A change in the relative production of the precious metals does
not necessarily alter their monetary value. In order to create
an alteration in the relative values of gold and silver with the
quantities annually produced, the disturbing cause must be of a
somewhat permanent nature. Moreover, it is necessary to examine, in
connection, either with a greater or less production, the causes which
might add to or diminish these results; such as expenses in working,
the varied wants of consumption, and the greater or less destruction of
coin by wear and tear, &c.
Monsieur de Humboldt remarks, that during the ten years, from 1817
to 1827, there was coined in Great Britain, above [3]1,294,000
marcs of gold; that is nearly one milliard of francs, and more than
[4]100,000,000 francs per annum, without any influence having been
produced by such extensive purchases on the relation of gold to silver:
the proportion, which was as 1 to 14·97, never exceeded 1 to 15·60; or
shewing a rise of not more than 4²⁄₁₀ per cent. Such was the case when
England, which for above twenty years had had only a paper circulation,
re-established a metallic currency, and attracted the coin and the
bars of gold dispersed throughout Europe. During these ten years she
absorbed, or nearly absorbed, an amount of gold which perhaps equalled
the production of the whole world, and certainly exceeded the import of
gold, during that period, into all the great commercial depots in the
civilized world. It would not enter into our subject to examine at what
sacrifices England made this monetary revival; but the equilibrium once
restored, and the empire of Britain having placed herself in harmony
with the rest of Europe, it does appear wonderful that it did not
cost more than a premium of 4 per cent. to have attracted a quantity
of gold, probably equal to the half or one-third of that possessed by
the whole of Europe. And the wonder increases when we remember, that
the Mint of London, which in 1814, 1815, and 1816, had not coined a
single sovereign, issued at once, in 1825, £9,520,758 sterling (about
240,000,000 of francs), which must have been consequently abstracted
from trade in the course of a few months. Political commotions brought
about other variations in the price of the precious metals. It is well
known, that on the news of the landing of Napoleon in 1815, gold rose
10 per cent. in London.
To explain how this sudden collection of gold, effected by Great
Britain with as much perseverance as vigour, did not bring about a
general crisis; it has been said, and not without reason, that the
quantity of the precious metals now existing in the shape of money,
rendered the oscillations in its production and supply as money, less
sensibly felt. It should be recollected, that if the metallic values
were so greatly depreciated by the discoveries of America, this state
referred to the existing condition of Europe, exhausted both of silver
and gold. The difference thus exhibited between the two periods is
very evident; but it does not appear to be sufficient to account for
the facility with which the circulation may increase in the present
day, without affecting the price of silver or gold. It may be as well
to add, that this movement, which appears to convey life throughout
every artery of commerce, is not fed now solely, as in olden times,
and during the middle ages, by the precious metals. Metallic money now
forms but a small portion of the total circulation, if we take into
account the mass of bank notes, bills of exchange, drafts and bankers’
cheques, which complete the amount of a circulating medium of exchange;
this, at the present day, taken as a whole, is something almost
indefinite: it appears to defy all calculation; and we might almost
say that the excess in the production of gold and silver now need not
necessarily produce more influence than the waves of the sea on the
permanent level of the ocean.
At the same time that the depreciation of gold and silver under
any general form becomes less probable, the increasing facility of
communication, and the greater mutual dependence of nations in matters
of credit, renders any great local difference in the value of money
more improbable. Whenever the precious metals become in excess in
one country, the surplus quickly reaches its neighbour. Let a sudden
scarcity of food, or any other cause, create a drain of specie, the
consequently increased value of money will soon draw back that which
has been exported. The cost of transport, and the premium of insurance
of gold, are the limits of the variations in the rates of exchange; and
the charges are being diminished every day, thanks to railroads and
steam communications. Before the wonderful progress in the development
of industry from the commencement of the nineteenth century, we have
seen the changes occurring at different periods, in the relative
production of the precious metals, without any corresponding alteration
in their relative values. At the close of the fifteenth century, it is
true, that America, furnishing nothing but gold, and this metal having
accumulated in Spain, Queen Isabella of Castile was forced to alter
the relative standard of gold and silver. After the first half of the
16th century, the production of gold having ceased to preponderate, and
silver being imported in great abundance, the value of the inferior
metal underwent such a depreciation, that the governments of Europe,
yielding to the force of circumstances, changed its relative legal
value; but with these two exceptions in the monetary laws, one purely
local, and the other European, we observe the production of each metal
extend and diminish alternately, without any relative alteration in
value of sufficient importance to attract public attention.
