aa ry LIBRARY © ON THE ; OF THE UNIVERSITY of ILLINGIS RELATION TO THE PUBLIC WELFARE Changes in the Volume of Money AND ON MONETARY STANDARDS. By DR. FF. A. P. BARNARD. 202 Proceedings of The American Metrological Society. ON THE RELATION TO THE PUBLIC WELFARE OF CHANGES IN THE VOLUME OF MONEY, AND ON MONETARY STANDARDS. During the past eight or ten years the world has been filled with a great outcry against the stupendous wrong said to have been done to the human race by the financial measures adopted | by certain governments, involving what is commonly called “the demonetization of silver.” The authors of those measures, and all others who have maintained their wisdom, have been denounced sometimes in terms of bitter vituperation, as designing men de- liberately aiming to build up the fortunes of the wealthy few at the expense of the suffering many ; and at other times in words of contemptuous pity, as the weak victims of a false philosophy by which they are misled to their own delusion and to the grave injury of their felowmen. It never seems to occur to the authors of these intemperate expressions that they are perhaps themselves under the influence of some slight hallucination which vitiates in a degree the clearness of their vision. The confidence with which they utter their judgments, is like that of the old prophets, who prefaced all their announcements with the unanswerable decla- ration, “Thus saith the Lord.” They speak in the absolute tone of men having authority. They disdain the language of hypo- thesis or conjecture. What they assert they assume to know. Those who differ from them, on the other hand, they treat as men without knowledge altogether ; men who put forward their own idle fancies instead of facts, and who live in a constant atmosphere of unreality. Regarding them in this light, they habitually speak of them as men without any proper acquaintance with the affairs of actual life, as unpractical men, or doctrinaires. This word doctrinaire involves a whole encyclopeedia of contemptuous mean- ing. It denotes a visionary, a pure theorist, a Utopian philo- sopher, whose notions, however correct or just they might be in some imaginary or impossible world, must be necessarily absurd and wrong in that particular and imperfect world in which it is our destiny to live. ERRATUM. On page 209, line 14, the word Corn should read Corn. ‘ 2 E ma 5 < £ ‘ ES ea = 7 - = 4 é * = ~ “ * — i = ane a tet = - t z = - = p , t, sagt 5 = - Joa : = S is 4 os = = - Ss ‘ =f < = % z — = -S. = E be 5 = s tS + uUMiv. hib & OED 08. Proceedings of The American Metrological Socvety. 203 Now there is good reason to believe that the truth is directly the reverse of what is here represented, and that these very oracular wiseacres are themselves the doctrinaires. We find them, for example, continually taking for granted certain propositions in regard to the effect upon the welfare of the masses of the people, of changes in the volume of the currency, and making these assumptions the basis of conclusions of a most sweeping character, when a very cursory examination of the actual facts of observation concerned in the question, will show the propositions themselves to be without substantial foundation, and to be mere fancies conceived in the imaginations of their authors to serve the purposes of their argument. The argument in the present case is something like the follow- ing: The demonetization of silver has diminished the amount of real money in the world by one-half. The consequence has been a universal fall of prices, and the consequence of a general fall of prices is invariably wide-spread suffering. Silver itself being reduced to a commodity of commerce, falls in price along with other things, and with its fall an immense amount of wealth is wantonly annihilated, And all this mischief has been done at the instigation of unprincipled men, who have managed to control the counsels of governments for the promotion of their selfish ends, to the disregard of the general good, and the great injury of the honest citizen. These assertions are not made in regard to the acts of distant governments and to the experience of other peoples, but in respect, especially, to the legislation of the American Congress in 1873 and 1874, and the influences which induced that legislation, and to the stagnation of business and the consequent sufferings of the industrial classes in our country during the last six or seven years. Now that this suffering has been great there can be no doubt, and that we have passed 4 through a period of comparatively low prices is also true : but that these facts are traceable in any manner to the legislation of Congress affecting silver, is not only not certain, but is demon- strably false. For the humanitarian philosophers who call upon us to weep over the universal wretchedness which has been brought down upon our countrymen by the demonetization of silver in 1873, are compelled by their own principles to argue Y ok ha Wan me 204 Proceedings of The American Metrological Society. that the immediate effect of that financial measure, in virtue of which it drew after it the imputed disastrous consequences, was to diminish enormously the volume of the money of the United States. Prices fell, they assert, because the volume of money was reduced. The volume of money was reduced by withdrawing from silver the character of money. The people suffered from the fall of prices, and thus the demonetization of silver was the cause of the suffering. Now, had it been the case that any considerable proportion of the circulating medium of the United States had been deprived of the character of money by the legislation of 1873 and 1874, the soundness of this reasoning would not necessarily follow, though the fact itself would be a factin harmony with the reason- ing; but such was not the case. For, the simple truth is, that, for nearly half century before that legislation took place, we had had no full legai tender silver in circulation at all. The only form of silver coin, which had been struck since 1853 having this legal tender character, was the silver dollar, and for sixty years there had not been ten million silver dollars struck in all. Moreover, the legislation referred to, so far from having been brought — about by dishonest influences exercised by interested men, was due to the advice of the finance officers of the government itself; for the very sufficient reason that as prices then stood, silver bullion uncoined was worth two or three per cent. more than the same metal coined into dollars; so that all the dollars issued from the mint were immediately exported, or melted up and con- _ verted into bullion again. While this state of things lasted, and it did last for two or three years, there was no clamor about demonetization; but when in 1876 the price of silver fell rapidly in the London market, the explosion was sudden and violent. The discussion of the dollar complicated itself at once with the question of the resumption of specie payments in the United States, for which, by an act of Congress passed in 1875, the Ist of January, 1879, had been fixed as the definite day ; and it was further embarrassed by the up- springing of a powerful party bent on resisting all resumption, and on maintaining a currency exclusively of paper forever. The success of this party, and it is a party which at times has appeared Proceedings of The American Metrological Society. 