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733
CURRENCY, 2 / 3
O R
BI-METALLISM EXAMINED.
B Y
WILLIAM BIRKMYRE,
O F
CAL CUT.T A. A N D POFT-G LASGOVV.
PUBLISHED AT THE REQUEST OF THE GREENOCK
CHAMBER OF COMMERCE.
GLASGOW :
M“NAUGHTAN & SINCLAIR, PRINTERS, 24 WEST NILE STREET.
1887.
3 O G, T, 2–
__-T"
CURRENCY,
BI-METALLISM EXAMINED,
BEING AN ADDRESS DELIVERED TO THE MEMBERS
OF THE GREENOCK CHAMBER OF COM-
MERCE, 28TH JULY, 1887.
B Y
WILLIAM BIRKMYRE,
O F
CA LC UTTA AND POFT-G LASCOVV.
PUBLISHED AT THE REQUEST OF THE GREEN OCK
CHAMEER OF COMMERCE.
G LAS GOW :
M“NAUGHTAN & SINCLAIR, PRINTERS, 24 WEST NILE STREET.
1887.
lw\º.£-s8.
A D D R E S S
DELIVERED BY
M R. W. I L L I A M B I R K M Y RE,
TO THE
CHA M BER OF COMMER CE, G RE EN O C K,
ON THE 28th /UZ V, 1887.
THERE is no branch of political economy so little under-
stood, nor one regarding which so much dogmatism exists,
as that relating to currency.
This much only is known with certainty, that bad
money drives out of circulation good money; and, further,
that all the laws relating to such questions know no
country, but, like those relating to gravitation, are
universally applicable. The exposition of these laws is
generally relegated to philosophers, or to men who make
abstruse questions the study of a lifetime. Yet the scant
progress made may be measured by the fact that although
it is three centuries since this law relating to bad money
was discovered, no other law has since been discovered
which receives universal assent.
In 1810, the Directors of the Bank of England gave
answers upon the subject, which, as has been well
4.
remarked, have become classical by their nonsense.
Recently there have been no fewer than three inter-
national conferences on the subject. The first, held in
Paris in 1867, recommended one universal gold standard.
The second, held in 1878, came to exactly the opposite
conclusion. Whilst the third, held in 1881, deter-
mined that it was practically impossible to demonetise
silver. Although so little progress has been made in this
most subtle branch of political economy, yet there is
always a currency question engaging the attention of
those interested in such matters. For many years it was
the pernicious influence upon our national prosperity by
the Bank Charter Act of 1844. This has now given
place to a demand for the Reform of our currency to the
exclusion of all similar topics. The word reform has a
fascination for many, but prima facie the case seems
against those who desire a reform of our currency, as we
find that during the past few years France, Germany,
Italy, Sweden, Norway, and Denmark, have practically
adopted, in so far as relates to gold and silver, Our
example, and have adopted the mono-metallic standard
of gold. They may have been wrong in following us;
but clearly their action creates a presumption that our
gold standard is the best.
Those demanding currency reform contend that gold
has, to our misfortune as a nation, appreciated, and this
appreciation of gold is sought to be proved by certain
index numbers, which show in many instances during
the past 15 years a general fall in prices. Another
method of expressing this fall is to state that gold has
appreciated.
The stock of gold for currency purposes may be esti-
mated approximately at 800 millions, and as so many
nations have lately adopted a gold standard, thus appar-
ently leaving more of the work of currency to be done
by one metal, a connection is tried to be found between
the low prices prevalent for many articles over all the
5
world, and this increased work which gold as a currency
has been called to perform, upon the principle held by
the Bi-metallists as axiomatic, “That were all the money
“in the world doubled or halved, trade would go on as
“before, prices being approximately doubled or halved.”
Silver, they contend, being, as it were, degraded from
its position in currency by many of the European Powers,
has thus left too much of the work of currency to be
done by one metal. Approximately, as stated in their
axiom, gold has got in a manner halved, and prices
halved. Or, to state the case differently, the discovery
of gold in Australia gave to the world's industry, from
1850 to 1860, a tremendous impetus, and as a conse-
quence prices rose. These mines have now ceased to
be so prolific, and, as now relative to the requirements
of commerce, gold is scarcer. This scarcity is largely
responsible for the general depression in prices which has
for the past 15 years been characteristic of not only our
trade, but of the trade of the world.
