pouring forth silver at the rate of from 20 ounces to 1 of gold up to 55
ounces to 1, the greatest variation in their value was less than 9 per
cent., and in the twenty years when the silver production was to that of
gold as less than 5 ounces to 1, the value of gold produced being more
than three times that of silver, their money value varied less than 3 per
cent., and yet we are coolly asked to believe that since 1873 silver is to
be rated among variable commodities like potatoes, the size of the crop
each year determining the value. Monometallists have had much to say about
the relative cheapness of gold during those years, and have laid much
stress upon the fact that it was an era of great prosperity and rapid
development, with rise of wages and the prices of farm produce. In this
argument they admit three things: that we have a moral and constitutional
right to use the cheaper metal at any time; that we did use gold for all
those years simply because it was easier to pay debts with it, that is, it
was cheaper, and that the use of the cheaper metal aided greatly in making
prosperity. That is all that any bimetallist claims. As the entire burden
was not then thrown upon silver, we claim that it should not now be thrown
upon gold, doubling or trebling the rate of its advancing value; and as
the privilege to use the cheaper metal then checked the advance of the
dearer and enhanced prosperity, we insist that the system of that time
shall be restored.
The subsequent figures are equally convincing. In 1861-65 the gold
products were 72.1 per cent. of the total, the silver 27.9 per cent., the
variation in ratio from 15.26 to 15.44. In 1866-70 the production stood
69.4 to 30.6, the variation in ratio 15.43 to 15.60. In 1871-75 production
was still 58.5 to 41.5, but the variation in coin value was from 15.57 to
16.62. That something had happened quite aside in its effects from
relative production was evident, but the people did not find out what it
was till late in 1875. At the time the demonetization act was passed, the
ratio was still 15.55 to 1, and one of the reasons given for the act of
February 12,1873, was that the silver dollar was worth $1.03 in gold; yet
before the close of that year, and before it was known that there was to
be any great increase in the product of silver, its relative value ran
down till it was below that of gold. Can any one doubt the cause? Surely
not if he observes the additional fact that the relative decline of silver
continued despite the greater value production of gold, and that 1882, ten
years after demonetization, was actually the first year since 1849 in
which the world's production of silver exceeded that of gold. What one
hundred and ninety years of continuous and often enormous relative
overproduction of silver had not done, ten years of demonetization had
accomplished, and that while the relative supply of gold was still the
greater. Is it possible to miss the real cause? Is there in Euclid a
demonstration more conclusive?
[Illustration: The above diagram shows the relative annual production of
gold and silver from 1870 to 1893, and ratio of values.]
Monometallists have exhausted the resources of verbal gymnastics to make
these figures fit their theories. Determined not to admit that
demonetization was the cause, they have given so many explanations that,
expressed in the briefest words, they would cover many pages like this.
The first was that the opening of the "Big Bonanza" on the Comstock lode
had given notice that silver was coming in a flood; but that was only for
popular use in this country. Scientific men knew that to be a rare find
indeed, not likely to occur again for centuries. The next explanation was
that China and India, so long the reservoir into which the surplus flowed,
had ceased to absorb it; and the next, demonetization of silver by Germany
and her throwing her old silver on the market. And with this the people
began to get at the true reason--the general demonetization by so many
nations.
The following table gives the annual production of gold and silver from
the discovery of America to and including the year 1892; and the highest
and lowest ratio of silver to gold from 1681 to and including the year in
which silver ceased to be in this country primary money:
YEARS. GOLD. SILVER. RATIO.