205 truly formidable, would have deprived the silver question, and the gold question no less, of all interest so far as this country is concerned. But to a certain extent the same motives actuated alike the champions of fiat money and the advocates of the re- monetization of silver. No earnest desire for the reappearance of silver manifested itself until silver became cheap, and no fiat- money party could be possible if the cheapness of fiat money were not sure to be phenomenal. If all commercial exchanges were conducted now, as they appear to have been in primitive times, on the principle of payment on delivery, neither cheap silver nor depreciated paper would be tolerated for a moment by either buyer or seller. In the actual state of the world it happens, however, that into many of the transactions of com- merce or of ordinary life there enters the element of time ; that is to say, for benefits received the receiver engages to return an equivalent at a later day. And this equivalent is money. Any- thing that makes money cheap—that is, diminishes its value rela- tively to commodities—is favorable to the debtor ; and therefore the most vociferous clamorers for fiat money are always found among the debtor class. For a similar reason the remonetiza- tion of silver when silver is cheap, as at present, finds favor with those who were so indifferent to its demonetization when it was dear, as in 1873, that they allowed this abominable measure, as they style it, to be at that time carried without lifting a finger to oppose it. Now, as there is hardly a man in the community who has not at one time or another some outstanding liability pressing upon him, the debtor class is necessarily very large. But for the same reason the creditor class is large also ; and most men are at once debtors and creditors. And hence the assumption which is so often made in the discussion of this question, that the com- munity is composed of two distinctly definable classes of people having interests diametrically antagonistic to each other, is un- tenable ; but, supposing it true, the further assumption that these two classes are not equally entitled to the sympathies of statesmen and the protecting care of the State, is more indefensi- ble still Yet we hear it constantly represented that any mea- sure which may by possibility bear heavily though only tem- porarily on the so-called debtor class—or perhaps we may rather 206 Proceedings of The American Metrological Society. say, any measure which does not distinctly tend to lighten the burdens of that class at the expense of the other—is incapable of justification, if not utterly reprehensible; while on the other hand a measure from which the creditor class suffers is regarded, in the same quarters, with a complacency which no attempt is made to disguise. This peculiarity may perhaps be accounted for by considering that in the vulgar mind the creditor class appear to be confounded with the rich, the capitalists, the “bloated bond- holders,” and all others whose sin it is to have been successful in business ; while the debtor class are supposed to be the needy, the hard-working poor, the small farmers, farm-laborers, mecha- nics, and manufacturing operatives. And these last in every com- munity, are, no doubt, largely in the majority. Unfortunately also this majority are only too much predisposed to think ill both of the designs and of the actions of those who have been more favored by fortune than themselves. But the truth is that the classification above indicated is totally erroneous and false. It is an impossibility to divide the people into two such well-defined and opposite classes. Scarcely can an individual anywhere be found who is not in one relation or another, at the same time a debtor and a creditor. But admitting as just the arbitrary line of division above assumed, the position of the two classes des- cribed should, for the purposes of this argument, be directly re- versed ; since in a comprehensive view of the conditions affecting the question, if any class is, in this country, especially the creditor class, it is the poor. This is so because, in defining this class, it is.an error to regard it as limited to such as are looking for the receipt of dues long outstanding ; it embraces, on the contrary, all that immensly greater number who have debts becoming due to them every day, from the labor of their hands or the exercise of their skill in every department of industry ; while on the other side we have as debtors all the banks, on account of their issues of promissory notes and on account of the vast deposits of the money of their customers in their vaults; all of the great joint-stock corporations engaged in manufacture or transportation, as toward the holders of their bonds and stocks, and toward the innumerable company of their employés; all the great importing merchants and jobbers to the bankers who discount their bills and other Proceedings of The American Metrological Society. 207 securities, and to the mariners who navigate their vessels ; and finally most municipal corporations and the State itself. To enumerate more particularly, we may set on the creditor side— 1. Men and women who maintain themselves by their daily labor, or who, in common language, “ work for wages.” 2. Persons in professional life depending on fixed salaries, including clergymen, teachers of all grades, and the entire civil, military and naval service. 3. Employés in mercantile houses, banks and business offices of all kinds. 4. Annuitants, embracing the holders of all descriptions of stocks and bonds, including those of the United States, of the State governments and of municipal corporations, as well as those of private banking, railroad, mining and manufacturmg com- panies ; in one or another of which forms, the small savings of multitudes of individuals in narrow circumstances have been in- vested in the hope of security. 