It is further argued that we are now as a nation
suffering trade depression on account of such scarcity,
although there is no proposition so hotly contested.
Eminent statisticians, on the contrary, maintain that
the world now possesses three and three-quarter times as
much gold coin as in 1850; that only 48 per cent of the
gold above ground is used as coin; that the world now
uses 70 per cent more silver money than in 1850; and
that, if prices were in the least degree regulated by the
abundance or scarcity of the metals, prices should be much
higher in France than here which they are not, as that
country usually possesses double of the stocks of metal
that we do ; and that we make 20s. coin do as much
trade as 85s, in France, 40s. in Italy, 58s. in the United
States, and 100s. in Spain.
Although these gold discoveries did undoubtedly stimu-
late trade in the period 1850 to 1860, there were other
6
causes—namely, the Crimean War, the Indian Mutiny, the
Lombard-Franco War, all of which tended in the same
direction. And finally, if our national statistics are of any
value, they show conclusively that during the period 1870
to 1880, when there were no gold discoveries, and when
prices as a whole were on a lower level, that our trade
advanced at a much greater rate than it did in the period
1850 to 1860. The truth is, the economic forces which
regulate prices are so subtle, so varied, and so little under-
stood, that one might just as well attempt to estimate the
due proportion which each separate article of food gives
to that mysterious force called life, as to try to gauge,
and give due proportion, to any, or all of the economic
forces regulating prices.
As all such attempts are futile, I am inclined to-day
to place myself in sympathetic relation with those who
contend that gold is scarce, and possibly the cause of
the general depression of prices, and as a consequence
entailing silent bankruptcy to many reckless Debtors, and
much inconvenience to prudent ones. This admission, for
the sake of argument, will simplify the discussion. The
whole work of gold, as a currency, is as a medium of
exchange ; by giving undue proportion to one of its
functions, as a standard of measure or value, simply leads
to confusion of thought, and reasoning in a circle. What-
ever currency is adopted, there must be a clear and
invariable standard of measure or value—the present gold
one being £3, 17s. 10%d. per ounce. In the same way
that the yard is an invariable measure of cloth ; and no
matter whether cloths are scarce or plentiful, the invariable
measure of the yard is always applied. As already stated,
I make the admission that gold is scarce, and thus possibly
the cause of price depression, so that the discussion may
be narrowed; and in order that I may look fairly at the
remedy for the evils from which we as a nation are said
to be suffering.
7
The remedy may be thus summarised —That as this
depression of prices—this shrinkage in values—is entailing
trade depression by the increased strain upon gold, elevate
silver into currency with gold, admit silver into partnership
with gold, and prices would immediately advance and
trade revive. It will be noted that the onus of proof lies
entirely with those who wish silver admitted into partner-
ship with gold, and the following questions involving the
whole subject might very properly be asked —
1st. In what as a nation are we suffering from trade
depression ?
2nd. In what way are low prices hurtful, or in what
way will high prices conduce, to our national prosperity ?
Regarding the statement that we are now suffering from
trade depression, the facts appear, viewed nationally, to
be against the assertion. There must, and always will be,
in such large and varied industries as ours, sectional
depressions of trade. Those who build and own ships
when a few good harvests occur are apt to think of trade
depressed because there are fewer cereals to carry. But
such a large question must be viewed nationally, and in
no way can this be more correctly noted than as indexed
in savings bank deposits, income-tax returns, criminal,
pauper, bankruptcy, and post office statistics, and, best of
all, in the increased consumption of all those commodities
which go to strengthen and comfort our population.
Augustus Montgredien says —“Every year our popu-
“lation increases at the rate of 1,000 per day, while food,
“clothing, lodgings, &c., are more easily and abundantly
“supplied to them than ever, for pauperism has decreased
“ 19 per cent since 1870.”
Mulhall estimates that the Savings of operatives averaged
8
1 million yearly down to 1860, rising 2% millions in sub-
sequent periods down to 1875, and in the last 11 years
averaging 7 millions. In 1860 there were 85,530 assessed
as earning more than £200 per annum. In 1870 there
were 130,375 so assessed ; in 1880, 210,430; whilst in 1886
the numbers reached to about 250,000.