1493-1520........ $3,855,000 $1,953,000
1521-1544........ 4,759,000 3,749,000
1545-1560........ 5,657,000 12,950,000
1561-1580........ 4,546,000 12,447,000
1581-1600........ 4,905,000 17,409,000
1601-1620........ 5,662,000 17,538,000
1621-1640........ 5,516,000 16,358,000
1641-1660........ 5,829,000 15,223,000
1661-1680........ 6,154,000 14,006,000
1681-1700........ 7,154,000 14,209,000 14.81-15.20
1701-1720........ 8,520,000 14,779,000 15.04-15.52
1721-1740........ 12,681,000 17,921,000 14.81-15.41
1741-1760........ 16,356,000 22,158,000 14.14-15.26
1761-1780........ 13,761,000 27,128,000 14.52-15.27
1781-1800........ 11,823,000 36,534,000 14.42-15.74
1801-1810........ 11,815,000 37,161,000 15.26-16.08
1811-1820........ 7,606,000 22,474,000 15.04-16.25
1821-1830........ 9,448,000 19,141,000 15.70-15.95
1831-1840........ 13,484,000 24,788,000 15.62-15.93
1841-1850........ 36,393,000 32,434,000 15.70-15.93
1851-1855........ 131,268,000 36,827,000 15.33-15.59
1856-1860........ 136,946,000 37,611,000 15.19-15.38
1861-1865........ 131,728,000 45,764,000 15.26-15.44
1866-1870........ 127,537,000 55,652,000 15.43-15.60
1871-1872........ 113,431,000 81,849,000 15.57-15.65
1873............. 96,200,000 81,800,000
1874............. 90,750,000 71,500,000
1875............. 97,500,000 80,500,000
1876............. 103,700,000 87,600,000
1877............. 114,000,000 81,000,000
1878............. 119,000,000 95,000,000
1879............. 109,000,000 96,000,000
1880............. 106,500,000 96,700,000
1881............. 103,000,000 102,000,000
1882............. 102,000,000 111,800,000
1883............. 95,400,000 115,300,000
1884............. 101,700,000 105,500,000
1885............. 108,400,000 118,500,000
1886............. 106,000,000 120,600,000
1887............. 105,000,000 124,366,000
1888............. 109,900,000 142,107,000
1889............. 118,800,000 162,690,000
1890............. 118,848,700 172,234,500
1891............. 126,183,500 186,446,880
1892............. 138,861,000 196,458,800
Thus we see that, for twenty-seven years after the discovery of America,
the gold production was double that of silver; for the next eighty years
the production of silver was considerably more than double that of gold;
for the next one hundred years the production of silver was more than
2-1/2 times that of gold, and for the next century and a half, to wit,
from 1701 to 1850, inclusive, despite the fact of the tremendous gain of
gold in the last few years, the production of silver fell but little short
of twice that of gold. And yet, the variations in coin value were of the
trifling character previously stated. When taken by shorter periods, the
argument is still more startling. Thus in 1801-20 the production was
almost exactly 4 of silver to 1 of gold; for the next twenty years a
minute fraction less than 2 of silver to 1 of gold; for the next twenty
2-1/2 of gold for 1 of silver; and for the next twenty nearly 2 of gold
for 1 of silver, while during these awful years since 1873, in which there
has been so much said about the "flood of silver," its production has
never once been twice that of gold, and for the entire period has exceeded
it by the merest trifle. Is it any wonder that Dr. Eduard Suess, the great
German authority on the metals, and Professor of Geology at the University
of Vienna, concluded his recent work with these strong statements:
"Present legislative institutions are at variance with the
conditions established by nature. Even now agriculture and in part
industry in Europe are sorely at a disadvantage against silver
countries such as India and Mexico. The advantage of this
situation accrues in England to the holders of interest-bearing
notes, the productive value of which increases with the growing
scarcity of gold.... As soon as the figure 23.75 shall have been
reached, all gold obligations will have increased in value
one-half; but nothing prevents that figure from rising to 31. [It
has since risen even above that.] ... You say a regulation cannot
be international, but you overlook how long the ratio of 1 to
15-1/2 was upheld and worked beneficently. We wish, say the London
bankers, to receive our interest in gold and not in depreciated
silver; but silver would not be depreciated the moment an
agreement went into effect. Why, you ask, shall we cast such
profit into the hands of the owners of silver mines? Remember that
you are now casting the same profit into the hands of the owners
of gold mines and washings. No man would lose by rehabilitation,
and the whole world would be richer.... Europe is laboring under a
grave delusion. The economy of the world cannot be arbitrarily
carried on in the hope that somewhere a new California, and at the
same time a new Australia, will be found whose alluvial lands will
give relief for a decade. ... The question is no longer whether
silver will again become a full value coinage metal over the whole
earth, but what are to be the trials through which Europe is to
reach that point."