5. Merchants, whether in the wholesale or the retail trade, embracing among the latter a countless number of small shop- keepers all over the country. 6. Mechanics in every branch of handicraft, who usually keep running accounts with their customers. 7. Banks, as holders of commercial paper, and other forms of bills receivable. 8. The State itself, as the receiver of taxes. On the debtor side we may enumerate— 1. The State, again, to the entire amount of the annual appro- priations made for the support of the government. 2. Banks to the amount of their stocks, deposits and circu- lation. 3. Borrowers on ordinary commercial paper, or on mortgage of real estate. 4. Small tradesmen toward the wholesale merchants, and the customers of both on open account. 208 Proceedings of The American Metrological Society. Holders of real estate on lease, whether in town or country. Purchasers of stock, farms, implements, tools, &e., on credit. Employers of all classes toward those dependent on them. DAMN The whole people as tax payers. The very attempt to make an enumeration like this, proves at once the impossibility of drawing such a line of demarcation among the people. There is no class of the community which as a whole can be placed with propriety on either side of the line. And though it may be admitted that there are individuals in every class whose temporary interests may sometimes be more on one side than on the other, yet, as has been already remarked, there is scarcely one who is not in certain of his relations at once a creditor and a debtor. Now if we consider the effect of the rise and fall in the value or purchasing power of money, we shall see clearly enough that it cannot possibly be such as we are commonly asked to believe. A rise in purchasing power which may be occasioned by a con- traction of the currency, if we suppose it to affect the creditor favorably and the debtor prejudicially, affects every individual more or less in both ways at the same time. But how is this effect produced ? Its first manifestation appears in a general fall of prices. The immediate result is a reduction in the cost of living which is felt beneficially by all who maintain themselves by the labor of their hands, and all who depend on salaries or fixed annuities. For wages and salaries do not fall synchronously with prices; but their reduction, when it comes, follows a long time after, and does not come at all unless the rule of low prices is at leneth permanently established. Even when it comes, it is only pro- portioned to the fall of prices; so that the income, though re- duced, stands once more to the cost of living in the same relation as before, and the individual in the end neither gains nor loses. Mr. Bagehot illustrates this point admirably in the following remarks extracted from his book on Lombard Street : “ In 1867 and the first half of 1868, corn was dear, as the follow- ing figures show: [Here follows a table showing the average monthly price of wheat from December 1866 to July 1868. | Proceedings of The American Metrological! Society. 209 * From that time it fell, and it was very cheap during the whole of 1869 and 1870. 'The effect of this cheapness is great in every department of industry [the author is writing contemporaneously] the working classes, having cheaper food, need to spend less on that food and have more to spend on other things. In conse- quence there is a gentle augmentation of demand through almost all departments of trade. And this almost always causes a great augmentation in what may be called the instrumental trade,—that is, in the trades which deal in machines and instruments used in many branches of commerce, and in the materials for such. Take for instance, the iron trades: [Here follows a comparison of the exportation of iron in the years 1869 to 1870 with the same in the years 1867 and 1868. | “ That is to say cheap coin (in England), operating throughout the world, created new demand for many kinds of articles— the production of a large number of such articles being aided by iron in some of its many forms—iron to that extent was exported, and the effect is cumulative. The manufacture of iron being stimu- lated, all persons concerned in that great manufacture are well off, have more to spend, and by spending it encourage other branches of manufacture, which again propagate the demand ; they receive and so encourage industries in a third degree de- pendent and removed.” Nothing could make it more clearly evident than this, how true it is that the fall of prices—that is to say, the rise in the value of money in reference to commodities—is an unqualified blessing to the great majority of the population whom it affects, that majority on whom falls the heaviest portion of the world’s daily toil. Among other classes who may be benefited by the fall, may be named merchants and handi-craftsmen, provided they can collect their dues; but on the other hand they are often largely losers by their defaulting debtors. The same may be said of banks, and of all lenders of money. It is a familiar experience to hear banks and money lenders denounced with bitterness by dema- ‘gogues, who are accustomed to treat the possession: of accu- mulated capital as a wrong to mankind. Yet it'is only by such 210 Proceedings of The American Metrological Society. Ds aR , accumulations that business enterprise can be encouraged, pro- duction stimulated, and the industrial activity of the world kept alive. with the idea that because they are selling at high prices they are better off, and in the latter they are alarmed lest the fall of the prices of their commodities will make them poor, yet, taking the community through, both hopes and fears are equally unfounded; and when matters adjust themselves to the new plane of prices, everything goes on as it did before the change, and no one is either worse off or better. But during the progress of the change more are losers than gainers, whether the tendency be up or down; and hence the condition of the highest prosperity which a nation can enjoy is that in which prices remain stationary. In such a state of things, business steadily and healthfully grows, and the volume of the currency should grow in no greater pro- portion, nor any less. But this growth will in the nature of the case be gradual, and it cannot be stimulated beyond its natural and healthful development by sudden and vast accessions to loan- able capital without provoking hazardous speculations and engen- dering wild and reckless schemes of which the results cannot fail to be deplorable. The dependence of the prosperity of a people upon the steadi- ness of the volume of money and its gradual and uniform increase in due proportion to the growth of the operations of industry, is well set forth in the report of the Congressional Monetary Com- mission of 1876, presented by the chairman, Senator John P. ' Jones, at the session of the forty-fourth congress, as follows: “Tt is in a volume of money keeping even pace with advancing population and commerce, and in the resulting steadiness of prices, that the wholesome nutriment of a healthy vitality is to be found. The highest moral, intellectual and material development of nations is promoted by the use of money unchanging in its value. That kind of money, instead of being the oppressor is one of the great instrumentalities of commerce and industry. It is as profitless as idle machinery, while it is idle; differing from all other useful agencies, it cannot benefit its owner except when Proceedings of The American Metrological Society. 