Regarding bankruptcies, the annual average in Great
Britain from 1875 to 1880 was 13,960, whilst in the period
1881 to 1884 it was 9,505. It is interesting to note
that the average amount of liabilities to each failure was
f2,600 in Great Britain, £2,700 in Canada, and £4,200
in the United States. With regard to the consumption
of commodities which go to strengthen and comfort our
population, we consumed yearly—1881 to 1886 – per
inhabitant, 106 lbs. meat, 356 lbs. wheat, 70 lbs. sugar,
and 75 ounces tea, as against 91 lbs. meat, 321 lbs.
wheat, 41 lbs, sugar, and 51 ounces tea for the ten years
ending 1870. The so-called trade depression may most
effectually be appreciated in the Report of the recent
Parliament Committee on the subject, which says —“We
“see no indication, taking the industries of the country as
“a whole, that there is any diminution in the aggregate of
“ commodities produced by British labour and British capi-
“tal. There is distinct evidence that profits are becoming
“more widely distributed among the classes engaged in
“industry, that while large capitalists may be receiving a.
“lower return than that to which they have been accus-
“tomed, the number of those who are making a profit,
“though possibly a small one, has largely increased.” * ~~
The complaint of the want of sufficient profit is not a
new one, but if the word sufficient is emphasised, this phase
of national misfortune loses much of its force.
It must, however, be noted that one of the most extra-
ordinary features of our national prosperity, as showing
9
upon what broad and healthy basis it rests, is that we are
prospering in spite of the fact that our largest individual
industry, agriculture, is passing through a crisis of unex-
ampled severity.
Sir James Caird estimates the loss in the purchasing
power of all classes engaged or connected with agriculture
at £42,800,000 during the year 1885. This amount, being
lost to the markets in which it was formerly spent, cannot
fail to have had a hurtful influence upon every trade in
this country, for all trades are interdependent ; yet, not-
withstanding this, our trade, as a whole, has made steady
progress. The object of the present is not to dwell at
length upon any individual industry; but in a sentence, it
may be remarked that were the laws relating to the
Owning of ships and of factories the same as those relating
to land, we should not now as a nation be the foremost
ship and factory owners in the world. Were those laws
passed for the supposed benefit of agriculture repealed, and
rents varying with prices obtained for agricultural produce,
or more appreciation of the necessity for shorter leases, in
view of the changes which steam and electricity are
making, we have no doubt a new era of prosperity would
be in store for agriculture.
Although, in our opinion, it is impossible to show
wherein the so-called trade depression, viewed nationally,
exists, yet it is quite competent for those holding the
view that the appreciation of gold, or, in other words,
the cheapness of prices, is a national misfortune, to contend
that we have progressed in spite of low prices. Had
prices been maintained, as they state they would, by
admitting silver into partnership with gold, our prosperity
as a nation would have made much greater progress.
Thus we come to the crux of the whole question, as
stated in the 2nd division of the subject —
10
In what way are low prices hurtful, or in what way
will high prices improve our national prosperity ? The
issue here is clear, distinct, and upon a well defined basis.
Low prices, or the appreciation of gold, if it is chosen to
be so-called, is a clear national benefit; whilst a higher
range of prices which those seek to obtain, and think
would be obtained, by the elevation of silver into partner-
ship with gold, would, in our humble opinion, be nothing
short, viewed nationally, of misfortune.
As a nation, we conduct one-fourth of the trade of
the whole world; inclusive of our colonies, we do 39 per
cent of the world's trade. Cheap prices mean that the
same volume of business can be conducted with less
capital, and when a merchant can conduct a business with
less capital it surely is to his advantage. Our country
has been well called the workshop of the world. Most of
the materials we work upon we do not produce, such as
cotton, silks, and hemps. Now, it is clear these articles
we do not produce cannot be too cheap, for from their
cheapness springs an increased demand for the goods we
manufacture. Were cotton 2s. per pound we know
what national disaster this would mean, compared with
cotton at 5d.
We are the largest creditor nation in the world,
approximately we receive from the world £100,000,000
per annum as interest. Now it is universally admitted as
axiomatic that we do not get bullion for this interest, but
produce. When wheat is 30s. per quarter we get exactly
double the number of quarters of wheat for our interest as
we would were wheat 60s. The same remark applies to
cotton, wool, copper, tea, and every description of our
imports. And if all these articles are to-day one-half
the price they were 12 years ago, we, as a nation, receive
exactly double the quantities in satisfaction of the annual
interest due to us by foreign nations. Viewed nationally,
11
it would not be to our interest to receive less produce
for this £100,000,000. Although a large proportion of
our imports are received by us, as interest upon foreign
investments, yet, so subtle are the hidden springs of
commerce, it is quite impossible to, as it were, “earmark”
one of our many imports, as being imported in Satisfaction
of interest.