At this point it seems to me well to present the figures of relative
production for the last century in a more compact shape, with a view to
bringing out the contrast:
Silver produced 1792-1850............ $1,690,217,000
Gold produced........................ 848,186,000
Excess of silver production.......... 842,031,000
Gold produced 1850-73................ $2,724,825,000
Silver produced...................... 1,150,025,000
Excess of gold....................... 1,574,800,000
Gold produced 1873-92, inclusive..... $2,060,897,000
Silver produced...................... 2,264,419,000
Excess of silver..................... 203,522,000
Gold produced 1850-92, inclusive..... $4,785,722,000
Silver produced...................... 3,414,444,000
Excess of gold....................... 1,371,278,000
Gold produced 1792-1892, inclusive... $5,633,908,000
Silver produced...................... 5,104,961,000
Excess of gold....................... 528,947,000
Thus are we confronted with the truly startling paradox that during all
the century and a half when the production of silver was nearly twice that
of gold, and the two centuries back of that when it was more than twice,
the variation in coinage value never rose to 9 per cent., and for many
years at a time corresponded with the ratio set by the mint; but at the
end of a century during which the gold production was half a billion
greater than that of silver, and at the end of half a century when it was
nearly a billion and a half greater, the really scarcer metal has declined
in terms of the other nearly one-half! And all this, the monometallist
tells us, because there has been an excess of silver produced amounting to
less than a quarter of a billion in twenty-three years. Belief in such a
proposition would indeed be a triumph of faith over figures. And to add to
the trial of our faith, we find, on bringing the figures down to the close
of the year 1895--and we cannot bring them later on account of official
slowness--the amounts of silver and gold in the world, as presented in
values at our ratio, are almost exactly equal, the greatest divergence
claimed by the most extreme monometallist being 16-3/10 ounces of silver
to one of gold!
I do not indulge the hope that the figures herein presented will affect
the opinion of any pronounced monometallist. There seems to be a
mysterious power in gold which blinds the eyes to deductions from
statistics and experience; the internal conviction of the monometallist
that gold stands still while everything else changes in value resists all
logic. In this country, that is. In England, where it has not become a
political question, and no one is interested in denying the facts,
monometallists almost universally concede the appreciation of gold and
defend monometallism on that ground. It is to the laboring producers of
the United States, still open to conviction, that I present these figures,
which to me seem absolutely conclusive.
IS BIMETALLISM PRACTICABLE?
Can this great nation coin silver and gold on the same terms, at the ratio
of 16 to 1, and maintain a substantial parity?
This question, like all others in political economy, may he argued
theoretically or on the basis of actual experience. The monometallists say
that one metal or the other always has been and always will be the cheaper
at any ratio; that if both be freely coined, the dearer will be more
valuable as bullion than as money, and will therefore go out of use. They
say that, in spite of all devices to the contrary, we must have
monometallism any how, and always on the basis of the cheaper metal.
The bimetallist replies that such is, in truth, the natural tendency; but
when the dearer metal is thrown out of use as money it thereby becomes
cheaper, and as the cheaper metal must take its place, a vastly greater
demand for it is created, and so it becomes dearer; thus an alternating
action keeps the two near a parity, provided that the ratio corresponds
nearly with the relative amounts of the two metals in the world's stock.
They claim that the world has thus a far less fluctuating standard of
value than it ever can have with one metal alone.
The monometallist rejoins that this is "all theory." This brings both
parties to the test of experience, and by common consent the experience of
France in the seventy years from 1803 to 1873 is taken as the best
practical test. At first view, it would seem as if the matter could easily
be settled, as the time is so recent that there could be no great
obscuration of the history; but on inquiry a determination of the real
facts is found to be no such simple matter, and as the disturbance of
natural law by war and other causes was almost constant, both sides find
enough in the facts to make a basis for their respective contentions. Let
us then consider this history.