217 he parts with it. It is only under steady prices that the produc- tion of wealth can reach its permanent maximum and that its equitable distribution is possible. Steadiness in prices increases labor to all and exacts labor from all. It gives security to credit, and stability and prosperity to business. It encourages large enterprises requiring time for their development, and crowns with success well matured and carefully executed plans. It discour- ages purely speculative ventures, and especially those based upon disaster. It encourages actual transactions rather than gambling on future prices. It metes out justice to both debtor and creditor, and secures credit to those who deserve it. It prevents capital from oppressing labor, and labor from oppressing capital, and secures to each its just share of the fruits of industry and enter- prise. It secures a reasonable interest for its use to the lenders of money, and a just share in the profits of production to the borrower. It keeps up the distinction between a mortgage and adeed. It insures a moderate competence to the many, rather than colossal fortunes to the few at the expense of the many.” All these blessings unquestionably attend the steadiness of an unvarying scale of prices both of commodities and of labor in any community; but it is not alone by the preservation of a uni- form volume of currency, or of a volume in constant proportion to population and wealth, that such a permanently uniform scale of prices can be maintained. Other causes besides the volume of the currency continually disturb it. We have seen, for ex- ample, how in consequence of a bad harvest, the price of wheat may be raised in England; and how the disturbance of the scale at this one point may propagate a disturbance through the whole range of prices. While it is well, therefore, to do nothing which may suddenly and largely affect the volume of the currency, we need not flatter ourselves that this precaution will suffice to avert those occasional periods of stagnation which so many other causes are continually conspiring to bring to pass, when industry flags and prices fall, and there comes up from every side the lamentation over the hardness of the times. | To return to the condition of our country in 1876, when the downward tendency in prices above referred to began to be marked. 218 Proceedings of The American Metrological Society. That tendency was inevitable, from the fact that the country was at the time in an entirely abnormal condition, a consequence of the terrible struggle through which we had so recently been compelled to pass for the preservation of the life of the nation. The precipitation upon us of that struggle compelled us suddenly to abandon the use of real money, and to replace it by a currency of no intrinsic value, maintained in circulation only by the force of law. The vast expenditures necessary for the prosecution of the war swelled enormously the volume of this artificial medium of exchange; the universal demand for provisions for the subsis- tence of the armies in the field raised rapidly and largely the prices of farm products; and the continual call for more and more of the material of war, stimulated all branches of mechanical industry to the highest point of production ; while the diversion from the pursuits of peace of the most effective portion of the industrial population to meet the military exigencies of the time, produced its natural effect upon the rates of wages. The years of the war were years of extravagance and reckless adventure ; the evil inheritance of the habits then engendered fell upon the years that followed; and under an outward appearance of pros- perity which both surprised and deceived the people, sowed the seeds of that harvest of disaster which finally came in overwhelm- ing shape in 1873. The depreciation of the currency was then | fifteen per cent. and nominal prices were proportionally high, From that point we had an upward struggle to bring our legal tender notes up to the par to which the resumption act passed a little later, was destined inexorably to force them, and the fall of prices was a result wholly inevitable, without reference to any supposable effects of the demonetiza- tion of silver—if any such there were—conspiring to this result. It is true that, toward the end, this fall became somewhat greater than the necessary appreciation of greenbacks would have re- quired; and it has been accordingly argued that silver had not fallen in reference to commodities, but that gold had risen. Thus Mr. Weston quotes statements from the New York Public, in which it is affirmed that, between 1876 and 1879, the general fallin prices amounted to nineteen per cent., while the fall in premium on gold was only ten and a half per cent., which leaves Proceedings of The American Metrological Society. 219 eight and a half per cent. apparently chargeable to the rise in the value of gold.* And further on he adds in reference to this :— “The rise in the value or purchasing power of gold, and the simultaneous approximation of the value of the greenback to the value of gold, are the upper and nether mill-stones which have ground debtors and mortgageors to powder.”