If the contention of Bi-metallists is correct—that by the
elevation of silver into partnership with gold prices would
rise—then, as a nation we must receive less produce in
satisfaction of the annual interest due to us by foreign
nations. An abundant harvest is generally considered a
blessing, because it means plenty and cheapness, and in like
manner we maintain that as a nation we cannot have prices
too cheap, for this means an increase of commodities for
distribution—i.e., more food, more clothing, &c., &c., within
the reach of a greater number, or, in other words, hunger
better satisfied, and rags giving place to abundant clothing.
Prices can only be said to be too cheap when commodities
are sold at a loss; but selling at a loss is a self-adjusting
process which very soon rights itself; and it must be borne
in mind that none of our national indexes indicate upon the
whole that these cheap commodities are being produced at
a loss. If, as is alleged, high prices are nationally bene-
ficial, then we ought to look upon bad harvests as a blessing,
and every invention which tends to cheapen commodities a
CUITSé.
The inconveniences attendant upon the cheapening of
commodities, either through the inventive ingenuity of man
or through other causes, are no doubt serious to sections of
the community; but as the benefits of such cheapening are
universal, they should always be welcomed.
If the contention of Bi-metallists is correct, all com-
modities should fall approximately, in sympathy with the
I 2
one exciting cause ; even the prudent debtor who has
borrowed capital on a fixed basis, and whom they com-
miserate so much, should be able to borrow on less onerous
terms, as loanable capital, like everything else, is a com-
modity. But there is one commodity in which, as a nation,
above all other commodities, we are most interested, which
has not fallen with the lowering of prices, and which tends
to invalidate the theory of commodities falling owing to
the scarcity of gold. The commodity to which I refer is
labour. Nor would it rise pro tanto with advancing
prices, mor can I conceive of anything so injurious to
labour as any expedient having such an object in view.”
Advancing prices are certainly an index of national
prosperity, when the advance is natural, but legislation
with the view of raising prices for the benefit of the
nation, has been tried over and over again, with the
result of defeating the end it had in view. There is no
experience so clear in the history of our country as the
baneful effects of legislation with such an object. Even
admitting to the full the contention of Bi-metallists that
prices have fallen on account of the increased requirements
of gold for currency purposes by Italy, France, Germany,
&c., by thus giving the metal an increased amount of work
to perform. This was surely no fault of ours. These
nations did so independently of us, and if this action has
operated injuriously upon a class in the United Kingdom,
such as men who have borrowed in gold, we as a nation are
surely not responsible, for in like manner many industries
suffer from an increase of foreign tariffs; but those interested
had just to accept their fate. Were Government to try to
redress this injury they could only do so at the expense of
those who hold gold, annuitants, &c., and millions of wage
* The average wage for five principal trades in England during 1840
was 3s. 5d. per day; in 1860, 4s. 5d. ; and in 1884, 5s. 2d. Agricultural
wages have risen 90 per cent, artizans and mechanics wages 50 per cent
since 1850.
13
earners, who would thus pay more for their food, clothing,
&c. This class bore the brunt when gold was made
plentiful by the Australian discoveries. Why should they
now be baulked of their due when the pendulum inclines
the other way ? Looking back over a generation, these
very classes, so suffering now, got great advantages, and
became wealthy without toiling and spinning. Why should
there now be an interference to prevent the other portions
of society, who are profited by low prices getting that
benefit 2 Undoubtedly the bulk of the community are so
benefited.
Bi-metallists admit that partial bi-metallism would
never do, but they hold that were the chief powers to
keep their mints open to receive silver at the ratio of
15% to 1, the demand would be such as to absorb all the
silver which could be produced ; for it is clear were this
rate established owners of silver would accept no less.
The market rate to-day is nearer 21 to 1, and the reason,
I presume, why Bi-metallists say we ought to retain 15%
to 1 is, that possibly neither France nor America would
join on any other basis, as to do so would entail an
enormous loss upon their stock of the metal. Why
should we and Germany help them out of their difficulties?