Napoleon Bonaparte became First Consul and practically ruler of France in
1799, and at once addressed himself, with his usual energy, to the task of
establishing a stable monetary system. He found that in 1785 Calonne had
established the ratio of 15-1/2 of silver to 1 of gold, and that it had
worked reasonably well. He accepted it, therefore, as justified by
experience, and his Finance Minister carried through the Council of State
an act for the free coinage of both metals at that ratio. For seventy
years this law stood practically unchanged, and it is speaking with great
moderation to say that in those seventy years there occurred more
disturbance of every kind unfavorable to the maintenance of a ratio than
in any other seventy years in monetary history. France was twice
conquered, her soil overrun, and her capital held by the enemy. She four
times changed her form of government. Once she was subjected to the
payment of enormous war expenditures, and again not only to the payment of
still greater expenditures but to a fine exceeding in amount the largest
sum of gold ever held in the United States. During a large part of this
time the world's production of silver was in excess of that of gold to an
extent very much greater than it has been in recent years, and then, after
a very brief interval of something like equal production, there was a
sudden and tremendous increase in the production of gold until it exceeded
that of silver more than 3 to 1 in value. During these years, also,
several of the neighboring nations, including seventy million people,
demonetized gold and threw the whole burden of sustaining its equality on
the continent of Europe upon France, and during another portion of the
time there were monetary disturbances so far-reaching that they shook the
foundations of credit in every civilized country in the world. And yet,
through all these convulsions, France for seventy years maintained a
substantial parity, by welding the two metals together for monetary
purposes.
The contrasted figures are simply amazing. In the decade of 1811-20 there
were produced 47 ounces of silver to 1 of gold, and yet the market ratio
outside of France never stood higher than 16.25 to 1. In the decade of
1821-30 the production was 32 ounces to 1 and the average ratio 15-80/100
to 1. In 1831-40 the production was 29 ounces to 1 and the average ratio
15-75/100 to 1. In 1841-50 the production was 14-9/10 ounces to 1 and the
average ratio 15-83/100 to 1. The demonstration is as complete as that of
any proposition in Euclid. In spite of the enormous overproduction of
silver, the maintenance of the mint ratio in France held the two so nearly
together that in three years out of four the difference in other countries
only amounted to the cost of transporting the silver to the French Mint
and of coinage.
[Illustration: The above diagram shows the relative annual production of
gold and silver during the bimetallic period in France. The ratio given is
the commercial ratio, that of the mint being 15.50 to 1. Note the
marvellous steadiness of the commercial ratio and contrast it with the
enormous fluctuation in the relative annual production of the two metals
during this period.]
To this should also be added the fact that French coins would have a
slightly less value in other countries than the coins of those countries,
but it is not easy to estimate the sentimental difference this would make.
From the enactment of the law of 1803 to the limitation of the coinage in
1875 France coined 5,100,000,000 francs of silver and 7,600,000,000 francs
of gold, or $1,020,000,000 of silver and $1,520,000,000 of gold, very
nearly, or 40 per cent. of the total amount of silver and 33 per cent. of
the total amount of gold produced in the world during those years.
It is further to be noted that, whether gold or silver was the dearer
metal at the ratio of 15-1/2 to 1 at any given time, France at that time
had more of gold and silver per capita than any country in the world, and
that, despite the enormous inflow of the cheaper metal, she held the
dearer and absorbed what now seems an astonishing amount of the cheaper.
Thus, in 1822 the imports of silver into France exceeded the exports by
125,000,000 francs, and in 1831 the amount had risen to 181,000,000
francs, and then it fell off and did not reach the latter sum again until
1848.
On the other hand, in the eight years 1853-60 there was a net import into
France of gold to the value of 3,082,000,000 francs, or $616,000,000; and
in the same years a net export of silver to the value of 1,465,000,000
francs, or $293,000,000. Thus in the short space of eight years France had
made monetary, or, rather, metallic transfers amounting to $909,000,000,
and that without a quiver of her financial system, and scarcely a
perceptible trace of the effects of that financial storm which swept
America, England, and Central Europe with such destructive fury in 1857-8.