+ But this is only an example of the tendency already referred to, in all movements to pass the point of equilibrium. Prices fell lower than they ought to have fallen, and for the moment failed to be governed by the actual value of money. The proof of this is in the fact that they did not remain for an hour at this point of extreme de- pression. On the Ist of January, 1879, resumption became an accomplished fact, and the prostration of prices which the effort to resume had produced, had been carried to the extreme of pos- sibility. If the effect had been permanent, it might have been fair to argue from it an actual increase in the value of gold as money. But no sooner had the uncertainty and apprehension which always existed in the public mind, so long as we continued to have no such thing as a standard of value in our business transactions, been removed by successful resumption, than the natural reaction took place at once, and prices began rapidly to rise. The director of the mint, in his annual report for the year 1879-80, furnishes a price table, which on this subject is highly instructive. This table gives the comparative prices of one hun- dred leading articles of domestic production exported from the United States for the years 1870, 1879 and 1880 up to June. It appears that in comparing 1879 with 1870, the prices of all the articles in the list, except twelve, have fallen—a fact which con- firms the foregoing statement of Mr. Weston. The exceptions, however, are rather remarkable; pig-iron, sheep, wool and horses being among the number; sheep having advanced nearly eighty per cent., and horses more than one hundred and sixty. The comparison of 1880 with 1879: shows, however, a singularly dif- ferent result. In sixty-five cases out of the one hundred, prices have advanced ; and in mayy instances, among which we find again pig-iron, horses and wool, the advance is very great. The * Weston, The Silver Question, p. 70. + Idem, p. 78. 220 Proceedings of The American Metrological Society. advance in iron extends to nearly all the forms of that metal, including bar-iron, iron rails, boiler plate and sheet and band. iron. Rice also, which in 1879 had advanced twenty-two per cent. upon 1870, has advanced additionally fifty per cent. upon 1879. Nearly all sorts of provisions have largely advanced, in- eluding all varieties of flour, aud both fresh and salted meats. A remarkable example occurs in the price of hops, of which from 1870 to 1879, the advance was seventy-two per cent., and from 1879 to 1880, one hundred and sixty per cent. further. The resumption in 1879 was therefore, a return to the state of commercial health from a state of commercial disease and threat- ened decline. It took place in spite of the predictions of the impossibility of effecting it for want of a sufficient gold reserve to make the operation safe. The remonetization of silver was forced upon Congress and the country mainly by the argument that unless we resumed upon silver we could not resume at all. Even Mr. Boutwell, who as a member of the Silver Commission of 1876 dissented from the majority, and argued against remonetiza- tion, was cited in the majority report of that Committee as having in his place, in the Senate, ‘scouted the proposition that it was possible to obtain even $100,000,000 in gold by the sale of the bonds for resumption or for any other purpose.”* Mr. Boutwell it is true, did in the speech referred to, present a pitiable spectacle of the manner in which, as Secretary of the Treasury, he had allowed himself to be dictated to by the bank of England. « The bank of England,” he said, “ foreseeing that there would be an accumulation of coin to the credit of the United States which might be taken away bodily in specie, gave notice to the officers of the Treasury Department of the United States that the power of that institution would be arrayed against the whole proceeding, unless we gave a pledge that the coin should not be removed, and that we would invest it in bonds of the United States as they were offered in the markets of London.” And then he weakly adds, “we were compelled to comply.” Further on, the ex-Senator continues :— ** There is another fact known to all. We recovered at Geneva * Report of Monetary Commission, created Aug. 19, 1876, p. 109. Proceedings of The American Metrological Soctely. 221 an award against Great Britain of $15,500,000, When this claim was maturing the banking and commercial classes of Great Britain induced the government to interpose, and by diplomatic arrange- ments, through the State department here operating on the Trea- sury department, secured the transfer of securities and thus avoided the transfer of coin. In the presence of these facts, is it to be assumed, for a moment, that we can go into the markets of the world and purchase coin with which we can redeem, four, three, two, or one hundred million outstanding legal-tender notes ? ” In reading this, one cannot but ask himself what would have happened, in case these delicate “ diplomatic arrangements” had failed, and the President of the United States had intimated that it would be convenient to us to have that small amount in gold. England had assented to the award, and had agreed to pay the money. Would she have refused ? But this talk about not being able to obtain gold for resump- tion or for any other purpose, is arrant nonsense. Any people or any man can obtain anywhere and at any time all the gold he wants, provided he has either of two important conditions in his favor, viz.: 1st. A perfectly established and unimpeachable credit, or, 2d. The possession of an unlimited amount of commodities which the world must buy or perish. Both these conditions were in our favor, and in spite of croakings from birds of ill-omen in politics, and in spite of the powerful influences exerted to defeat the object, we got the money and we are getting more of it yet—more even than we need, or than it is desirable for us to have, every day. In spite of the remonetization of silver, we resumed on gold. Remonetization, we were promised, would make silver as good as gold. It has not done it yet and will not do it; but the opera- tion of the existing silver law will compel the Treasury to go on buying and coining this metal’ indefinitely, till gradual as the process may be, the end will come at last, and there can be but one possible ending—the entire depletion of the Treasury of all its gold, and the replacement of that store by an equal nominal value of silver. Should a bill like the Bland Bill become a law, the process will be no longer gradual. ‘The fall in the value of 222 Proceedings of The American Metrological Society. money will be precipitous, and the resulting disaster enormous beyond the power of computation. It willbe buta slight allevia- tion of the general gloom to know that a few debtors and mort- gageors have escaped the calamity which has befallen the rest of their fellow citizens. In spite of the fact that the remonetization law of 1878 was undoubtedly passed in the expectation, and with the intention on the part of its authors, that silver should be used under it in the redemption of the legal tenders, itis doubtful whether, in point of law, the United States has any right to tender silver in such re- demption. The language of the law makes the silver dollar “a legal tender for all dues public and private.” The government is therefore, bound to receive it in all