, must point out something else in the progress of industry since
1850 entirely different and contrary to the progress before; otherwise,
it is natural to point to these gold discoveries as that which has en-
tirely altered the progress of prices.
NOTE D.-(See p. 43.)
The following extracts from the Melbourne Argus, quoted in the
Journal of the Statistical Society for September 1862, vol. xxv. p. 397,
show how rapid has been the decline in the profits of gold digging.
“We cannot estimate the aggregate earnings of our mining popu-
lation at more than £8,000,000 sterling, which divided among
100,000 diggers (the exact number returned is 100,463), only gives
£80 per head per annum. But even this sum must be considerably
in excess of the net earnings of each individual, since from the gross
product must be deducted the interest on the mining plant employed,
the cost of the fuel consumed by the steam engines, and of the timber
required for stabling, the maintenance of the horses used in connec-
tion with the whims, pumps, and puddling machines, and a large sum
to represent the deterioration of plant, and casualties.
Probably £70 a-year would approximate more closely to the
average earnings of each miner, and the bearing of this fact upon the
value of labour generally in this colony, is too important to be over-
looked. The income of the digger has constituted a standard by which
the wages of day labourers have been adjusted ever since the dis-
covery of the gold fields. The fluctuations in the wages of the latter
have been determined by those of the former; and the close relation
which has existed, and continues to exist, between the decline in the
rate of wages and the average earnings of the miners, as a class, will
become apparent by a comparison of them at the undermentioned
rates and periods.' The data given when uniformly reduced to the
rate per day are as follows.

Rate of wages per day.
Farm labourers (with rations ? )
Stock keepers (with rations ?)
Masons
Carpenters
•
General labourers
Miners (gold diggers)
3 22
1854
1857
1861
S.
d.
S. d.
S.
d.
5 10
4 2
6
4 4
3 4
8
32
0
16
14
0
0
11
0
12
6
9
0
8
5 6
8
28 0 14
74
་

APPENDIX.
73
As the above are the average earnings of diggers, and many earned
much more, of course the majority must have earned something less.
Though in the past years of the gold excitement wages were much
raised by the attraction of the diggings, it is obvious the real profits
cannot fall much lower without the occupation being deserted. A
successful gold digger must be a strong, active, intelligent, and even
ingenious man, capable of earning good wages in a hundred occupa-
tions.
NOTE E.-(See p. 44.)
The following estimate of the gold produce of Victoria up to the
end of 1859, is given by the Registrar General of Victoria.
1851
1852
1853
1854
1855
£580,587
10,899,733
12,600,083
9,568,262
11,172,261
1856
1857
1858
1859
- £11,942,783
11,046,113
10,112,752
9,122,702
The greatest productiveness of the Victoria diggings was attained
within two years from their discovery. The fluctuations are chiefly
caused by the migrations of diggers, and the following account of
the produce of New South Wales, from the Sydney Morning Herald,
of January 21, 1863, shows a continuous decrease down to the year
1855, and then a continuous increase up to the present time, which
about compensates the falling off of the Victoria produce.
Ounces.
Ounces.
1851
161,880
1857
148,126
1852
199,500
1858
255,535
1853
173,960
1859
293,574
1854
148,900
1860
355,328
1855
107,250
1861
403,139
1856
134,950
1862
584,219
The produce of 1851 is that of half a year only. Some writers
have fallen into a serious mistake by treating the export of gold dust
from New South Wales as the whole produce. They should have
added many millions of pounds coined at the Sydney Royal Mint.
The total supply of new gold during the twelve years 1849-60,
has been stated by Mr. Newmarch at 300 millions sterling, which
is equal to about 50 per cent, or the half of the total stock of gold
supposed to be in use at the beginning of the period. Is it likely?
Is it conceivable that the stock of gold in the world, which before
1848 must have been nearly stationary, should suddenly have grown
half as large again without a considerable effect upon prices?
THE END.
BY THE SAME.
Price 3s 6d each, coloured.
DIAGRAM SHEWING ALL THE WEEKLY ACCOUNTS OF THE
BANK OF ENGLAND, since the Passing of the Bank Act of
1844, with the Amount of Bank of England, Private, and Joint
Stock Bank Promissory notes, in circulation during each week,
and the Bank minimum rate of Discount.
DIAGRAM SHEWING THE PRICE OF THE ENGLISH FUNDS,
the Price of Wheat, the number of Bankruptcies, and the rate
of Discount, monthly, since 1731; so far as the same have been
ascertained.
N.B. The above represent to the eye all the useful results of tables containing
125,000 figures, carefully compiled for the purposes of the Diagrams.
In preparation.
THE MERCHANT'S ATLAS AND HAND BOOK OF COMMER-
CIAL FLUCTUATIONS, since the year 1844, exhibiting the
progress of Commerce from month to month, with a full analysis
of the periodic and seasonal fluctuations.

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