Were we caught with such enormous stocks of a depreciated
metal, would France or the United States help us out of
our difficulties 2
Bi-metallists admit that no nation could be bound, in
perpetuity, to the system, but they have no fears of any
retreating from such a union, as it would be for their
interest always to maintain this ratio.
This, I think, admits of great question. Can we trust
to what we conceive to be the sense of interest of any
nation to implement international obligations A few
years hence they might hold it as their interest to abandon
14
the compact, and leave us with a lot of metal not worth
the money represented. We have, as a nation, no such
stock of metal to elevate, and why run the risk of enor-
mous loss by one or more of the nations withdrawing
from the league !
In addition to the raising of prices, Bi-metallists claim
that by the universal admission of silver into partnership
with gold, a greater stability would result in prices. This
is also disputed; but, admitting to the utmost their con-
tention, then it would necessarily follow that universal
mono-metallism would give the same result. But it is
open to grave doubt whether universal, international, any-
thing upon any vital question in this our present civilisa-
tion, is possible, seeing that the universal blessings of peace
are so much admitted, but never carried out.
Since the demonetisation of silver has taken place there
have doubtless been violent fluctuations in the price of the
metal, which have entailed loss and profit; but, so far as
statistics go, no diminution of trade has resulted to the
section of our community trading with countries having a
silver standard. Under ordinary circumstances the effects
of this demonetisation of silver would long ago have
adjusted itself, and a tolerable equilibrium have been
established, but for the extraordinary action of America
in the compulsory purchase of silver. In the opinion of
many, these purchases tend to lower the price of silver.
Were this country to buy and store annually millions of
tons of an imperishable article, such as iron, the effect in
the end would be to lower the price of the article. At all
events, beyond all doubt, the uncertainties regarding the
action of America with regard to silver has a most dis-
turbing effect, not only upon its value, but upon the trade
of all silver-currency countries. But is not this one of the
many inconveniences we suffer, from a policy adopted by a
nation from what they conceive to be their interest ? And
I 5
thus the position is strengthened of those who think it
would be unwise to bind ourselves upon currency questions
with nations who have, to our thinking, such erratic ideas
regarding political economy.
After all, is there not a danger of giving this question
of currency a prominence to which it is not entitled ? As
really the choice of a metal, or metals, for currency is
purely a matter of convenience—for, in the nature of
things, the choice cannot add to, or detract from the wealth
of a nation, which, in a sentence, may be said to consist of
commodities which have an exchange value—It may seem
paradoxical, but it is nevertheless true, that if commodities
to-day are worth 33 per cent less than what they were
twelve years ago, then anyone worth £66,000 to-day is as
wealthy as he was with £100,000 twelve years ago.
Suppose, for one moment, Bi-metallism were established,
and that according to theory, prices did advance about 33
per cent, then every hundred pounds saved by all classes of
society, would after the passage of such measure be worth
about £66. When such a calamity is the result of
what may be called the “act of God,” it is hard to be
borne with, but when the result of legislation, it is little
short of a crime.
Hides, eggs, oxen, and almost every description of
metal—including platinum—have some time or other per-
formed the office of currency. No matter what currency
is chosen, commodities always adjust themselves to it;
and, as the work currency performs is simply one of the
many media for the exchange of commodities, and thus
inclusive of, and inseparable from the standard of value, the
question resolves itself into one of convenience.
Gold is not the exclusive medium of exchange; indeed,
in the opinion of many reliable authorities, its work as a
medium compared with other media is trifling. I have
never yet seen an attempt to classify all the media of
16
exchange, or to show in what proportion each medium
bears upon the subject under discussion. Were gold
inconveniently scarce—were there not enough for the re-
quirements of currency—were all the other media of
exchange to disappear by magic—then the necessity, as a
matter of convenience, for augmenting the currency, might
well engage the serious attention of the country. But no
one has yet seriously argued, that there is an inconvenient
want of the metal for currency purposes. As stated at
the outset, the onus of proof rests with those who desire
to change our currency. So far as I can humbly
estimate, even admitting all the premises from which
Bi-metallists argue, adequate reasons have not yet been
given for a change, apart altogether from the fact that
every point is fiercely contested.
Volumes have been written upon every question I have
touched, with the result that solid ground has not been,
nor cannot be found. Seeing the whole subject is
involved in such mystery, are we not, in the language
of our great dramatist, better to suffer the ills we have,
than fly to others that we know not of?