dues payable to itself ; but the law of 1873 declared the gold dollar of 25.8 grains nine-tenths fine to be “the unit of value,” and the obligation of the United States to pay dollars are obligations to pay such units of value— that is, such coins as the government has itself thus defined to be dollars ; and this obligation is not satisfied by the payment of other coins which have not that character, however under com- pulsion of law, individuals may be obliged to receive them in transactions between themselves. This question is, however, apart from the object of the present paper, of which the design has been to show that much of the sentimental reasoning which has been thrust into the discussion of the silver question, is fallacious in its assumptions and erroneous in its conclusions. It will also, it is hoped, contribute somewhat to bring to view the impropriety of transforming a great problem of political economy into a controversy about doubtful questions of purely humanitarian interest and practical benevolence. We certainly have gold enough for our own purposes, and we have had enough for nearly half a century. England has had enough for hers for two centuries. By relinquishing silver we leave the more for those who need it. Suppose the people of New York were to substitute universally the electric light, now growing so popular, in the place of gas. They would leave so much larger an amount of coal for the gas-supply of other cities. Or, to take a more strictly analogous example, suppose the people > Proceedings of The American Metrological Society. 223 of the United States should with one consent abandon the use of wheat as food in favor of some other breadstuff, say Indian corn: Though by doing so they would decibize this grain (if the word is allowable) for themselves, food would be more abundant for the rest of mankind; but in case the price of wheat should there- fore fall, we should hardly expect other nations to turn upon us with the complaint that we had made their food cheaper to them. Now, even though we leave silver alone, there are multitudes to whom this metal is almost as much a necessity as their daily food. And among these we must not forget that, besides the semi-civilized millions of the East, there have to be counted also the people of the Austrian Empire in Europe, who still hold to the single silver standard, and those of the Turkish Empire in. which coinage is in the ratio of 1:15 ; and which is certain, there- fore, if specie payments shall ever there be successfully main- tained, to draw silver from all neighboring states; to say nothing of the vast population of Russia among whom the double standard prevails, and who have shown no disposition as yet toward gold monometallism. Moreover, if the Latin Union alone would return to its professed preference, the double standard, the prostra- tion of the silver market would be at once relieved without the need of any help from us. The ills of which the French bimetal- lists complain, so far as they are occasioned by governmental acts interfering with the coinage, they have brought upon them- selves ; and it is entirely in their own power, if they will, to throw them off. But it is argued that though we may have gold enough now for our purposes, we shall find ourselves pinched in case all the other nations should engage with us in a general scramble for this metal. This danger is entirely imaginary ; but suppose that such scramble should occur, what amount of gold should we need? It must be remembered that our people make very little use of money in the form of coin. Except for the most trivial transactions, payments are made among us universally either by means of paper representatives of money or by checks drawn on banks. In this respect our habits differ widely from those of any other people under the sun. Our British brethren resemble us in this particular more nearly than any other people on the 224 Proceedings of The American Metrological Society. other side of the Atlantic ; but even among them no notes are in circulation below the value of five pounds in England, or below one pound in Scotland and Ireland. The consequence is that while, from the official reports transmitted to our government by Mr. Lowell on the monetary condition of the United Kingdom, it appears that the total amount of gold coin and bullion in the kingdom was equal, in May last, to £135,613,000, only £28,739,000 of this was in the banks; leaving, consequently, in circulation among the people £106,800,000, or more than $534,000,000. ‘The entire amount of the circulation in the form of bank-notes at the same time was £35,464,047, equal to $177,320,235. In the United States it appears, from the report of the director of the mint, that, in October last there was in the treasury and in the banks the sum of $174,944,791 in gold coin, while there _ was estimated to be $200,379,138 in private hands. On the other hand, in paper we had, according to the report of the comptroller of the currency, on the 31st August last, $697,757,809. Thus our gold coin in the hands of the people was less than two-fifths of that of England, though our population exceeds that of the United Kingdom by nearly 20,000,000, while our paper circulation is about four times as great as that of Great Britain. It appears also that our cash reserve, not counting silver, to secure the redemp- tion of the paper currency, is but about one dollar to four. The cash reserve of England is proportionally larger, but this reserve in the present statement is unusually large; it is often drawn down to half the amount; and as it is mainly in the Bank of England, where all the other joint-stock banks and bankers keep their deposits, it is, as Mr. Bagehot has pointed out, the sole guaranty which exists for the safety of British credit. It appears from the foregoing that the gold coin in circulation among the people in Great Britain is equal to seventeen dollars per head of the entire population; while that in the United States is but four dollars a head. Also, that the paper circulation in Great Britain is less than six dollars a head, while in the United States it is fourteen dollars per head. On the Continent of Europe there is scarcely any paper money in circulation, except in countries which have suspended specie Proceedings of The American Metrological Society. 