“From the year 1645 to the commencement of the 18th century,” says
M. Michel Chevalier, “silver took the lead in a most remarkable
manner. Then occurred the bright days of the mines in Potosi, and the
production of silver exceeded that of gold, weight for weight, in the
proportion of 60 to 1; after that, and without any diminution in the
produce of silver, came the glorious time for the Brazilian gold mines.
Simultaneously appeared the auriferous regions of Chico, Antioguia, and
Pepayou. The commercial world received from America 1 kilogramme [5]of
gold for every 30 kilogrammes of silver. Thus passed the middle of
the 17th century. Then the silver mines of Mexico put forth all their
splendour, and the proportion increased to 40 to 1. The Brazilian mines
began to diminish, whilst those of Mexico continued to increase in
production; and, at the beginning of the next century, silver exceeded
gold in the proportion of 57 to 1. In 1846 the production of silver
still continued to predominate, and we are now at the proportion again
of about 40 to 1.”
Humboldt’s calculations differ but little from those of M. Michel
Chevalier. This great authority considers that the import of gold until
the first years in the 18th century, bore the proportion to silver of
1 to 65. Let either of these suppositions be true, there can be little
doubt, that the relative weight of supply of the two metals varied
by one half, without any serious alteration in their relative price;
which surely proves that gold was essentially required, and that the
increase of production did but fill up the gap, which, as far as the
18th century, the progress of civilization and of luxury had created,
without an adequate means of supply.
In ancient times, the relative value of the two metals appears to
have been almost entirely governed by the quantities produced and
brought to market. A pound of gold was worth eight or ten pounds of
silver, according as the quantity brought to market varied in the
like proportion. The simplicity of commercial interests, in a state
of society when neither luxurious arts or industry were thought of,
offered no inducements for the collection of gold or silver for their
use as money, excepting on account of their relative scarcity; but when
fighting ceased to be the principal occupation of mankind, and labour
began to be held in some estimation, an end was put to this patriarchal
state: if the people lost their primitive simplicity, the relation of
supply and demand no longer depended exclusively on the proportionate
production of the two metals; other causes affecting a rise and fall
began to operate on prices.
When the precious metals were nearly absorbed in the supply of money,
their commercial value had no other element to influence an alteration
than the requirements of circulation; the monetary value governed the
commercial price. But, at the present time the contrary is the case:
the greater the degree of civilization, and the greater the increase
of a taste for luxuries, the more does the demand for the precious
metals for other objects exceed the want of them for coin. Mr. Jacob,
whose work on the precious metals appeared in 1831, places a value of
[6]149,000,000 francs on the gold and silver annually used for articles
of jewellery and plate in Europe and America.
During the last twenty years the progress of luxury amongst the
industrious and commercial nations of the world has been enormous.
The moveable wealth of France and England has made prodigious
accumulations. What family is there so poor as not to have some article
of plate? Gilding is no longer confined to the decorations of temples
and palaces; it is found in the most humble cottage. To what a length
may it not reach if the taste should increase for gilding the dresses
of ladies, and for covering the uniforms of our men with gold or silver
lace?
On the whole, then, it appears that the demand for gold and silver, as
articles of commerce, is likely to exceed the demand for the precious
metals solely for use as money. This is a new point; and we must not
lose sight of it in endeavouring to appreciate the effect which an
increase or diminution in the production of the precious metals may
have, both on their price and on their relative value.
Without noting the variations which have occurred from one century
to another, in the production and in the importation of gold and
silver, in order to recapitulate the quantities of the precious metals
which America has poured into the European markets in 318 years,
from the discovery of Hispaniola to the revolution in Mexico, M. de
Humboldt considers the production of gold to have been [7]2,381,600
kilogrammes, and that of silver [8]110,362,222 kilogrammes: making a
total value of about [9]32 “milliards” of francs: the weight of gold
imported represents about ¹⁄₄₇th of that of silver. It does not appear
probable, that the produce of gold in other parts during these three
centuries has materially altered these proportions. Admitting that
when first the Mexican revolution retarded the working of their silver
mines, the amount of coined money throughout Europe represented a value
of [10]8 “milliards” of francs, of which [11]6 “milliards” were in
silver, and [12]2 “milliards” in gold, the relative quantity in weight
would still have been as 47 to 1; and yet the relative monied value,
thirty years since, varied in Europe between 1 to 14½, and 1 to 15¾.