It further appears that, despite the enormous import of gold, the
subsequent export was comparatively small, and thus, such was the
wonderful absorbing power of the nation under the free coinage law of
1803, that France came out of each successive financial storm with an
increased stock of the precious metals, and more than once has the Bank of
England been compelled to apply to France for the specie to arrest a
destructive panic growing out of an insufficient amount of coined money
upon a safe basis and an overissue of supplemental or faith money.
By the year 1860 it was supposed that the danger of the world being
"flooded with gold" was substantially over; and during that decade France
not only sustained the double standard single-handed and alone, but did it
against the tremendous pressure due to the demonetization of gold in
Austria, Germany, and other countries. It is not possible to say with
certainty how far gold would have cheapened, or, to speak in the current
language, how high the ratio of silver would have become, had France
during the decade abandoned her bimetallic system; but it is certain that
the disproportion would have been enormous, undoubtedly very much greater
than the present disproportion in the market between silver and gold,
resulting from the demonetization of silver. M. Chevalier gave it as his
opinion that the ratio would sink at least as low as 8 to 1, that is, that
gold would be worth but half what it was rated at in relation to silver in
the American coinage, and this he believed would certainly happen, despite
the power and willingness of France to maintain the old ratio. He did not
venture to say how low the ratio would sink if France abandoned her
policy, but he evidently looked forward to a time when gold would be
practically too cheap for money.
Years afterward, in writing as a philosopher rather than an advocate, he
took more rational ground, and compared the action of France to that of a
parachute which retarded the fall of gold. The maximum effect of the
enormous gold inflation of 1848-65 was to create a disturbance of less
than five per cent. in value of the metals in countries outside of France.
During all the years that the law of 1803 was in practical force the
variations as shown by a diagram seemed but trifling, despite the enormous
over-production of silver for many years and of gold for many other years,
and yet, immediately after 1873, although ten years were yet to elapse
before the world was to produce silver in excess of gold, almost instantly
the diagram shows the downward trend of silver far, far in excess of any
previous experience.
How was it through all these years with the industrial and financial
condition of France? It would indeed be little to the purpose to prove
that she had maintained the metals at a parity by free coinage, if, in the
meantime, her people had suffered loss. Monometallists tell us that not
only is bimetallism impossible, but that the attempt to maintain it is in
every way hurtful, in fact, disastrous. They point us to the fact that
England is the clearing house of the world; that those whose currency is
not assimilated to that of England are subjected to enormous losses in the
exchange, resulting from fluctuations; that by attempting bimetallism a
nation puts itself in the second or third rank, and that the results are
in every way bad. Well, all those conditions applied to France. She, like
the United States, may be considered as regarding England in the light of
the world's clearing house, and her currency may be said to have
fluctuated, as they declare ours would, with bimetallism. What, then, have
been the general results to France? What effect has it had upon her
commercial, social, and industrial development? On this point let us
return thanks that the testimony is universal. No other nation in the
world has made such stupendous progress in the general improvement of her
people as France has made since 1803. No civilized country probably had
sunk to such depths of popular misery as had France at the beginning of
her revolution, and we can hardly believe that the subsequent fourteen
years of war and internal turmoil had greatly improved her condition when
the policy of 1803 was adopted.
[Illustration: The above diagram shows the course of the commercial ratio
of the values of gold and silver during the bimetallic period of France.
The upper dotted line (A) shows the extreme high limit of ratio, and the
lower dotted line (C) the extreme low limit reached from the years 1803 to
1873. The central line (B) is the mint ratio of 15.50 to 1 fixed by the
French Government in 1803. The variable line (D) is the commercial ratio
of the values of the two metals during that period. Note the slight
variation in this ratio from 1803 to 1873, during which time the
bimetallic action of the French law was operative, and then contrast it
with the sudden and swift descent of the ratio after the demonetization of
silver by the various nations in 1873 and 1875.]
Bimetallism and a rigid adherence to a specie basis were two of the means
adopted by Bonaparte to restore France, and during all his wars, with
their terrible expenses, he never once departed from the specie standard.
After the Act of 1803 France was still to have twelve years of war and
severe trial. She has subsequently had two revolutions and a foreign war,
singularly destructive in its course, and ending in her subjugation, the
occupation of her territory, and the loss of two of her wealthiest
provinces.