225 payments. Nor on the Continent is it customary as in England and in the United States, for individuals to keep their money on deposit in banks and to make payments by check. It follows that the need of a Continental people for current coin is immensely greater than that of a population like ours; since they carry upon their persons or keep about their dwellings all the money they can save, while we do nothing of the kind. This Continental peculiarity has been accounted for, and prob- ably with justice, by the consideration that, for centuries, the Continent of Europe has been the theatre, with intervals of un- certain tranquility, of military operations, in which occupation and spoliation went along together, and treasure accumulated in the vaults of a bank was only so much the more conveniently placed under the hand of the spoiler. Men have been accus- tomed to feel, therefore, that there is no safety for personal property but that which the individual may be able to provide for himself ; and they, therefore, prefer to keep their money about them. The Director of the Mint gives for France in November, 1878, the amount of gold in circulation as $927,000,000 ; besides nearly $600,000,000 of silver. The population of France is about 36,- 000,000, which gives about twenty-six dollars of gold and seven- teen dollars of silver as the average to each individual. This far exceeds any possible wants of a people like ours. Unless the habits of our people greatly change, therefore, of which there is no probabillty, we shall always be able to com- mand gold enough for our purposes. Butif it should fall out otherwise, and we should find, in the competition among nations for the possession of the more precious, that our gold is slipping from us, we need not fear that in any event, we shall be left without money. Great as may be the inconvenience attending the change, we may always cast in our lot with the poorer and weaker nations, and accept silver as our medium of exchange and our standard of value. Except for its cumbrousness and lack of portability, silver is as capable of subserving the purposes of money as gold. But this is true only on the supposition that silver in the coniage is estimated at its true value in relation to 226 Proceedings of The American Metrological Society. other commodities. If an attempt is made by legislation to give to silver coin an artificial value above that which it is able to command as bullion in the markets of the world, and to make it at the same time universally a legal tender, the experiment of a money of silver only will prove a disastrous failure. The reason why, at this time, there is what is called a silver question at all, is that the advocates of silver remonetization are not content with making silver a real money for what it is worth, but demand at the same time that it shall be current for a good deal more than it is worth. Nor it will be an experiment attended with results any more successful, to attempt to use both silver and gold together, and to make each of the metals interchangeably and equally a standard of value. As neither of the metals preserves unchangeably through long periods of time a constant value in reference to commodities in general, so neither they do preserve a constant relation of value to each other. The bimetallists assert that, in point of fact, a double standard has existed among certain peoples for several centuries ; but the only basis of truth which exists for this asser- tion is the fact, that laws have existed sanctioning the double standard, while under these laws, and in spite of them, but a single standard has ever existed in point of fact for any appreci- able length of time. Under double standard laws, the relation between the commercial values of the metals always has deter- mined and always must determine which shall be the actual standard, the cheaper metal expelling the dearer as effectually as if it had been suppressed by law. The monetary history of Great Britain for a period of more then four centuries, during which she vainly strove to maintain the double standard, affords conclusive evidence of this truth, The ratio of value between gold and silver was fixed by Edward TIL. in 1345 at 1:122 nearly. At this rate gold could not be forced into the circulation, and he subsequently changed it to 1:114. Even this proved ineffectual and the same monarch changed the ratio twice additionally before the close of his reign. Henry IV. half a century later fixed the ratio at 1: 1(4, the lowest known to Brirish annals while the policy was adhered to of Proceedings of The American Metrological Soctety. 227 - endeavoring to conform the legal to the commercial ratio of But Henry VIII. and his son Edward VI. whose notions of the power of law to create a value where it does not exist, were quite as pronounced as of those of Mr. Henri Cernuschi in our own day, issued a series of decrees, in accordance with which the legal value of the gold and silver in the coinage of England stood related to each other successively as follows: values. In 36th Henry VIII., Silver was to Goldas 1 : 6; el (73 37th 73 73 “c 73 “ 6c “ec ] : 5 kd Bdward VL, 2%). As OT 6c 4th (73 ““ Pas “ce 6“ (73 <3 1 -4 g “cs 5th 79 “é “sc “cc 6c “cc 6c sf : 2294 The consequence of this was of course inevitable. ‘It followed,”’ says Lord Liverpool, “that all the gold was either hoarded, melt- ed, exported, or in some way driven out of circulation.” Disregarding these extravagancies, however, it may be said that repeated changes were found necessary in the ratio of value be- tween the metals in the coinage down to the accession of George L, early in the eighteenth century, when the struggle to maintain both metals in the coinage was abandoned, and silver ceased to be used in England except for petty retail traffic. The story is worth telling in a little more detail. During the reigns of James I. and Charles I. this struggle was very energetic. It ceased temporarily to occupy attention under stress of more urgent affairs, during the great rebellion and the Commonwealth. But after the Restoration, and down to the ac- cession of William of Orange, it went on actively, one metal or the other disappearing from circulation after every fresh effort to prevent this annoying result. The two monarchs named above, in addition to employing the natural means of accomplishing their object, that is, endeavoring to conform the legal ratio of values accurately to the commercial ratio, invoked the terrors of the penal law and exercised all the powers of the High Court of Star Chamber to deter men from the grave misdemeanor of melting down coin or carrying it out of the kingdom. Throughout the greater part of her reign Elizabeth maintained the legal ratio between the metals at 1:11,5,. In her 43d year she changed this to 1:108;. Gold was apparently falling, but 228 . Proceedings of The American Metrological Society. — directly after the accession of her successor, it took an upward turn which presently caused this metal to be as actively melted up and exported as it had been under