Thus, in the value of the precious metals, the difference was three
times less than in their weight.
Nothing is more difficult in matters relating to money than to present
statistics which may be considered as an approximation to truth. It
would appear that as gold and silver are used as the denominators of
value, generally, throughout the world, all the phenomena connected
with their production and circulation ought to be noted with the
greatest precision: they ought to be the points to which the attention
of statisticians should be “_par excellence_” directed. What can be
more important, in an economical point of view, than to establish a
regular scale, indicating the rapidity of every movement connected with
the subject, and acting as a gauge of its extent?
Divers causes appear, however, hitherto to have prevented such a
desideratum. In the first place, gold and silver producing countries
have generally been in a rude state of civilization; and as unable to
apply rules for the public weal, as to employ machinery to aid their
industry. Thus, even in the registry in Mexico under the Spanish
rule, of all the money coined at their mint, and for ascertaining
the amount produced in the mines by the proportion of the tax due to
government, which ought to be levied thereon by the hundred-weight,--it
is absolutely necessary to take into account all that quantity which
escapes the vigilance of the tax-collector, and which is either sent
into the interior, or exported clandestinely.
What is the sum of the precious metals really produced at any given
time? What is the proportion of such production which, when exported,
acts as a regulator of the prices in Europe? How are the channels
formed which sometimes direct the stream of commerce towards the east,
and sometimes towards the west, in the distribution of the metallic
wealth of the world? All such problems, as regards the past, must
probably remain unsolved. The enquiry becomes more easy when referring
to our own times; but even then large allowances for incorrectness of
data must necessarily be made.
At the beginning of this century, according to M. de Humboldt,
gold and silver were imported annually into Europe in the relative
proportions of about 1 to 55; that is, [13]15,800 kilogrammes of gold
to [14]869,960 kilogrammes of silver. M. Michel Chevalier, stating,
not the import but the production, calculates it at [15]23,700
kilogrammes of gold against [16]900,000 kilogrammes of silver, or in
the proportion of 1 to 38; but the gold of Africa and Asia, comprised
in this statement, never really found its way into European markets
except in the smallest quantities, and in such amounts as could have
no appreciable influence on the commercial prices of the metals. From
1810 to 1830, according to Mr. Jacob, the produce of America diminished
by one half. As the reduction refers principally to silver, that is
to say, to those mines which required both capital and labor, it is
fair to assume that, at least during the first part of this period,
the relative proportion of gold to silver would have increased; but we
have no means of verifying figures which appear to justify what would
otherwise rest solely on the analogy of the case.
In 1847, when the general working of the auriferous region of the
Oural Mountains was at its meridian, M. Chevalier considers the annual
production of gold throughout the world to have been [17]63,250
kilogrammes, and that of silver [18]875,000 kilogrammes. This would be
[19]25,000 kilogrammes _less_ of silver, and [20]30,000 kilogrammes
_more_ of gold, than at the beginning of the century. At these figures
gold stands in reference to silver as 1 to 14. The return from these
gold regions appears to have been greatly over-estimated. I find in a
table, published in the “_Times_” of May, 1852, statements which appear
to be founded on correct data, and which bring the production of gold
up to 42,800 kilogrammes--that is, to [21]147,400,000 francs.
This result, then, is remarkable. The 17th century produced 1 lb. of
gold to 60 lb. of silver. In the 18th century the production was as 1
lb. to 30 lbs. At the beginning of the 19th century silver was again
abundant, and appeared in quantity as 1 to 50. Towards the year 1847
the production of gold again increased, and the relative proportions
were as 1 to 20. The development of the Siberian mines, which has
so materially changed the relative production of the two metals, has
produced no sensible alteration in price. Will it be the same with
the wonderful discoveries in California and Australia? To solve this
question, it will be desirable to examine accurately the actual state
of the production of gold and silver throughout the world.