Edward VI. In order to check or arrest this evil, the king in his second year diminished the weight of the gold coin by about ten per cent. ; reducing the ratio from about 1:11, where Elizabeth had left it, to 1:12. But this not sufficing, in less than five years he reduced it again from 1:12 to 1:13. The total actual rise was in all more than 21 per cent. But in this last advance he overdid the matter, and silver now began to be exported or melted as gold had been before. The sovereigns of diminished weight issued under the first of these changes, in order to distinguish them from those previously coined, were called wnites, though still rated at 20 shillings. But after the second reduction, to prevent the future exportation of the unites, they were declared to be legal tender for 22 shillings. In consequence of this over-valuation of gold, silver became exceedingly scarcely, and very little was brought to the mint for coinage. The king therefore resorted to measures of severity in the hope of stopping the exportation of the precious metals which went on rapidly ; and by a proclamation of 1614 setting forth “that great quantities of gold and silver are continually carried forth into forraigne parts, not only for the supply of com- merce in respect of the excesse of forraigne commodities (which ig a thing itselfe intolerable), but also upon secret and subtle gaines made at the mints abroad, which artifices as he does not approve, nor much lesse emulate, but is desirous to frustrate,” ordered that the statutes made and in force against the exportation of gold or silver in coin, jewels, plate, or vessels, or howsoever, should be strictly executed under the severest penalties. Three years afterward the Privy Council made a curious attempt to control the laws of commercial exchange by issuing an order requir- ing the East India Company and the Goldsmith’s Company to bind themselves under penalties not to pay more for silver than the mint price. In 1618 another proclamation wasissued by the king, in which he complained that “the drawing of moneys into the goldsmith’s hand, by turning silver into gold upon profit of exchange, doth make it the more ready to be ingrossed into the merchant’s hand for transportation to mints abroad,” and pro- _ Proceedings of The American Metrological Society. 229 hibited the melting down of the gold or silver coin of the realm. Four years later he complained in another proclamation that his previous injunctions had been disregarded, “notwithstanding some remarkable examples of justice in his High Court of Star Chamber,” and prohibited the exportation not only of coin but of bullion, and further made it penal to sell gold or silver bullion to any person except “the officers of his Majesty’s mint and changes.” He also prohibited certain manufactures requiring the use of the precious metals. And later, in 1624, he renewed the prohibition to any person to sell gold or silver “ except to the officers of the mint and changes,” and ordered that “no refiner sell to any person any manner of silver in mass,” and that “no goldsmith sell any fine silver allayed or molten into mass to any person or persons whatever, nor one goldsmith to another.” Charles I., after his accession, persisted in the repressive mea- sures employed by his father, and to render them more effectual revived the ancient office of King’s Exchanger, appointing the Earl of Holland to fill the same, issuing at the same time a decree “that no person except the said Earl of Holland should presume to exchange or buy any manner of bullion, in any species of foreign coin or in ingots, or in any other form whatever.” In 1636 a decree of the Court of Star Chamber sentenced seven persons convicted of culling out the heavier of the coins of the realm and melting them down and exporting the same, as well as foreign coin and bullion, to foreign parts, to pay £8,100 fine and to be imprisoned in the Fleet till their fines were paid. This kind of traffic is said to have been pursued by certain individuals with a profit of seven or eight thousand pounds per annum. Yet these proclamations were all in vain, and these severities pro- duced no practical effect whatever. Violett, a contemporary writer, states in a public document* that £30,000 in the minor coin of the realm were melted annually by a single goldsmith for six successive years, from 1624’ to 1630. The same author adds that throughout all the reign of this monarch, and in defiance of royal menaces and Star Chamber decrees, “silver sold constantly in London at one, two, and three pence per ounce above the * Violett’s proposals to Oliver Cromwell, 1665 ; cited by Liverpool. 230 Proceedings of The American Metrological Society. — mint price.” This was the experience of England under the — double standard before the Commonwealth. , Bie After the restoration, though the struggle to maintain the double standard continued, and though consequently one metal — or the other (usually the gold) was constantly driven out of circulation, the people at length, disregarding law, paid and re- — ceived gold coins according to their actual silver value as bullion, — and not according to their legal value, and thus the guineas of Charles IL, originally issued at 20 shillings, passed at 21, 22 and more—even finally at not less than thirty shillings. Meantime the silver coinage fell into a deplorable condition, the coins hay- ing been clipped and worn until they had lost half their weight, and under William III. a general recoinage took place. At this time the real value of the guinea in the new silver was only 20s. 8d. while it was passing current at 21s. 6d. Its legal tender currency was reduced to 21s., at which it remained fixed. But as this reduction was not sufficient, silver was largely exported and soon ceased to be, what it had been for seven hundred years before, the practical standard of value in England. In 1774 the law at length recognized the impossibility of maintaining two different standards side by side, and silver was made legal tender only for sums not exceeding twenty-five pounds sterling. In 1817 — this legal tender limit was reduced to forty shillings, and the ~ silver coinage of England has since consisted only of tokens hav- — ing a real value materially less than that for which they pass current We ourselves have also had a century of experience of the folly of attempting to maintain a double standard. If then silver is to be the money of the future in the United States, let it be the only standard money; let it be coined at its actual value, and let gold be subsidiary or as far as it may be used at all, let it — pass as it did in England after the Commonwealth, “ according to the current rates.”